ITEM 1. FINANCIAL STATEMENTS
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| (In thousands, except share and per share data) | June 30,
2022 | | December 31,
2021 |
| (Unaudited) | | |
| CURRENT ASSETS | | | |
| Cash and cash equivalents | $ | 294,831 | | | $ | 352,129 | |
Accounts receivable, net of allowance of $32,304 in 2022 and $29,270 in 2021 | 967,120 | | | 1,030,380 | |
| Prepaid expenses | 94,099 | | | 65,927 | |
| | | |
| Other current assets | 16,067 | | | 24,431 | |
| Total Current Assets | 1,372,117 | | | 1,472,867 | |
| PROPERTY, PLANT AND EQUIPMENT | | | |
| Property, plant and equipment, net | 716,241 | | | 782,093 | |
| INTANGIBLE ASSETS AND GOODWILL | | | |
| Indefinite-lived intangibles - licenses and other | 1,778,405 | | | 1,778,045 | |
| Other intangibles, net | 1,540,092 | | | 1,666,600 | |
| Goodwill | 2,313,349 | | | 2,313,581 | |
| OTHER ASSETS | | | |
| Operating lease right-of-use assets | 807,994 | | | 741,410 | |
| Other assets | 172,919 | | | 126,713 | |
| Total Assets | $ | 8,701,117 | | | $ | 8,881,309 | |
| CURRENT LIABILITIES | | | |
| Accounts payable | $ | 198,983 | | | $ | 206,007 | |
| Current operating lease liabilities | 41,962 | | | 88,585 | |
| Accrued expenses | 288,363 | | | 353,045 | |
| | | |
| Accrued interest | 66,276 | | | 67,983 | |
| Deferred revenue | 161,921 | | | 133,123 | |
| Current portion of long-term debt | 675 | | | 673 | |
| Total Current Liabilities | 758,180 | | | 849,416 | |
| Long-term debt | 5,626,744 | | | 5,738,195 | |
| Noncurrent operating lease liabilities | 859,417 | | | 738,814 | |
| Deferred income taxes | 497,638 | | | 558,222 | |
| Other long-term liabilities | 65,717 | | | 80,897 | |
| Commitments and contingent liabilities (Note 6) | | | |
| STOCKHOLDERS’ EQUITY | | | |
| Noncontrolling interest | 8,659 | | | 8,410 | |
Preferred stock, par value $.001 per share, 100,000,000 shares authorized, no shares issued and outstanding | — | | | — | |
Class A Common Stock, par value $.001 per share, authorized 1,000,000,000 shares, issued 122,068,221 and 120,633,937 shares in 2022 and 2021, respectively | 122 | | | 120 | |
Class B Common Stock, par value $.001 per share, authorized 1,000,000,000 shares, issued 21,391,972 and 21,590,192 shares in 2022 and 2021, respectively | 21 | | | 22 | |
Special Warrants, 5,293,055 and 5,304,430 issued and outstanding in 2022 and 2021, respectively | — | | | — | |
| Additional paid-in capital | 2,891,129 | | | 2,876,571 | |
| Accumulated deficit | (1,997,000) | | | (1,962,819) | |
| Accumulated other comprehensive loss | (1,154) | | | (257) | |
Cost of shares (538,709 in 2022 and 389,814 in 2021) held in treasury | (8,356) | | | (6,282) | |
| Total Stockholders' Equity | 893,421 | | | 915,765 | |
| Total Liabilities and Stockholders' Equity | $ | 8,701,117 | | | $ | 8,881,309 | |
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands, except per share data) | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Revenue | $ | 954,005 | | | $ | 861,605 | | | $ | 1,797,463 | | | $ | 1,568,270 | |
| Operating expenses: | | | | | | | |
| Direct operating expenses (excludes depreciation and amortization) | 365,382 | | | 320,515 | | | 695,906 | | | 613,328 | |
| Selling, general and administrative expenses (excludes depreciation and amortization) | 379,057 | | | 372,640 | | | 763,401 | | | 714,970 | |
| Depreciation and amortization | 110,788 | | | 127,945 | | | 224,839 | | | 235,308 | |
| Impairment charges | 245 | | | — | | | 1,579 | | | 37,744 | |
| Other operating expense, net | 15,664 | | | 12,379 | | | 16,534 | | | 15,150 | |
| Operating income (loss) | 82,869 | | | 28,126 | | | 95,204 | | | (48,230) | |
| Interest expense, net | 81,494 | | | 84,887 | | | 160,713 | | | 170,008 | |
| Gain on investments, net | 9,590 | | | 49,644 | | | 7,825 | | | 49,835 | |
| Equity in loss of nonconsolidated affiliates | (29) | | | (31) | | | (58) | | | (59) | |
| Gain on extinguishment of debt | 8,203 | | | — | | | 8,203 | | | — | |
| Other expense, net | (2,175) | | | (363) | | | (2,445) | | | (1,170) | |
| Income (loss) before income taxes | 16,964 | | | (7,511) | | | (51,984) | | | (169,632) | |
| Income tax benefit (expense) | (1,782) | | | (24,449) | | | 18,427 | | | (104,384) | |
| Net income (loss) | 15,182 | | | (31,960) | | | (33,557) | | | (274,016) | |
| Less amount attributable to noncontrolling interest | 781 | | | 326 | | | 624 | | | (7) | |
| Net income (loss) attributable to the Company | $ | 14,401 | | | $ | (32,286) | | | $ | (34,181) | | | $ | (274,009) | |
| Other comprehensive loss, net of tax: | | | | | | | |
| Foreign currency translation adjustments | (650) | | | (40) | | | (897) | | | (256) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Other comprehensive loss, net of tax | (650) | | | (40) | | | (897) | | | (256) | |
| Comprehensive income (loss) | 13,751 | | | (32,326) | | | (35,078) | | | (274,265) | |
| Less amount attributable to noncontrolling interest | — | | | — | | | — | | | — | |
| Comprehensive income (loss) attributable to the Company | $ | 13,751 | | | $ | (32,326) | | | $ | (35,078) | | | $ | (274,265) | |
| Net income (loss) attributable to the Company per common share: | | | | | | | |
| Basic | $ | 0.10 | | | $ | (0.22) | | | $ | (0.23) | | | $ | (1.87) | |
| Weighted average common shares outstanding - Basic | 148,050 | | | 146,509 | | | 147,783 | | | 146,362 | |
| Diluted | $ | 0.10 | | | $ | (0.22) | | | $ | (0.23) | | | $ | (1.87) | |
| Weighted average common shares outstanding - Diluted | 149,131 | | | 146,509 | | | 147,783 | | | 146,362 | |
| | | | | | | |
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands, except share data) | | | | | Controlling Interest | | |
| Common Shares(1) | | Non-
controlling
Interest | | Common
Stock | | Additional
Paid-in
Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated
Other
Comprehensive Loss | | Treasury
Stock | | |
| Class A
Shares | | Class B
Shares | | Special Warrants | | | | | | | | Total |
Balances at March 31, 2022 | 121,402,390 | | | 21,430,500 | | | 5,293,069 | | | $ | 8,066 | | | $ | 143 | | | $ | 2,882,515 | | | $ | (2,011,401) | | | $ | (504) | | | $ | (6,798) | | | $ | 872,021 | |
| Net income | | | | | | | 781 | | | — | | | — | | | 14,401 | | | — | | | — | | | 15,182 | |
Vesting of restricted stock and other | 627,289 | | | | | | | — | | | — | | | 4 | | | — | | | — | | | (1,558) | | | (1,554) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Share-based compensation | | | | | | | — | | | — | | | 8,610 | | | — | | | — | | | — | | | 8,610 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Conversion of Special Warrants to Class A Shares | 14 | | | | | (14) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Conversion of Class B Shares to Class A Shares | 38,528 | | | (38,528) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
Other | | | | | | | (188) | | | — | | | — | | | — | | | — | | | — | | | (188) | |
| Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (650) | | | — | | | (650) | |
Balances at June 30, 2022 | 122,068,221 | | | 21,391,972 | | | 5,293,055 | | | $ | 8,659 | | | $ | 143 | | | $ | 2,891,129 | | | $ | (1,997,000) | | | $ | (1,154) | | | $ | (8,356) | | | $ | 893,421 | |
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2022.
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands, except share data) | | | | | Controlling Interest | | |
| Common Shares(1) | | Non-
controlling
Interest | | Common
Stock | | Additional
Paid-in
Capital | | Accumulated Deficit | | Accumulated
Other
Comprehensive Loss | | Treasury
Stock | | |
| Class A Shares | | Class B
Shares | | Special Warrants | | | | | | | | Total |
Balances at March 31, 2021 | 112,033,028 | | | 29,070,192 | | | 5,379,822 | | | $ | 7,830 | | | $ | 141 | | | $ | 2,854,647 | | | $ | (2,045,343) | | | $ | (22) | | | $ | (3,302) | | | $ | 813,951 | |
| Net income (loss) | | | | | | | 326 | | | — | | | — | | | (32,286) | | | — | | | — | | | (31,960) | |
| Vesting of restricted stock and other | 780,173 | | | | | | | — | | | 1 | | | 3,107 | | | — | | | — | | | (1,929) | | | 1,179 | |
Share-based compensation | | | | | | | — | | | — | | | 5,903 | | | — | | | — | | | — | | | 5,903 | |
| Dividend declared and paid to noncontrolling interests | | | | | | | (188) | | | — | | | — | | | — | | | — | | | — | | | (188) | |
| Conversion of Special Warrants to Class A Shares | 14,694 | | | | | (14,694) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Conversion of Class B Shares to Class A Shares | 5,433,680 | | | (5,433,680) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (40) | | | — | | | (40) | |
Balances at June 30, 2021 | 118,261,575 | | | 23,636,512 | | | 5,365,128 | | | $ | 7,968 | | | $ | 142 | | | $ | 2,863,657 | | | $ | (2,077,629) | | | $ | (62) | | | $ | (5,231) | | | $ | 788,845 | |
| | | | | | | | | | | | | | | | | | | |
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2021.
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands, except share data) | | | | | | | | | Controlling Interest | | |
| Common Shares(1) | | Non-
controlling
Interest | | Common
Stock | | Additional
Paid-in
Capital | | Accumulated
Deficit | | Accumulated
Other
Comprehensive Loss | | Treasury
Stock | | |
| Class A
Shares | | Class B
Shares | | Special Warrants | | | | | | | | Total |
Balances at December 31, 2021 | 120,633,937 | | | 21,590,192 | | | 5,304,430 | | | $ | 8,410 | | | $ | 142 | | | $ | 2,876,571 | | | $ | (1,962,819) | | | $ | (257) | | | $ | (6,282) | | | $ | 915,765 | |
| Net income (loss) | | | | | | | 624 | | | — | | | — | | | (34,181) | | | — | | | — | | | (33,557) | |
Vesting of restricted stock and other | 1,224,689 | | | | | | | — | | | 1 | | | 413 | | | — | | | — | | | (2,074) | | | (1,660) | |
| | | | | | | | | | | | | | | | | | | |
| Share-based compensation | | | | | | | — | | | — | | | 14,145 | | | — | | | — | | | — | | | 14,145 | |
| Conversion of Special Warrants to Class A Shares | 11,375 | | | | | (11,375) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Conversion of Class B Shares to Class A Shares | 198,220 | | | (198,220) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
Other | | | | | | | (375) | | | — | | | — | | | — | | | — | | | — | | | (375) | |
| Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (897) | | | — | | | (897) | |
Balances at June 30, 2022 | 122,068,221 | | | 21,391,972 | | | 5,293,055 | | | $ | 8,659 | | | $ | 143 | | | $ | 2,891,129 | | | $ | (1,997,000) | | | $ | (1,154) | | | $ | (8,356) | | | $ | 893,421 | |
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2022 or 2021.
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands, except share data) | | | | | | | | | Controlling Interest | | |
| Common Shares(1) | | Non- controlling Interest | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | |
| Class A Shares | | Class B Shares | | Special Warrants | | | | | | | | Total |
Balances at December 31, 2020 | 64,726,864 | | | 6,886,925 | | | 74,835,899 | | | $ | 8,350 | | | $ | 72 | | | $ | 2,849,020 | | | $ | (1,803,620) | | | $ | 194 | | | $ | (3,199) | | | $ | 1,050,817 | |
| Net loss | | | | | | | (7) | | | — | | | — | | | (274,009) | | | — | | | — | | | (274,016) | |
| Vesting of restricted stock | 810,545 | | | | | | | — | | | 1 | | | 3,118 | | | — | | | — | | | (2,032) | | | 1,087 | |
| | | | | | | | | | | | | | | | | | | |
| Share-based compensation | | | | | | | — | | | — | | | 11,588 | | | — | | | — | | | — | | | 11,588 | |
| Conversion of Special Warrants to Class A and Class B Shares | 47,136,441 | | | 22,337,312 | | | (69,473,753) | | | — | | | 69 | | | (69) | | | — | | | — | | | — | | | — | |
| Conversion of Class B Shares to Class A Shares | 5,587,725 | | | (5,587,725) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Other | | | | | 2,982 | | | (375) | | | — | | | — | | | — | | | — | | | — | | | (375) | |
| Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (256) | | | — | | | (256) | |
Balances at June 30, 2021 | 118,261,575 | | | 23,636,512 | | | 5,365,128 | | | $ | 7,968 | | | $ | 142 | | | $ | 2,863,657 | | | $ | (2,077,629) | | | $ | (62) | | | $ | (5,231) | | | $ | 788,845 | |
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2022 or 2021.
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | |
| (In thousands) | Six Months Ended June 30, |
| 2022 | | 2021 |
| Cash flows from operating activities: | | | |
| Net loss | $ | (33,557) | | | $ | (274,016) | |
| Reconciling items: | | | |
| Impairment charges | 1,579 | | | 37,744 | |
| Depreciation and amortization | 224,839 | | | 235,308 | |
| Deferred taxes | (60,587) | | | 99,318 | |
| Provision for doubtful accounts | 8,815 | | | (2,003) | |
| Amortization of deferred financing charges and note discounts, net | 2,942 | | | 3,055 | |
| | | |
| Share-based compensation | 14,145 | | | 11,588 | |
| Loss on disposal of operating and other assets | 15,583 | | | 11,347 | |
| Gain on investments | (7,825) | | | (49,835) | |
| Equity in loss of nonconsolidated affiliates | 58 | | | 59 | |
| Gain on extinguishment of debt | (8,203) | | | — | |
| Barter and trade income | (12,250) | | | (4,469) | |
| Other reconciling items, net | 680 | | | 278 | |
| Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | |
| Decrease in accounts receivable | 54,240 | | | 36,289 | |
| Increase in prepaid expenses and other current assets | (24,996) | | | (40,651) | |
| Increase in other long-term assets | (5,371) | | | (6,919) | |
| Increase (decrease) in accounts payable | (6,963) | | | 18,783 | |
| Increase (decrease) in accrued expenses | (75,154) | | | 17,455 | |
| Decrease in accrued interest | (1,706) | | | (31) | |
| Increase in deferred income | 15,261 | | | 6,847 | |
| Increase in other long-term liabilities | 2,059 | | | 710 | |
| Cash provided by operating activities | 103,589 | | | 100,857 | |
| Cash flows from investing activities: | | | |
| Business combinations | — | | | (230,816) | |
| Proceeds from sale of other investments | — | | | 50,757 | |
| Purchases of property, plant and equipment | (72,210) | | | (51,061) | |
| Proceeds from disposal of assets | 26,754 | | | 13,016 | |
| | | |
| Change in other, net | (4,201) | | | (159) | |
| Cash used for investing activities | (49,657) | | | (218,263) | |
| Cash flows from financing activities: | | | |
| | | |
| | | |
| | | |
| Payments on long-term debt and credit facilities | (105,749) | | | (20,608) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Change in other, net | (4,962) | | | 726 | |
| Cash used for financing activities | (110,711) | | | (19,882) | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (519) | | | (134) | |
| Net decrease in cash, cash equivalents and restricted cash | (57,298) | | | (137,422) | |
| Cash, cash equivalents and restricted cash at beginning of period | 352,554 | | | 721,187 | |
| Cash, cash equivalents and restricted cash at end of period | $ | 295,256 | | | $ | 583,765 | |
| SUPPLEMENTAL DISCLOSURES: | | | |
| Cash paid for interest | $ | 160,003 | | | $ | 168,294 | |
| Cash paid for income taxes | 6,835 | | | 3,027 | |
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
Preparation of Interim Financial Statements
All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to iHeartMedia, Inc. and its consolidated subsidiaries. The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The Company's reportable segments are:
▪the Multiplatform Group, which includes the Company's Broadcast radio, Networks and Sponsorships and Events businesses;
▪the Digital Audio Group, which includes all of the Company's Digital businesses, including Podcasting; and
▪the Audio & Media Services Group, which includes Katz Media Group (“Katz Media”), a full-service media representation business, and RCS Sound Software ("RCS"), a provider of scheduling and broadcast software and services.
The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling interest or is the primary beneficiary. Investments in companies which the Company does not control, but exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.
COVID-19
Our business has been adversely impacted by the novel coronavirus pandemic (“COVID-19”), its impact on the operating and economic environment and related, near-term advertiser spending decisions. Beginning in March 2020 and continuing through the remainder of 2020 and into 2021 revenue was significantly and negatively impacted as a result of a decline in advertising spend driven by COVID-19. As a result of continued recovery from the impact of COVID-19, our revenue for the three months ended June 30, 2022 increased compared to the three months ended June 30, 2021 across each of our reportable segments.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES Act”) was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company was able to defer the payment of $29.3 million in certain employment taxes during 2020, half of which was due and paid on January 3, 2022 and the other half will be due on January 3, 2023. In addition, the Company claimed $12.4 million in refundable payroll tax credits related to the CARES Act provisions, of which $0.7 million was received in 2020, $3.8 million was received in 2021 and $7.9 million was received in January 2022.
As of June 30, 2022, the Company had approximately $294.8 million in cash and cash equivalents. While the effects of COVID-19 may continue to negatively impact the results of operations, cash flows and financial position of the Company, the related financial impact cannot be reasonably estimated at this time. Based on current available liquidity, the Company expects to be able to meet its obligations as they become due over the coming year.
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2022 presentation.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the amounts reported in the Consolidated Statements of Cash Flows:
| | | | | | | | | | | |
| (In thousands) | June 30,
2022 | | December 31,
2021 |
| Cash and cash equivalents | $ | 294,831 | | | $ | 352,129 | |
| Restricted cash included in: | | | |
| Other current assets | 425 | | | 425 | |
| | | |
| Total cash, cash equivalents and restricted cash in the Statement of Cash Flows | $ | 295,256 | | | $ | 352,554 | |
Certain Relationships and Related Party Transactions
From time to time, certain companies in which the Company holds minority equity interests, purchase advertising in the ordinary course. None of these ordinary course transactions have a material impact on the Company.
New Accounting Pronouncements Recently Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting to provide optional relief from applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. In addition, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848) – Scope, to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company does not expect the adoption of this standard to materially impact the financial position, results of operations or cash flows.
New Accounting Pronouncements Not Yet Adopted
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification 606. The amendments of ASU 2021-08 are effective for interim and annual periods beginning after December 15, 2022. The Company is currently evaluating the future impact of adoption of this standard.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 – REVENUE
Disaggregation of Revenue
The following tables show revenue streams for the three and six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Eliminations | | Consolidated |
| Three Months Ended June 30, 2022 |
| Revenue from contracts with customers: | | | | | | | | | |
Broadcast Radio(1) | $ | 463,304 | | | $ | — | | | $ | — | | | $ | — | | | $ | 463,304 | |
Networks(2) | 127,532 | | | . | | — | | | — | | | 127,532 | |
Sponsorship and Events(3) | 38,064 | | | — | | | — | | | — | | | 38,064 | |
Digital, excluding Podcast(4) | — | | | 166,880 | | | — | | | (1,376) | | | 165,504 | |
Podcast(5) | — | | | 85,681 | | | — | | | — | | | 85,681 | |
Audio & Media Services(6) | — | | | — | | | 71,065 | | | (1,378) | | | 69,687 | |
Other(7) | 4,035 | | | — | | | — | | | (167) | | | 3,868 | |
| Total | 632,935 | | | 252,561 | | | 71,065 | | | (2,921) | | | 953,640 | |
Revenue from leases(8) | 365 | | | — | | | — | | | — | | | 365 | |
| Revenue, total | $ | 633,300 | | | $ | 252,561 | | | $ | 71,065 | | | $ | (2,921) | | | $ | 954,005 | |
| | | | | | | | | |
| Three Months Ended June 30, 2021 |
| Revenue from contracts with customers: | | | | | | | | | |
Broadcast Radio(1) | $ | 451,142 | | | $ | — | | | $ | — | | | $ | — | | | $ | 451,142 | |
Networks(2) | 123,586 | | | — | | | — | | | — | | | 123,586 | |
Sponsorship and Events(3) | 28,585 | | | — | | | — | | | — | | | 28,585 | |
Digital, excluding Podcast(4) | — | | | 144,502 | | | — | | | (1,178) | | | 143,324 | |
Podcast(5) | — | | | 53,428 | | | — | | | — | | | 53,428 | |
Audio & Media Services(6) | — | | | — | | | 61,175 | | | (2,004) | | | 59,171 | |
Other(7) | 2,192 | | | — | | | — | | | (168) | | | 2,024 | |
| Total | 605,505 | | | 197,930 | | | 61,175 | | | (3,350) | | | 861,260 | |
Revenue from leases(8) | 345 | | | — | | | — | | | — | | | 345 | |
| Revenue, total | $ | 605,850 | | | $ | 197,930 | | | $ | 61,175 | | | $ | (3,350) | | | $ | 861,605 | |
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Eliminations | | Consolidated |
| Six Months Ended June 30, 2022 |
| Revenue from contracts with customers: | | | | | | | | | |
Broadcast Radio(1) | $ | 879,785 | | | $ | — | | | $ | — | | | $ | — | | | $ | 879,785 | |
Networks(2) | 245,090 | | | — | | | — | | | — | | | 245,090 | |
Sponsorship and Events(3) | 71,665 | | | — | | | — | | | — | | | 71,665 | |
Digital, excluding Podcast(4) | — | | | 312,555 | | | — | | | (2,645) | | | 309,910 | |
Podcast(5) | — | | | 154,225 | | | — | | | — | | | 154,225 | |
Audio & Media Services(6) | — | | | — | | | 131,922 | | | (2,719) | | | 129,203 | |
Other(7) | 7,265 | | | — | | | — | | | (335) | | | 6,930 | |
| Total | 1,203,805 | | | 466,780 | | | 131,922 | | | (5,699) | | | 1,796,808 | |
Revenue from leases(8) | 655 | | | — | | | — | | | — | | | 655 | |
| Revenue, total | $ | 1,204,460 | | | $ | 466,780 | | | $ | 131,922 | | | $ | (5,699) | | | $ | 1,797,463 | |
| | | | | | | | | |
| Six Months Ended June 30, 2021 |
| Revenue from contracts with customers: | | | | | | | | | |
Broadcast Radio(1) | $ | 809,678 | | | $ | — | | | $ | — | | | $ | — | | | $ | 809,678 | |
Networks(2) | 238,672 | | | — | | | — | | | — | | | 238,672 | |
Sponsorship and Events(3) | 50,978 | | | — | | | — | | | — | | | 50,978 | |
Digital, excluding Podcast(4) | — | | | 263,703 | | | — | | | (3,072) | | | 260,631 | |
Podcast(5) | — | | | 91,780 | | | — | | | — | | | 91,780 | |
Audio & Media Services(6) | — | | | — | | | 116,312 | | | (3,865) | | | 112,447 | |
Other(7) | 3,590 | | | — | | | — | | | (335) | | | 3,255 | |
| Total | 1,102,918 | | | 355,483 | | | 116,312 | | | (7,272) | | | 1,567,441 | |
Revenue from leases(8) | 829 | | | — | | | — | | | — | | | 829 | |
| Revenue, total | $ | 1,103,747 | | | $ | 355,483 | | | $ | 116,312 | | | $ | (7,272) | | | $ | 1,568,270 | |
(1)Broadcast Radio revenue is generated through the sale of advertising time on the Company’s domestic radio stations.
(2)Networks revenue is generated through the sale of advertising on the Company’s Premiere and Total Traffic & Weather network programs and through the syndication of network programming to other media companies.
(3)Sponsorship and events revenue is generated through local events and major nationally-recognized tent pole events and include sponsorship and other advertising revenue, ticket sales, and licensing, as well as endorsement and appearance fees generated by on-air talent.
(4)Digital, excluding Podcast revenue is generated through the sale of streaming and display advertisements on digital platforms and through subscriptions to iHeartRadio streaming services.
(5)Podcast revenue is generated through the sale of advertising on the Company's podcast network.
(6)Audio & Media Services revenue is generated by services provided to broadcast industry participants through the Company’s Katz Media and RCS businesses. As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast software and media streaming, along with research services for radio stations, broadcast television stations, cable channels, record labels, ad agencies and Internet stations worldwide.
(7)Other revenue represents fees earned for miscellaneous services, including on-site promotions, activations, and local marketing agreements.
(8)Revenue from leases is primarily generated by the lease of towers to other media companies, which are all categorized as operating leases.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Trade and Barter
Trade and barter transactions represent the exchange of advertising spots for merchandise, services, advertising and promotion or other assets in the ordinary course of business. The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the advertising spots promised to the customer. Trade and barter revenues and expenses, which are included in consolidated revenue and selling, general and administrative expenses, respectively, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (In thousands) | 2022 | | 2021 | | 2022 | | 2021 |
| Trade and barter revenues | $ | 38,222 | | | $ | 46,508 | | | $ | 85,591 | | | $ | 78,454 | |
| Trade and barter expenses | 29,336 | | | 40,045 | | | 75,751 | | | 68,043 | |
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Trade and barter revenue includes $5.3 million and $2.3 million during the three months ended June 30, 2022 and 2021, respectively, and $12.3 million and $4.5 million during the six months ended June 30, 2022 and 2021, respectively, in connection with investments made in companies in exchange for advertising services.
The following tables show the Company’s deferred revenue balance from contracts with customers:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (In thousands) | 2022 | | 2021 | | 2022 | | 2021 |
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| Deferred revenue from contracts with customers: | | | | | | | |
Beginning balance(1) | $ | 184,056 | | | $ | 165,330 | | | $ | 161,114 | | | $ | 145,493 | |
| | | | | | | |
| Revenue recognized, included in beginning balance | (61,973) | | | (55,762) | | | (90,406) | | | (60,185) | |
| Additions, net of revenue recognized during period, and other | 67,596 | | | 40,163 | | | 118,971 | | | 64,423 | |
| Ending balance | $ | 189,679 | | | $ | 149,731 | | | $ | 189,679 | | | $ | 149,731 | |
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(1) Deferred revenue from contracts with customers, which excludes other sources of deferred revenue that are not related to contracts with customers, is included within deferred revenue and other long-term liabilities on the Consolidated Balance Sheets, depending upon when revenue is expected to be recognized.
The Company’s contracts with customers generally have terms of one year or less; however, as of June 30, 2022, the Company expects to recognize $391.9 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration greater than one year, with substantially all of this amount to be recognized over the next five years. Commissions related to the Company’s media representation business have been excluded from this amount as they are contingent upon future sales.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue from Leases
As of June 30, 2022, the future lease payments to be received by the Company are as follows:
| | | | | |
| (In thousands) |
|
| 2022 | $ | 534 | |
| 2023 | 782 | |
| 2024 | 590 | |
| 2025 | 405 | |
| 2026 | 321 | |
| Thereafter | 1,526 | |
| Total | $ | 4,158 | |
NOTE 3 – LEASES
The Company enters into operating lease contracts for land, buildings, structures and other equipment. Arrangements are evaluated at inception to determine whether such arrangements contain a lease. Operating leases primarily include land and building lease contracts and leases of radio towers. Arrangements to lease building space consist primarily of the rental of office space, but may also include leases of other equipment, including automobiles and copiers. Operating leases are reflected on the Company's balance sheet within Operating lease right-of-use assets ("ROU assets") and the related short-term and long-term liabilities are included within Current and Noncurrent operating lease liabilities, respectively.
The Company's finance leases are included within Property, plant and equipment with the related liabilities included within Long-term debt.
ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term.
The Company tests for impairment of assets whenever events and circumstances indicate that such assets might be impaired. During the six months ended June 30, 2022, the Company recognized non-cash impairment charges of $1.6 million, including $1.4 million related to ROU assets, and $0.2 million related to leasehold improvements as a result of proactive decisions by management to abandon and sublease a number of operating leases in connection with strategic actions to streamline the Company’s real estate footprint as part of the Company’s modernization initiatives. During the six months ended June 30, 2021, the Company recognized non-cash impairment charges of $37.7 million, including $28.8 million related to ROU assets, and $8.9 million related to leasehold improvements also as a result of the proactive decisions by management discussed above.
The implicit rate within the Company's lease agreements is generally not determinable. As such, the Company uses the incremental borrowing rate ("IBR") to determine the present value of lease payments at the commencement of the lease. The IBR, as defined in ASC 842, is "the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment."
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table provides supplemental cash flow information related to leases for the periods presented:
| | | | | | | | | | | |
| Six Months Ended June 30, |
| (In thousands) | 2022 | | 2021 |
| Cash paid for amounts included in measurement of operating lease liabilities | $ | 76,153 | | | $ | 65,150 | |
Lease liabilities arising from obtaining right-of-use assets(1) | 135,128 | | | 17,156 | |
(1) Lease liabilities from obtaining right-of-use assets include new leases entered into during the six months ended June 30, 2022 and 2021, respectively.
The Company reflects changes in the lease liability and changes in the ROU asset on a net basis in the Statements of Cash Flows. The non-cash operating lease expense was $43.3 million and $49.4 million for the six months ended June 30, 2022 and June 30, 2021, respectively.
NOTE 4– PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
Property, Plant and Equipment
The Company’s property, plant and equipment consisted of the following classes of assets as of June 30, 2022 and December 31, 2021, respectively:
| | | | | | | | | | | |
| (In thousands) | June 30,
2022 | | December 31,
2021 |
| Land, buildings and improvements | $ | 319,463 | | | $ | 355,474 | |
| Towers, transmitters and studio equipment | 195,860 | | | 180,571 | |
| Computer equipment and software | 557,926 | | | 521,872 | |
| Furniture and other equipment | 37,572 | | | 35,390 | |
| Construction in progress | 68,588 | | | 64,732 | |
| 1,179,409 | | | 1,158,039 | |
| Less: accumulated depreciation | 463,168 | | | 375,946 | |
| Property, plant and equipment, net | $ | 716,241 | | | $ | 782,093 | |
Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets primarily consist of Federal Communications Commission ("FCC") broadcast licenses in its Multiplatform Group segment.
Other Intangible Assets
Other intangible assets consists of definite-lived intangible assets, which primarily include customer and advertiser relationships, talent and representation contracts, trademarks and tradenames and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time that the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at amortized cost.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of June 30, 2022 and December 31, 2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | June 30, 2022 | | December 31, 2021 |
| Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
| Customer / advertiser relationships | $ | 1,646,402 | | | $ | (546,135) | | | $ | 1,646,402 | | | $ | (459,620) | |
| Talent and other contracts | 338,900 | | | (138,956) | | | 338,900 | | | (117,337) | |
| Trademarks and tradenames | 335,862 | | | (105,328) | | | 335,862 | | | (88,252) | |
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| Other | 17,794 | | | (8,447) | | | 17,794 | | | (7,149) | |
| Total | $ | 2,338,958 | | | $ | (798,866) | | | $ | 2,338,958 | | | $ | (672,358) | |
Total amortization expense related to definite-lived intangible assets for the Company for the three months ended June 30, 2022 and 2021 was $63.4 million and $87.4 million, respectively. Total amortization expense related to definite-lived intangible assets for the Company for the six months ended June 30, 2022 and 2021 was $126.5 million and $153.7 million, respectively.
As acquisitions and dispositions occur in the future, amortization expense may vary. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:
| | | | | |
| (In thousands) | |
| 2023 | $ | 244,387 | |
| 2024 | 243,194 | |
| 2025 | 212,001 | |
| 2026 | 200,251 | |
| 2027 | 176,171 | |
Goodwill
The following table presents the changes in the carrying amount of goodwill:
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| (In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Consolidated |
| Balance as of January 1, 2021 | $ | 1,462,217 | | | $ | 579,319 | | | $ | 104,399 | | | $ | 2,145,935 | |
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| Acquisitions | 1,267 | | | 168,031 | | | — | | | 169,298 | |
| Dispositions | (1,446) | | | — | | | — | | | (1,446) | |
| Foreign currency | — | | | — | | | (206) | | | (206) | |
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| Balance as of December 31, 2021 | $ | 1,462,038 | | | $ | 747,350 | | | $ | 104,193 | | | $ | 2,313,581 | |
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| Dispositions | (15) | | | — | | | — | | | (15) | |
| Foreign currency | — | | | — | | | (217) | | | (217) | |
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Balance as of June 30, 2022 | $ | 1,462,023 | | | $ | 747,350 | | | $ | 103,976 | | | $ | 2,313,349 | |
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 – LONG-TERM DEBT
Long-term debt outstanding for the Company as of June 30, 2022 and December 31, 2021 consisted of the following:
| | | | | | | | | | | |
| (In thousands) | June 30, 2022 | | December 31, 2021 |
| Term Loan Facility due 2026 | $ | 1,864,032 | | | $ | 1,864,032 | |
| Incremental Term Loan Facility due 2026 | 401,220 | | | 401,220 | |
Asset-based Revolving Credit Facility due 2023(1) | — | | | — | |
Asset-based Revolving Credit Facility due 2027(1)(2) | — | | | — | |
6.375% Senior Secured Notes due 2026 | 800,000 | | | 800,000 | |
5.25% Senior Secured Notes due 2027 | 750,000 | | | 750,000 | |
4.75% Senior Secured Notes due 2028 | 500,000 | | | 500,000 | |
Other secured subsidiary debt(3) | 4,577 | | | 5,350 | |
| Total consolidated secured debt | 4,319,829 | | | 4,320,602 | |
| | | |
8.375% Senior Unsecured Notes due 2027(4) | 1,336,450 | | | 1,450,000 | |
| Other unsecured subsidiary debt | 69 | | | 90 | |
| Original issue discount | (12,027) | | | (13,454) | |
| Long-term debt fees | (16,902) | | | (18,370) | |
| Total debt | 5,627,419 | | | 5,738,868 | |
| Less: Current portion | 675 | | | 673 | |
| Total long-term debt | $ | 5,626,744 | | | $ | 5,738,195 | |
(1)On May 17, 2022, we entered into a $450.0 million New ABL Facility, maturing in 2027, which refinanced and replaced in its entirety the Existing ABL Facility. Refer to the 'Asset-based Revolving Credit Facility due 2027' section below for more information.
(2)As of June 30, 2022, the New ABL Facility had a facility size of $450.0 million, no outstanding borrowings and $29.4 million of outstanding letters of credit, resulting in $420.6 million of borrowing base availability.
(3)Other secured subsidiary debt consists of finance lease obligations maturing at various dates from 2023 through 2045.
(4)During the three months ended June 30, 2022, we repurchased $113.5 million aggregate principal amount of iHeartCommunications Inc.'s 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash, excluding accrued interest, via open market transactions. The repurchased notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $8.2 million.
The Company’s weighted average interest rate was 5.9% and 5.4% as of June 30, 2022 and December 31, 2021, respectively. The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.9 billion and $5.9 billion as of June 30, 2022 and December 31, 2021, respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as either Level 1 or Level 2.
Asset-based Revolving Credit Facility due 2027
On May 17, 2022, iHeartCommunications, Inc., as borrower, entered into a Credit Agreement (the “New ABL Credit Agreement”) with iHeartMedia Capital I, LLC, the direct parent of iHeartCommunications, Inc., as parent guarantor, certain subsidiaries of iHeartCommunications, Inc. party thereto, Bank of America, N.A., as administrative and collateral agent, and each other lender party thereto from time to time, governing a new $450.0 million New ABL Facility, maturing in 2027, which refinanced and replaced in its entirety the Existing ABL Facility. The New ABL Facility includes a letter of credit sub-facility and a swingline loan sub-facility.
Size and Availability
The New ABL Facility provides for a senior secured asset-based revolving credit facility in the aggregate principal amount of up to $450.0 million, with amounts available from time to time (including in respect of letters of credit) equal to the lesser of (A) the borrowing base, which equals the sum of (i) 90.0% of the eligible accounts receivable of iHeartCommunications and the
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
subsidiary guarantors and (ii) 100% of qualified cash, each subject to customary reserves and eligibility criteria, and (B) the aggregate revolving credit commitments. Subject to certain conditions, iHeartCommunications may at any time request one or more increases in the amount of revolving credit commitments, in an amount up to the sum of (x) $150.0 million and (y) the amount by which the borrowing base exceeds the aggregate revolving credit commitments. As of June 30, 2022, the New ABL Facility had a facility size of $450.0 million, no outstanding borrowings and $29.4 million of outstanding letters of credit, resulting in $420.6 million of borrowing base availability.
Interest Rate and Fees
Borrowings under the New ABL Facility bear interest at a rate per annum equal to the applicable rate plus, at iHeartCommunications’ option, either (1) a base rate, (2) a term secured overnight financing rate ("SOFR") (which includes a credit spread adjustment of 10 basis points) or (3) for certain foreign currencies, a eurocurrency rate. The applicable margin for borrowings under the New ABL Facility range from 1.25% to 1.75% for both eurocurrency and term SOFR borrowings and from 0.25% to 0.75% for base-rate borrowings, in each case, depending on average excess availability under the New ABL Facility based on the most recently ended fiscal quarter.
In addition to paying interest on outstanding principal under the New ABL Facility, iHeartCommunications is required to pay a commitment fee to the lenders under the New ABL Facility in respect of the unutilized commitments thereunder. The commitment fee rate ranges from 0.25% to 0.375% per annum dependent upon average unused commitments during the prior quarter. iHeartCommunications may also pay customary letter of credit fees.
Maturity
Borrowings under the New ABL Facility will mature, and commitments thereunder will terminate, on May 17, 2027.
Prepayments
If at any time, the sum of the outstanding amounts under the New ABL Facility exceeds the lesser of (i) the borrowing base and (ii) the aggregate commitments under the facility (such lesser amount, the “line cap”), iHeartCommunications is required to repay outstanding loans and cash collateralize letters of credit in an aggregate amount equal to such excess. iHeartCommunications may voluntarily repay outstanding loans under the New ABL Facility at any time without premium or penalty, other than customary “breakage” costs with respect to eurocurrency rate loans. Any voluntary prepayments made by iHeartCommunications will not reduce iHeartCommunications’ commitments under the New ABL Facility.
Guarantees and Security
The New ABL Facility is guaranteed by the guarantors of iHeartCommunications’ existing Term Loan Facility. All obligations under the New ABL Facility, and the guarantees of those obligations, are secured by a perfected security interest in the accounts receivable and related assets of iHeartCommunications’ and all of the guarantors’ accounts receivable, qualified cash and related assets and proceeds thereof that is senior to the security interest of iHeartCommunications’ existing Term Loan Facility in such accounts receivable, qualified cash and related assets and proceeds thereof, subject to permitted liens and certain exceptions.
Certain Covenants and Events of Default
If borrowing availability is less than the greater of (a) $40.0 million and (b) 10% of the aggregate commitments under the New ABL Facility, in each case, for two consecutive business days (a “Trigger Event”), iHeartCommunications will be required to comply with a minimum fixed charge coverage ratio of at least 1.00 to 1.00 for fiscal quarters ending on or after the occurrence of the Trigger Event, and must continue to comply with this minimum fixed charge coverage ratio until borrowing availability exceeds the greater of (x) $40.0 million and (y) 10% of the aggregate commitments under the New ABL Facility, in each case, for 20 consecutive calendar days, at which time the Trigger Event shall no longer be deemed to be occurring. As of June 30, 2022, no Trigger Event had occurred, and iHeartCommunications was not required to comply with this minimum fixed charge coverage ratio.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Surety Bonds, Letters of Credit and Guarantees
As of June 30, 2022, the Company and its subsidiaries had outstanding surety bonds, commercial standby letters of credit and bank guarantees of $8.3 million, $29.8 million and $0.2 million, respectively. These surety bonds, letters of credit and bank guarantees relate to various operational matters including insurance, lease and performance bonds as well as other items.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.
Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial/contract disputes; defamation matters; employment and benefits related claims; intellectual property claims; real estate matters; governmental investigations; and tax disputes.
Alien Ownership Restrictions and FCC Declaratory Ruling
The Communications Act and FCC regulation prohibit foreign entities and individuals from having direct or indirect ownership or voting rights of more than 25 percent in a corporation controlling the licensee of a radio broadcast station unless the FCC finds greater foreign ownership to be in the public interest. On November 5, 2020, the FCC issued a declaratory ruling, which permits the Company to be up to 100% foreign owned, subject to certain conditions, as described further in Note 8, Stockholders' Equity (the "2020 Declaratory Ruling").
NOTE 7 – INCOME TAXES
The Company’s income tax benefit (expense) for the three and six months ended June 30, 2022 and the three and six months ended June 30, 2021 consisted of the following components:
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Current tax expense | $ | (38,581) | | | $ | (3,477) | | | $ | (42,160) | | | $ | (5,066) | |
| Deferred tax benefit (expense) | 36,799 | | | (20,972) | | | 60,587 | | | (99,318) | |
| Income tax benefit (expense) | $ | (1,782) | | | $ | (24,449) | | | $ | 18,427 | | | $ | (104,384) | |
The effective tax rates for the three and six months ended June 30, 2022 were 10.5% and 35.4%, respectively. The effective tax rates were primarily impacted by the forecasted increase in valuation allowance against certain deferred tax assets, related primarily to disallowed interest expense carryforwards and net operating loss carryforwards, due to uncertainty regarding the Company’s ability to utilize those assets in future periods.
The effective tax rates for the three and six months ended June 30, 2021 were (325.5)% and (61.5)%, respectively. The effective tax rates were primarily impacted by the deferred tax expense recorded for the valuation allowance against certain deferred tax assets for disallowed interest expense and net operating loss carryforwards due to the uncertainty of the Company’s ability to utilize those assets in future periods.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 – STOCKHOLDERS' EQUITY
Pursuant to the Company's 2019 Equity Incentive Plan (the "2019 Plan"), the Company historically granted restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals. On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the “2021 Plan”) was approved by stockholders and replaced the 2019 Plan. Pursuant to our 2021 Plan, we will continue to grant equity awards covering shares of the Company's Class A common stock to certain key individuals.
Share-based Compensation
Share-based compensation expenses are recorded in Selling, general and administrative expenses and were $8.6 million and $5.9 million for the Company for the three months ended June 30, 2022 and June 30, 2021, respectively. Share-based compensation expenses were $14.1 million and $11.6 million for the Company for the six months ended June 30, 2022 and June 30, 2021, respectively.
In August 2020, the Company issued performance-based restricted stock units ("Performance RSUs") to certain key employees. Such Performance RSUs vest upon the achievement of critical operational (cost savings) improvements and specific environmental, social and governance initiatives, which were being measured over an approximately 18-month period from the date of issuance. In the three and six months ended June 30, 2021, the Company recognized $0.5 million and $1.0 million in relation to these Performance RSUs.
On March 28, 2022, the Company issued performance-based restricted stock units ("Q1 2022 Performance RSUs") to certain key employees. Such Q1 2022 Performance RSUs vest upon the achievement of total stockholder return goals and continued service, which are being measured over an approximately 50-month period from the date of issuance. In the three and six months ended June 30, 2022, the Company recognized $0.8 million in relation to these Q1 2022 Performance RSUs.
On May 9, 2022, the Company issued performance-based restricted stock units ("Q2 2022 Performance RSUs") and restricted stock units ("2022 RSUs") to certain key employees. Such Q2 2022 Performance RSUs vest upon the achievement of certain total stockholder return goals, Adjusted EBITDA goals, Diversity, Equity and Inclusion goals, and continued service. Such 2022 RSUs vest upon continued service. These awards are being recognized ratably over a 3-year period from the date of issuance. In the three and six months ended June 30, 2022, the Company recognized $0.7 million in relation to these Q2 2022 Performance RSUs.
As of June 30, 2022, there was $62.0 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions. This cost is expected to be recognized over a weighted average period of approximately 3.8 years. In addition, as of June 30, 2022, there were unrecognized compensation costs of $11.7 million for the Q1 2022 Performance RSUs and $14.7 million for the Q2 2022 Performance RSUs related to unvested share-based compensation arrangements that will vest based on certain performance and service conditions. These costs will be recognized over a 50-month period from the date of issuance for the Q1 2022 Performance RSUs and over the 3-year period from the date of issuance for the Q2 2022 Performance RSUs.
Common Stock and Special Warrants
The Company is authorized to issue 2,100,000,000 shares, consisting of (a) 1,000,000,000 shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”), (b) 1,000,000,000 shares of Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”), and (c) 100,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the Company's Class A Common Stock, Class B Common Stock and Special Warrants issued as of June 30, 2022:
| | | | | | | | |
| June 30,
2022 | | | |
| | | | |
Class A Common Stock, par value $.001 per share, 1,000,000,000 shares authorized | 122,068,221 | | | | |
Class B Common Stock, par value $.001 per share, 1,000,000,000 shares authorized | 21,391,972 | | | | |
| Special Warrants | 5,293,055 | | | | |
| Total Class A Common Stock, Class B Common Stock and Special Warrants issued | 148,753,248 | | | | |
During the three and six months ended June 30, 2022, stockholders converted 38,528 and 198,220 shares of the Class B common stock into Class A common stock. During the three and six months ended June 30, 2021, stockholders converted 5,433,680 and 5,587,725 shares of the Class B common stock into Class A common stock.
Special Warrants
Each Special Warrant issued under the special warrant agreement entered into in connection with the Company's emergence from bankruptcy in 2019 may be exercised by its holder to purchase one share of Class A common stock or Class B common stock at an exercise price of $0.001 per share, unless the Company in its sole discretion believes such exercise would, alone or in combination with any other existing or proposed ownership of common stock, result in, subject to certain exceptions, (a) such exercising holder owning more than 4.99 percent of the Company's outstanding Class A common stock, (b) more than 22.5 percent of the Company's capital stock or voting interests being owned directly or indirectly by foreign individuals or entities, (c) the Company exceeding any other applicable foreign ownership threshold or (d) violation of any provision of the Communications Act or restrictions on ownership or transfer imposed by the Company's certificate of incorporation or the decisions, rules and policies of the FCC. Any holder exercising Special Warrants must complete and timely deliver to the warrant agent the required exercise forms and certifications required under the special warrant agreement. The Communications Act and FCC regulations prohibit foreign entities or individuals from indirectly (i.e., through a parent company) owning or voting more than 25 percent of a licensee’s equity, unless the FCC determines that greater indirect foreign ownership is in the public interest. As described further in Note 6 above, November 5, 2020, the FCC issued the 2020 Declaratory Ruling, which permits the Company to be up to 100% foreign owned.
During the three and six months ended June 30, 2022, stockholders exercised 14 and 11,375 Special Warrants for an equivalent number of shares of Class A common stock. There were no Special Warrants exercised for shares of Class B common stock during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, stockholders exercised 14,694 and 47,136,441 Special Warrants for an equivalent number of shares of Class A common stock. During the six months ended June 30, 2021, stockholders exercised 22,337,312 Special Warrants for an equivalent number of shares of Class B common stock.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Computation of Income (Loss) per Share
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands, except per share data) | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| NUMERATOR: | | | | | | | |
| Net income (loss) attributable to the Company – common shares | $ | 14,401 | | | $ | (32,286) | | | $ | (34,181) | | | $ | (274,009) | |
| | | | | | | |
DENOMINATOR(1): | | | | | | | |
| Weighted average common shares outstanding - basic | 148,050 | | | 146,509 | | | 147,783 | | | 146,362 | |
Stock options and restricted stock(2): | 1,081 | | | — | | | — | | | — | |
| Weighted average common shares outstanding - diluted | 149,131 | | | 146,509 | | | 147,783 | | | 146,362 | |
| | | | | | | |
| Net income (loss) attributable to the Company per common share: | | | | | | | |
| Basic | $ | 0.10 | | | $ | (0.22) | | | $ | (0.23) | | | $ | (1.87) | |
| Diluted | $ | 0.10 | | | $ | (0.22) | | | $ | (0.23) | | | $ | (1.87) | |
(1) All of the outstanding Special Warrants are included in both the basic and diluted weighted average common shares outstanding of the Company for the three and six months ended June 30, 2022 and 2021.
(2) Outstanding equity awards representing 6.2 million and 10.8 million shares of Class A common stock of the Company for the three months ended June 30, 2022 and 2021, respectively, and 10.4 million and 10.8 million for the six months ended June 30, 2022 and 2021, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive.
NOTE 9 – SEGMENT DATA
The Company’s primary businesses are included in its Multiplatform Group and Digital Audio Group segments. Revenue and expenses earned and charged between Multiplatform Group, Digital Audio Group, Corporate and the Company's Audio & Media Services Group are eliminated in consolidation. The Multiplatform Group provides media and entertainment services via broadcast delivery and also includes the Company’s events and national syndication businesses. The Digital Audio Group provides media and entertainment services via digital delivery. The Audio & Media Services Group provides other audio and media services, including the Company’s media representation business (Katz Media) and its provider of scheduling and broadcast software (RCS). Corporate includes infrastructure and support, including executive, information technology, human resources, legal, finance and administrative functions for the Company’s businesses. Share-based payments are recorded in Selling, general and administrative expense.
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present the Company's segment results for the Company for the three and six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Segments | | | | | | |
| (In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Corporate and other reconciling items | | Eliminations | | Consolidated |
| Three Months Ended June 30, 2022 |
| Revenue | $ | 633,300 | | | $ | 252,561 | | | $ | 71,065 | | | $ | — | | | $ | (2,921) | | | $ | 954,005 | |
| | | | | | | | | | | |
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Operating expenses(1) | 438,804 | | | 173,678 | | | 48,995 | | | 58,264 | | | (2,921) | | | 716,820 | |
Segment Adjusted EBITDA(2) | $ | 194,496 | | | $ | 78,883 | | | $ | 22,070 | | | $ | (58,264) | | | $ | — | | | $ | 237,185 | |
| Depreciation and amortization | | | | | | | | | | | (110,788) | |
| Impairment charges | | | | | | | | | | | (245) | |
| Other operating expense, net | | | | | | | | | | | (15,664) | |
| Restructuring expenses | | | | | | | | | | | (19,009) | |
| Share-based compensation expense | | | | | | | | | | | (8,610) | |
| Operating income | | | | | | | | | | | $ | 82,869 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Intersegment revenues | $ | 167 | | | $ | 1,376 | | | $ | 1,378 | | | $ | — | | | $ | — | | | $ | 2,921 | |
| Capital expenditures | 36,378 | | | 5,912 | | | 2,423 | | | 4,940 | | | — | | | 49,653 | |
| Share-based compensation expense | — | | | — | | | — | | | 8,610 | | | — | | | 8,610 | |
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| Segments | | | | | | |
| (In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Corporate and other reconciling items | | Eliminations | | Consolidated |
| Three Months Ended June 30, 2021 |
| Revenue | $ | 605,850 | | | $ | 197,930 | | | $ | 61,175 | | | $ | — | | | $ | (3,350) | | | $ | 861,605 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Operating expenses(1) | 424,452 | | | 143,640 | | | 40,704 | | | 71,651 | | | (3,350) | | | 677,097 | |
Segment Adjusted EBITDA(2) | $ | 181,398 | | | $ | 54,290 | | | $ | 20,471 | | | $ | (71,651) | | | $ | — | | | $ | 184,508 | |
| Depreciation and amortization | | | | | | | | | | | (127,945) | |
| Impairment charges | | | | | | | | | | | — | |
| Other operating expense, net | | | | | | | | | | | (12,379) | |
| Restructuring expenses | | | | | | | | | | | (10,155) | |
| Share-based compensation expense | | | | | | | | | | | (5,903) | |
| Operating income | | | | | | | | | | | $ | 28,126 | |
| | | | | | | | | | | |
| Intersegment revenues | $ | 168 | | | $ | 1,178 | | | $ | 2,004 | | | $ | — | | | $ | — | | | $ | 3,350 | |
| Capital expenditures | 21,371 | | | 6,286 | | | 1,144 | | | 3,310 | | | — | | | 32,111 | |
| Share-based compensation expense | — | | | — | | | — | | | 5,903 | | | — | | | 5,903 | |
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Segments | | | | | | |
| (In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Corporate and other reconciling items | | Eliminations | | Consolidated |
| Six Months Ended June 30, 2022 |
| Revenue | $ | 1,204,460 | | | $ | 466,780 | | | $ | 131,922 | | | $ | — | | | $ | (5,699) | | | $ | 1,797,463 | |
Operating expenses(1) | 876,057 | | | 335,389 | | | 93,465 | | | 115,848 | | | (5,699) | | | 1,415,060 | |
Segment Adjusted EBITDA(2) | $ | 328,403 | | | $ | 131,391 | | | $ | 38,457 | | | $ | (115,848) | | | $ | — | | | $ | 382,403 | |
| Depreciation and amortization | | | | | | | | | | | (224,839) | |
| Impairment charges | | | | | | | | | | | (1,579) | |
| Other operating expense, net | | | | | | | | | | | (16,534) | |
| Restructuring expenses | | | | | | | | | | | (30,102) | |
| Share-based compensation expense | | | | | | | | | | | (14,145) | |
| Operating income | | | | | | | | | | | $ | 95,204 | |
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| Intersegment revenues | $ | 335 | | | $ | 2,645 | | | $ | 2,719 | | | $ | — | | | $ | — | | | $ | 5,699 | |
| Capital expenditures | 48,716 | | | 11,068 | | | 4,122 | | | 8,304 | | | — | | | 72,210 | |
| Share-based compensation expense | — | | | — | | | — | | | 14,145 | | | — | | | 14,145 | |
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| Segments | | | | | | |
| (In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Corporate and other reconciling items | | Eliminations | | Consolidated |
| Six Months Ended June 30, 2021 |
| Revenue | $ | 1,103,747 | | | $ | 355,483 | | | $ | 116,312 | | | $ | — | | | $ | (7,272) | | | $ | 1,568,270 | |
Operating expenses(1) | 817,558 | | | 261,182 | | | 80,492 | | | 129,555 | | | (7,272) | | | 1,281,515 | |
Segment Adjusted EBITDA(2) | $ | 286,189 | | | $ | 94,301 | | | $ | 35,820 | | | $ | (129,555) | | | $ | — | | | $ | 286,755 | |
| Depreciation and amortization | | | | | | | | | | | (235,308) | |
| Impairment charges | | | | | | | | | | | (37,744) | |
| Other operating expense, net | | | | | | | | | | | (15,150) | |
| Restructuring expenses | | | | | | | | | | | (35,195) | |
| Share-based compensation expense | | | | | | | | | | | (11,588) | |
| Operating loss | | | | | | | | | | | $ | (48,230) | |
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| Intersegment revenues | $ | 335 | | | $ | 3,072 | | | $ | 3,865 | | | $ | — | | | $ | — | | | $ | 7,272 | |
| Capital expenditures | 31,440 | | | 11,711 | | | 2,191 | | | 5,719 | | | — | | | 51,061 | |
| Share-based compensation expense | — | | | — | | | — | | | 11,588 | | | — | | | 11,588 | |
(1) Consolidated operating expenses consist of Direct operating expenses and Selling, general and administrative expenses and exclude Restructuring expenses, share-based compensation expenses and depreciation and amortization.
(2) For a definition of Adjusted EBITDA for the consolidated company and a reconciliation to Operating income (loss), the most closely comparable GAAP measure, and to Net income (loss), please see "Reconciliation of Operating Income (Loss) to Adjusted EBITDA" and "Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA" in Item 2 of this Quarterly Report on Form 10-Q. Beginning on January 1, 2021, Segment Adjusted EBITDA became the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Format of Presentation
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related footnotes contained in Item 1 of this Quarterly Report on Form 10-Q of iHeartMedia, Inc. (the "Company," "iHeartMedia," "we," "our," or "us").
Our reportable segments are:
▪the Multiplatform Group, which includes our Broadcast radio, Networks and Sponsorships and Events businesses;
▪the Digital Audio Group, which includes our Digital businesses, including Podcasting; and
▪the Audio & Media Services Group, which includes Katz Media Group (“Katz Media”), our full-service media representation business, and RCS Sound Software ("RCS"), a provider of scheduling and broadcast software and services.
These reporting segments reflect how senior management operates the Company. This structure provides visibility into the underlying performance, results, and margin profiles of our distinct businesses and enables senior management to monitor trends at the operational level and address opportunities or issues as they arise via regular review of segment-level results and forecasts with operational leaders.
Additionally, Segment Adjusted EBITDA is the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as Revenue less operating expenses, excluding Restructuring expenses (as defined below) and share-based compensation expenses.
We operate as a company with multiple platforms including radio, digital, podcasting, networks and events, as well as ad technology capabilities. We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience. We believe the presentation of our results by segment provides additional insight into our broadcast radio business and our fast-growing digital business. We believe that our ability to generate cash flow from operations from our business initiatives and our current cash on hand will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next twelve months.
Description of our Business
Our strategy centers on delivering entertaining and informative content where our listeners want to find us across our various platforms.
Multiplatform Group
The primary source of revenue for our Multiplatform Group is from selling local and national advertising time on our radio stations, with contracts typically less than one year in duration. The programming formats of our radio stations are designed to reach audiences with targeted demographic characteristics. We work closely with our advertising and marketing partners to develop tools and leverage data to enable advertisers to effectively reach their desired audiences. Our Multiplatform Group also generates revenue from network syndication, nationally recognized events and other miscellaneous transactions.
Management looks at our Multiplatform Group's operations’ overall revenue as well as the revenue from each type of advertising, including local advertising, which is sold predominately in a station’s local market, and national advertising, which is sold across multiple markets. Local advertising is sold by each radio station’s sales staff while national advertising is sold by our national sales team. We periodically review and refine our selling structures in all regions and markets in an effort to maximize the value of our offering to advertisers and, therefore, our revenue.
Management also looks at Multiplatform Group's revenue by region and market size. Typically, larger markets can reach larger audiences with wider demographics than smaller markets. Additionally, management reviews our share of audio advertising revenues in markets where such information is available, as well as our share of target demographics listening in an average quarter hour. This metric gauges how well our formats are attracting and retaining listeners.
Management also monitors revenue generated through our programmatic ad-buying platform, and our data analytics advertising product, SmartAudio, to measure the success of our enhanced marketing optimization tools. We have made significant investments so we can provide the same ad-buying experience that once was only available from digital-only companies and enable our clients to better understand how our assets can successfully reach their target audiences.
Management monitors average advertising rates and cost per mille, the cost of every 1,000 advertisement impressions (“CPM”), which are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent ratings service. In addition, our advertising rates are influenced by the time of day the advertisement airs, with morning and evening drive-time hours typically priced the highest. Our price and yield information systems enable our station managers and sales teams to adjust commercial inventory and pricing based on local market demand, as well as to manage and monitor different commercial durations in order to provide more effective advertising for our customers at what we believe are optimal prices given market conditions. Yield is measured by management in a variety of ways, including revenue earned divided by minutes of advertising sold.
A portion of our Multiplatform Group segment’s expenses vary in connection with changes in revenue. These variable expenses primarily relate to costs in our programming and sales departments, including profit sharing fees and commissions, and bad debt. Our content costs, including music license fees for music delivered via broadcast, vary with the volume and mix of songs played on our stations.
Digital Audio Group
The primary source of revenue in the Digital Audio Group segment is the sale of advertising on the Company’s iHeartRadio mobile application and website, station websites, and podcast network. Revenues for advertising spots are recognized over time based on impressions delivered or time elapsed, depending upon the terms of the contract. Digital Audio Group’s contracts with advertisers are typically a year or less in duration and are generally billed monthly upon satisfaction of the performance obligations.
Through our Digital Audio Group, we continue to expand the choices for listeners. We derive revenue in this segment by developing and delivering our content and selling advertising across multiple digital distribution channels, including via our iHeartRadio mobile application, our station websites and other digital platforms that reach national, regional and local audiences.
Our strategy has enabled us to extend our leadership in the rapidly growing podcasting sector, and iHeartMedia is the number one podcast publisher in America. Our reach now extends across more than 250 platforms and 2,000 different connected devices, and our digital business is comprised of streaming, subscription, display advertisements, and other content that is disseminated over digital platforms.
A portion of our Digital Audio Group segment’s expenses vary in connection with changes in revenue. These variable expenses primarily relate to our content costs including profit sharing fees and third-party content costs, as well as sales commissions and bad debt. Certain of our content costs, including digital music performance royalties, vary with the volume of listening hours on our digital platforms.
Audio & Media Services Group
Audio & Media Services Group revenue is generated by services provided to broadcast industry participants through our Katz Media and RCS businesses. As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast software and media streaming, along with research services for radio stations, broadcast television stations, cable channels, record labels, ad agencies and Internet stations worldwide.
Economic Conditions
Our advertising revenue is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP. A recession or downturn in the U.S. economy could have a significant impact on the Company’s ability to generate revenue.
COVID-19
Beginning in March 2020 and continuing in the following months, we saw a sharp decline in each of our Broadcast radio, Networks and Sponsorships revenue streams as a result of the impact of the coronavirus pandemic ("COVID-19") and the resulting impact on the U.S. economy. Our Multiplatform Group revenues significantly increased during 2021, and continued to increase in the first half of 2022 compared to the first half of 2021 as a result of continued recovery from the impact of COVID-19. Our Digital Audio Group revenues, including podcasting, have continued to grow each quarter during COVID-19 and throughout the recovery. Our Audio & Media Services Group revenues have increased for the first half of 2022 compared to the first half of 2021 mainly due to the continued recovery from the impact of COVID-19. Refer to Note 1, Basis of Presentation, for more information regarding COVID-19 and its impact on our financial statements.
Cost Savings Initiatives
We have implemented key modernization initiatives and operating-expense-saving initiatives to take advantage of the significant investments we have made in new technologies to deliver incremental cost efficiencies, including initiatives to streamline our real estate footprint, and we continue to explore opportunities for further efficiencies.
Impairment Charges
As part of our operating-expense-savings initiatives, we have taken proactive steps to streamline our real estate footprint and reduce related lease and operating expenses incurred by the Company. These strategic actions typically result in impairment charges due to the write-down of the affected right-of-use assets and related fixed assets, including leasehold improvements. For the six months ended June 30, 2022 and 2021, we recognized non-cash impairment charges of $1.6 million and $37.7 million, respectively, as a result of these cost-savings initiatives.
Executive Summary
Our revenues for the second quarter of 2022 increased across our Multiplatform Group, Digital Audio Group and Audio & Media Services Group segments as a result of the continued recovery from the impacts of the COVID-19 pandemic and the continued increased demand for digital advertising, including podcasting.
The key developments that impacted our business during the quarter are summarized below:
•Consolidated Revenue of $954.0 million increased $92.4 million, or 10.7% during the quarter ended June 30, 2022 compared to Consolidated Revenue of $861.6 million in the prior year's second quarter.
•Revenue and Segment Adjusted EBITDA from our Multiplatform Group increased $27.5 million and $13.1 million compared to the prior year's second quarter, respectively.
•Revenue and Segment Adjusted EBITDA from our Digital Audio Group increased $54.6 million and $24.6 million compared to the prior year's second quarter, respectively.
•Revenue and Segment Adjusted EBITDA from our Audio & Media Services Group increased $9.9 million and $1.6 million compared to the prior year's second quarter, respectively.
•Operating income of $82.9 million increased $54.8 million from $28.1 million in the prior year’s second quarter.
•Net income of $15.2 million increased $47.2 million from a Net loss of $32.0 million in the prior year's second quarter.
•Cash flows provided by operating activities of $155.8 million increased from $29.1 million in the prior year's second quarter.
•Adjusted EBITDA(1) of $237.2 million, was up $52.7 million from $184.5 million in prior year's second quarter.
•Free cash flow(2) of $106.1 million increased from $(3.0) million in the prior year's second quarter.
The table below presents a summary of our historical results of operations for the periods presented:
| | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | |
| 2022 | | 2021 | | |
| Revenue | $ | 954,005 | | | $ | 861,605 | | | |
| Operating income | 82,869 | | | 28,126 | | | |
| Net income (loss) | 15,182 | | | (31,960) | | | |
| Cash provided by operating activities | 155,801 | | | 29,129 | | | |
| | | | | |
Adjusted EBITDA(1) | $ | 237,185 | | | $ | 184,508 | | | |
Free cash flow(2) | 106,148 | | | (2,982) | | | |
| | | | | |
| | | | | |
(1) For a definition of Adjusted EBITDA and a reconciliation to Operating income, the most closely comparable GAAP measure, and to Net income (loss), please see "Reconciliation of Operating Income (Loss) to Adjusted EBITDA" and "Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA" in this MD&A.
(2) For a definition of Free cash flow and a reconciliation to Cash provided by operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash provided by operating activities to Free cash flow” in this MD&A.
Results of Operations
The tables below present the comparison of our historical results of operations for the three and six months ended June 30, 2022 to the three and six months ended June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | Six Months Ended
June 30, | | |
| 2022 | | 2021 | | 2022 | | 2021 | |
| Revenue | $ | 954,005 | | | $ | 861,605 | | | $ | 1,797,463 | | | $ | 1,568,270 | | | |
| Operating expenses: | | | | | | | | | |
Direct operating expenses (excludes depreciation and amortization) | 365,382 | | | 320,515 | | | 695,906 | | | 613,328 | | | |
Selling, general and administrative expenses (excludes depreciation and amortization) | 379,057 | | | 372,640 | | | 763,401 | | | 714,970 | | | |
| Depreciation and amortization | 110,788 | | | 127,945 | | | 224,839 | | | 235,308 | | | |
| Impairment charges | 245 | | | — | | | 1,579 | | | 37,744 | | | |
| Other operating expense, net | 15,664 | | | 12,379 | | | 16,534 | | | 15,150 | | | |
| Operating income (loss) | 82,869 | | | 28,126 | | | 95,204 | | | (48,230) | | | |
| Interest expense, net | 81,494 | | | 84,887 | | | 160,713 | | | 170,008 | | | |
| Gain on investments, net | 9,590 | | | 49,644 | | | 7,825 | | | 49,835 | | | |
| Equity in loss of nonconsolidated affiliates | (29) | | | (31) | | | (58) | | | (59) | | | |
| Gain on extinguishment of debt | 8,203 | | | — | | | 8,203 | | | — | | | |
| Other expense, net | (2,175) | | | (363) | | | (2,445) | | | (1,170) | | | |
| | | | | | | | | |
| Income (loss) before income taxes | 16,964 | | | (7,511) | | | (51,984) | | | (169,632) | | | |
| Income tax benefit (expense) | (1,782) | | | (24,449) | | | 18,427 | | | (104,384) | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net income (loss) | 15,182 | | | (31,960) | | | (33,557) | | | (274,016) | | | |
Less amount attributable to noncontrolling interest | 781 | | | 326 | | | 624 | | | (7) | | | |
| Net income (loss) attributable to the Company | $ | 14,401 | | | $ | (32,286) | | | $ | (34,181) | | | $ | (274,009) | | | |
The tables below present the comparison of our revenue streams for the three and six months ended June 30, 2022 to the three and six months ended June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | % | | Six Months Ended
June 30, | | % |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
| Broadcast Radio | $ | 463,304 | | | $ | 451,142 | | | 2.7 | % | | $ | 879,785 | | | $ | 809,678 | | | 8.7 | % |
| Networks | 127,532 | | | 123,586 | | | 3.2 | % | | 245,090 | | | 238,672 | | | 2.7 | % |
| Sponsorship and Events | 38,064 | | | 28,585 | | | 33.2 | % | | 71,665 | | | 50,978 | | | 40.6 | % |
| Other | 4,400 | | | 2,537 | | | 73.4 | % | | 7,920 | | | 4,419 | | | 79.2 | % |
| Multiplatform Group | 633,300 | | | 605,850 | | | 4.5 | % | | 1,204,460 | | | 1,103,747 | | | 9.1 | % |
| Digital, excluding Podcast | 166,880 | | | 144,502 | | | 15.5 | % | | 312,555 | | | 263,703 | | | 18.5 | % |
| Podcast | 85,681 | | | 53,428 | | | 60.4 | % | | 154,225 | | | 91,780 | | | 68.0 | % |
| Digital Audio Group | 252,561 | | | 197,930 | | | 27.6 | % | | 466,780 | | | 355,483 | | | 31.3 | % |
| Audio & Media Services Group | 71,065 | | | 61,175 | | | 16.2 | % | | 131,922 | | | 116,312 | | | 13.4 | % |
| Eliminations | (2,921) | | | (3,350) | | | | | (5,699) | | | (7,272) | | | |
| Revenue, total | $ | 954,005 | | | $ | 861,605 | | | 10.7 | % | | $ | 1,797,463 | | | $ | 1,568,270 | | | 14.6 | % |
Consolidated results for the three and six months ended June 30, 2022 compared to the consolidated results for the three and six months ended June 30, 2021 were as follows:
Revenue
Consolidated revenue increased $92.4 million during the three months ended June 30, 2022 compared to the same period of 2021. The increase in Consolidated revenue is attributable to the continued recovery from the macroeconomic effects of COVID-19 and the continuing growth of our operating businesses. Multiplatform Group revenue increased $27.5 million, or 4.5%, primarily resulting from strengthening demand for broadcast advertising, the return of live events and an increase in political advertising revenue as 2022 is a midterm election year. Digital Audio Group revenue increased $54.6 million, or 27.6%, driven primarily by continuing increases in demand for digital advertising and the continued growth of podcasting. Audio & Media Services revenue increased $9.9 million primarily due to the increase in political advertising revenue as 2022 is a midterm election year and the continued recovery from the impact of COVID-19.
Consolidated revenue increased $229.2 million during the six months ended June 30, 2022 compared to the same period of 2021. The increase in Consolidated revenue is attributable to the continued recovery from the macroeconomic effects of COVID-19 and the continuing growth of our operating businesses. Multiplatform Group revenue increased $100.7 million, primarily resulting from strengthening demand for broadcast advertising, the return of live events during the six months ended June 30, 2022 compared to the same period of 2021, and an increase in political advertising revenue as 2022 is a midterm election year. Digital Audio Group revenue increased $111.3 million, driven primarily by continuing increases in demand for digital advertising, including continued growth in podcasting. Audio & Media Services revenue increased $15.6 million primarily due to the continued recovery from the impact of COVID-19 and an increase in political advertising revenue as 2022 is a midterm election year.
Direct Operating Expenses
Consolidated direct operating expenses increased $44.9 million during the three months ended June 30, 2022 compared to the same period of 2021. The increase in direct operating expenses was primarily driven by higher variable content costs resulting from our significant increase in revenue, including profit sharing expenses, third-party digital costs, and production costs related to the return of local and national live events.
Consolidated direct operating expenses increased $82.6 million during the six months ended June 30, 2022 compared to the same period of 2021. The increase in direct operating expenses was primarily driven by higher variable content costs resulting from our significant increase in revenue, including profit sharing expenses, third-party digital costs, and production costs related to the return of local and national live events.
Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses increased $6.4 million during the three months ended June 30, 2022 compared to the same period of 2021. The increase in Consolidated SG&A expenses was driven primarily by increased employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations, increased sales commission expenses as a result of higher revenue, and increased bad debt expense. These increases were partially offset by lower variable bonus accruals and a decrease in national trade and barter expenses primarily related to the timing of the iHeartRadio Music Awards show.
Consolidated SG&A expenses increased $48.4 million during the six months ended June 30, 2022 compared to the same period of 2021. The increase in SG&A expenses was driven primarily by higher employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations, increased sales commission expenses as a result of higher revenue, increased bad debt and higher trade and barter expense. These increases were partially offset by lower variable bonus accruals.
Depreciation and Amortization
Depreciation and amortization decreased $17.2 million and $10.5 million during the three and six months ended June 30, 2022 compared to the same periods of 2021, primarily as a result of certain intangible assets being fully amortized, partially offset by increased capital expenditures related to IT and real estate optimization initiatives.
Impairment Charges
As part of our operating expense-savings initiatives, we have taken strategic actions to streamline our real estate footprint and related expenses, resulting in impairment charges due to the write-down of right-of-use assets and related fixed
assets, including leasehold improvements. During the six months ended June 30, 2022 and 2021, we recognized non-cash impairment charges of $1.6 million and $37.7 million, respectively, as a result of these cost-savings initiatives.
Other Operating Expense, Net
Other operating expense, net of $15.7 million and $12.4 million for the three months ended June 30, 2022 and 2021, respectively, and Other operating expense, net of $16.5 million and $15.2 million for the six months ended June 30, 2022 and 2021, respectively, relate primarily to non-cash net book losses recognized on asset disposals in connection with our real estate optimization initiatives.
Interest Expense
Interest expense decreased $3.4 million and $9.3 million, respectively, during the three and six months ended June 30, 2022 compared to the same periods of 2021, primarily as a result of the interest rate reduction of our incremental term loan facility as amended in July 2021 and the $250.0 million voluntary repayment made in July 2021 on our term loan credit facilities in connection with the repricing transaction.
Gain on Investments, Net
During the three and six months ended June 30, 2022, we recognized a gain on investments, net of $9.6 million and $7.8 million, respectively, in connection with increases in the value of our investments. During the three and six months ended June 30, 2021, we recognized a gain of $49.6 million and $49.8 million, respectively, primarily related to the sale of our investment in the San Antonio Spurs.
Gain on Extinguishment of Debt
During the three and six months ended June 30, 2022, we recognized a gain on extinguishment of debt of $8.2 million in connection with the open market repurchases of $113.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash.
Income Tax Benefit (Expense)
The effective tax rate for the Company for the three and six months ended June 30, 2022 was 10.5% and 35.4%, respectively. The effective tax rate was primarily impacted by the forecasted increase in valuation allowance against certain deferred tax assets, related primarily to disallowed interest expense carryforwards and net operating loss carryforwards, due to uncertainty regarding the Company’s ability to utilize those assets in future periods.
Net Income (Loss) Attributable to the Company
Net income attributable to the Company of $14.4 million during the three months ended June 30, 2022 increased $46.7 million compared to a Net loss attributable to the Company of $32.3 million during the three months ended June 30, 2021, primarily as a result of the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the continuing growth of our operating businesses.
Net loss attributable to the Company decreased $239.8 million to $34.2 million during the six months ended June 30, 2022 compared to Net loss attributable to the Company of $274.0 million during the six months ended June 30, 2021, primarily as a result of the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the continuing growth of our operating businesses.
Multiplatform Group Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | % | | Six Months Ended
June 30, | | % |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
| Revenue | $ | 633,300 | | | $ | 605,850 | | | 4.5 | % | | $ | 1,204,460 | | | $ | 1,103,747 | | | 9.1 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
Operating expenses(1) | 438,804 | | | 424,452 | | | 3.4 | % | | 876,057 | | | 817,558 | | | 7.2 | % |
| Segment Adjusted EBITDA | $ | 194,496 | | | $ | 181,398 | | | 7.2 | % | | $ | 328,403 | | | $ | 286,189 | | | 14.8 | % |
| Segment Adjusted EBITDA margin | 30.7 | % | | 29.9 | % | | | | 27.3 | % | | 25.9 | % | | |
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
Three Months
Revenue from our Multiplatform Group increased $27.5 million compared to the prior year, primarily as a result of the continued recovery from the impact of COVID-19. Broadcast revenue grew $12.2 million, or 2.7%, year-over-year, driven by higher spot revenue and political advertising revenue as 2022 is a midterm election year, partially offset by lower trade and barter revenue due to the impact of the timing of the iHeartRadio Music Awards show, while Networks grew $3.9 million, or 3.2%, year-over-year. Revenue from Sponsorship and Events increased by $9.5 million, or 33.2%, year-over-year, primarily as a result of the return of live events.
Operating expenses increased $14.4 million, driven primarily by event costs related to the return of live events including the iHeart Country Festival, higher sales commissions in connection with the increase in revenue, and an increase in bad debt expense due to a credit in Q2 2021 related to the recovery of COVID-19 reserves recorded in 2020. These increases were partially offset by a decrease in trade and barter expense due to the impact of the timing of the iHeartRadio Music Awards show and lower variable bonus accruals based on financial performance.
Six Months
Revenue from our Multiplatform Group increased $100.7 million compared to the prior year, primarily as a result of the continued recovery from the impact of COVID-19. Broadcast revenue increased $70.1 million, or 8.7%, year-over-year, while Networks grew $6.4 million, or 2.7%, year-over-year. Revenue from Sponsorship and Events increased by $20.7 million, or 40.6%, year-over-year, primarily as a result of the return of live events.
Operating expenses increased $58.5 million, driven primarily by higher event costs in connection with the return of live events including the iHeart Country Festival, as well as higher sales commission, talent and profit share costs, all driven by higher revenue, and an increase in bad debt expense due to a credit in 2021 related to the recovery of COVID-19 reserves recorded in 2020. These increases were partially offset by lower rent and utilities in connection with our real estate optimization initiatives as well as lower variable bonus accruals based on financial performance.
Digital Audio Group Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | % | | Six Months Ended
June 30, | | % |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
| Revenue | $ | 252,561 | | | $ | 197,930 | | | 27.6 | % | | $ | 466,780 | | | $ | 355,483 | | | 31.3 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
Operating expenses(1) | 173,678 | | | 143,640 | | | 20.9 | % | | 335,389 | | | 261,182 | | | 28.4 | % |
| Segment Adjusted EBITDA | $ | 78,883 | | | $ | 54,290 | | | 45.3 | % | | $ | 131,391 | | | $ | 94,301 | | | 39.3 | % |
| Segment Adjusted EBITDA margin | 31.2 | % | | 27.4 | % | | | | 28.1 | % | | 26.5 | % | | |
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
Three Months
Revenue from our Digital Audio Group increased $54.6 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew $22.4 million, or 15.5%, year-over-year, driven by increased demand for digital advertising as well as Podcast revenue which increased by $32.3 million, or 60.4%, year-over-year, driven by higher revenues from the development of new podcasts as well as growth from existing podcasts. Digital Audio Group revenue increased as a result of general increased demand for digital advertising and the growing popularity of podcasting.
Operating expenses increased $30.0 million due to higher employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations and higher variable content costs, third-party digital costs and profit share expenses due to higher revenue and the development of new podcasts.
Six Months
Revenue from our Digital Audio Group increased $111.3 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew $48.9 million, or 18.5%, year-over-year, driven by increased demand for digital advertising. Podcast revenue also increased by $62.4 million, or 68.0%, year-over-year, driven by higher revenues from the development of new podcasts and growth from existing podcasts. Digital Audio Group revenues increased as a result of general increased demand for digital advertising, the growing popularity of podcasting, the continued addition of premium content to our industry-leading podcast business and our improving ability to monetize our digital audiences and inventory utilizing our sales force and advertising technology platforms, partially driven by investments in the digital space.
Operating expenses increased $74.2 million in connection with our Digital Audio Group’s significant revenue growth, including the impact of variable employee compensation expense, talent costs and third-party digital costs due to higher revenue, as well as increased content and production costs primarily resulting from the development of new podcasts. In addition, operating expenses increased due to investments in key infrastructure to support our growing digital operations.
Audio & Media Services Group Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | % | | Six Months Ended
June 30, | | % |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
| Revenue | $ | 71,065 | | | $ | 61,175 | | | 16.2 | % | | $ | 131,922 | | | $ | 116,312 | | | 13.4 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
Operating expenses(1) | 48,995 | | | 40,704 | | | 20.4 | % | | 93,465 | | | 80,492 | | | 16.1 | % |
| Segment Adjusted EBITDA | $ | 22,070 | | | $ | 20,471 | | | 7.8 | % | | $ | 38,457 | | | $ | 35,820 | | | 7.4 | % |
| Segment Adjusted EBITDA margin | 31.1 | % | | 33.5 | % | | | | 29.2 | % | | 30.8 | % | | |
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
Three Months
Revenue from our Audio & Media Services Group increased $9.9 million compared to the comparative period in the prior year due to an increase in political advertising revenue as 2022 is a midterm election year and the continued recovery from the impact of COVID-19.
Operating expenses increased $8.3 million primarily as a result of higher employee compensation related to seasonal (political) staffing, higher merchandising costs and a new purchase agreement with third-parties for specific inventory spots.
Six Months
Revenue from our Audio & Media Services Group increased $15.6 million compared to the comparative period in the prior year due to an increase in political advertising revenue as 2022 is a midterm election year and the continued recovery from the impact of COVID-19.
Operating expenses increased $13.0 million primarily as a result of higher employee compensation related to seasonal (political) staffing, higher merchandising costs and a new purchase agreement with third-parties for specific inventory spots.
Reconciliation of Operating Income (Loss) to Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Operating income (loss) | $ | 82,869 | | | $ | 28,126 | | | $ | 95,204 | | | $ | (48,230) | |
| Depreciation and amortization | 110,788 | | | 127,945 | | | 224,839 | | | 235,308 | |
| Impairment charges | 245 | | | — | | | 1,579 | | | 37,744 | |
| Other operating expense, net | 15,664 | | | 12,379 | | | 16,534 | | | 15,150 | |
| Share-based compensation expense | 8,610 | | | 5,903 | | | 14,145 | | | 11,588 | |
| Restructuring expenses | 19,009 | | | 10,155 | | | 30,102 | | | 35,195 | |
Adjusted EBITDA(1) | $ | 237,185 | | | $ | 184,508 | | | $ | 382,403 | | | $ | 286,755 | |
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net income (loss) | $ | 15,182 | | | $ | (31,960) | | | $ | (33,557) | | | $ | (274,016) | |
| Income tax (benefit) expense | 1,782 | | | 24,449 | | | (18,427) | | | 104,384 | |
| Interest expense, net | 81,494 | | | 84,887 | | | 160,713 | | | 170,008 | |
| Depreciation and amortization | 110,788 | | | 127,945 | | | 224,839 | | | 235,308 | |
| EBITDA | $ | 209,246 | | | $ | 205,321 | | | $ | 333,568 | | | $ | 235,684 | |
| Gain on investments, net | (9,590) | | | (49,644) | | | (7,825) | | | (49,835) | |
| Gain on extinguishment of debt | (8,203) | | | — | | | (8,203) | | | — | |
| Other expense, net | 2,175 | | | 363 | | | 2,445 | | | 1,170 | |
| Equity in loss of nonconsolidated affiliates | 29 | | | 31 | | | 58 | | | 59 | |
| Impairment charges | 245 | | | — | | | 1,579 | | | 37,744 | |
| Other operating expense, net | 15,664 | | | 12,379 | | | 16,534 | | | 15,150 | |
| Share-based compensation expense | 8,610 | | | 5,903 | | | 14,145 | | | 11,588 | |
| Restructuring expenses | 19,009 | | | 10,155 | | | 30,102 | | | 35,195 | |
Adjusted EBITDA(1) | $ | 237,185 | | | $ | 184,508 | | | $ | 382,403 | | | $ | 286,755 | |
(1)We define Adjusted EBITDA as consolidated Operating income (loss) adjusted to exclude restructuring expenses included within Direct operating expenses and SG&A expenses, and share-based compensation expenses included within SG&A expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization, Impairment charges and Other operating expense, net. Alternatively, Adjusted EBITDA is calculated as Net income (loss), adjusted to exclude Income tax (benefit) expense, Interest expense, net, Depreciation and amortization, Loss (gain) on investments, net, Gain on extinguishment of debt, Other expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating expense, net, Share-based compensation expense, and restructuring expenses. Restructuring expenses primarily include expenses incurred 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 not representative of the Company's operations during a normal business cycle. We use Adjusted EBITDA, among other measures, to evaluate the Company’s operating performance. This measure is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of 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. It is also a primary measure used by management in evaluating companies as potential acquisition targets. We believe the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management. We
believe it helps improve investors’ ability to understand our operating performance and makes it easier to compare our results with other companies that have different capital structures or tax rates. In addition, we believe this measure is also among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing our operating performance to other companies in our industry. Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income (loss) or net income (loss) as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs. Because it excludes certain financial information compared with operating income (loss) and compared with consolidated net income (loss), the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2022 | | | | | | | 2021 | | 2022 | | 2021 |
| Cash provided by operating activities | $ | 155,801 | | | | | | | | $ | 29,129 | | | $ | 103,589 | | | $ | 100,857 | |
| Purchases of property, plant and equipment | (49,653) | | | | | | | | (32,111) | | | (72,210) | | | (51,061) | |
Free cash flow(1) | $ | 106,148 | | | | | | | | $ | (2,982) | | | $ | 31,379 | | | $ | 49,796 | |
| | | | | | | | | | | | |
(1)We define Free cash flow ("Free Cash Flow") as Cash provided by (used for) operating activities less capital expenditures, which is disclosed as Purchases of property, plant and equipment in the Company's Consolidated Statements of Cash Flows. We use Free Cash Flow, among other measures, to evaluate the Company’s liquidity and its ability to generate cash flow. We believe that Free Cash Flow is meaningful to investors because we review cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations. In addition, we believe that Free Cash Flow helps improve investors' ability to compare our liquidity with other companies. Since Free Cash Flow is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, Cash provided by (used for) operating activities and may not be comparable to similarly titled measures employed by other companies. Free Cash Flow is not necessarily a measure of our ability to fund our cash needs.
Share-Based Compensation Expense
On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the "2021 Plan") was approved by stockholders and replaced the prior plan. Pursuant to our 2021 Plan, we will grant restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals.
Share-based compensation expenses are recorded in SG&A expenses and were $8.6 million and $5.9 million for the three months ended June 30, 2022 and 2021, respectively, and $14.1 million and $11.6 million for the six months ended June 30, 2022 and 2021, respectively.
On March 28, 2022, we issued performance-based restricted stock units ("Q1 2022 Performance RSUs") to certain key employees. The Q1 2022 Performance RSUs vest upon the achievement of certain total stockholder return goals and continued service, which are being measured over an approximately 50-month period from the date of issuance.
On May 9, 2022, we issued performance-based restricted stock units ("Q2 2022 Performance RSUs") and restricted stock units ("2022 RSUs") to certain key employees. The Q2 2022 Performance RSUs vest upon the achievement of certain total stockholder return goals, Adjusted EBITDA goals, Diversity, Equity and Inclusion goals, and continued service. The Q2 2022 Performance RSUs are measured over a 3-year period from the date of issuance. The 2022 RSUs vest upon continued service. The 2022 RSUs are being recognized ratably over a 3-year period from the date of issuance.
As of June 30, 2022, there was $62.0 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions. This cost is expected to be recognized over a weighted average period of approximately 3.8 years. In addition, as of June 30, 2022, there were unrecognized compensation costs of $11.7 million of Q1 2022 Performance RSUs and $14.7 million of Q2 2022 Performance RSUs related to unvested share-based compensation arrangements that will vest based on performance and service conditions. These costs will be recognized over a 50-month period from the date of issuance for the Q1 2022 Performance RSUs and over a 3-year period from the date of issuance for the Q2 2022 Performance RSUs.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following discussion highlights cash flow activities during the periods presented:
| | | | | | | | | | | |
| (In thousands) | Six Months Ended
June 30, |
| 2022 | | 2021 |
| Cash provided by (used for): | | | |
| Operating activities | $ | 103,589 | | | $ | 100,857 | |
| Investing activities | (49,657) | | | (218,263) | |
| Financing activities | (110,711) | | | (19,882) | |
Free Cash Flow(1) | 31,379 | | | 49,796 | |
(1) For a definition of Free cash flow from operations and a reconciliation to Cash provided by (used for) operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash provided by (used for) operating activities to Free cash flow from operations” in this MD&A.
Operating Activities
Cash provided by operating activities of $103.6 million during the six months ended June 30, 2022 increased from $100.9 million during the six months ended June 30, 2021 primarily due to an increase in cash flows from operations as the Company's businesses continue to recover from the impact of COVID-19, mostly offset by an increase in the payment of bonuses and commissions in the first quarter of 2022. The Company did not pay bonuses to the vast majority of employees in the first quarter of 2021.
Investing Activities
Cash used for investing activities of $49.7 million during the six months ended June 30, 2022 primarily reflects $72.2 million in cash used for capital expenditures. We spent $48.7 million for capital expenditures in our Multiplatform Group segment primarily related to our real estate optimization initiatives, $11.1 million in our Digital Audio Group segment primarily related to IT infrastructure, $4.1 million in our Audio & Media Services Group segment, primarily related to software, and $8.3 million in Corporate primarily related to equipment and software purchases. Cash used for investing activities was partially offset by proceeds from the sale of certain properties related to our real estate optimization initiatives.
Cash used for investing activities of $218.3 million during the six months ended June 30, 2021 primarily reflects the net cash payment made to acquire Triton Digital for $228.5 million. In addition, $51.1 million in cash was used for capital expenditures. We spent $31.5 million for capital expenditures in our Multiplatform Group segment and $11.7 million for capital expenditures in our Digital Audio Group segment primarily related to IT infrastructure, $2.2 million in our Audio & Media Services Group segment, primarily related to software and $5.7 million in Corporate primarily related to equipment and software purchases. Cash used for investing activities was partially offset by cash provided by investing activities related to proceeds received of $50.8 million from the sale of our investment in the San Antonio Spurs.
Financing Activities
Cash used for financing activities totaled $110.7 million during the six months ended June 30, 2022 primarily due to the open market repurchases of $113.5 million aggregate principal amount of our 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash, reflecting a discounted purchase price from the face value of the notes.
Cash used for financing activities of $19.9 million during the six months ended June 30, 2021 primarily resulted from required quarterly principal payments made on the Term Loan Facility and repayment of a subsidiary note payable.
Sources of Liquidity and Anticipated Cash Requirements
Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $294.8 million as of June 30, 2022, cash flow from operations and borrowing capacity under our $450.0 million senior secured asset-based revolving credit facility entered into on May 17, 2022 (the "New ABL Facility") which refinanced and replaced in its entirety the existing ABL Facility (the "Existing ABL Facility"). As of June 30, 2022, iHeartCommunications had no amounts outstanding under the ABL Facility, a facility size of $450.0 million and $29.4 million in outstanding letters of credit, resulting in $420.6 million of borrowing base availability. Together with our cash balance of $294.8 million as of June 30, 2022 and our borrowing capacity under the New ABL Facility, our total available liquidity1 was approximately $715 million.
We regularly evaluate economic conditions including the ongoing impact of COVID-19 on our business. For the six months ended June 30, 2022, our revenues increased compared to the six months ended June 30, 2021 due to recovery from the macroeconomic effects of COVID-19, among other factors discussed in the Results of Operations section of the MD&A. Although we cannot predict future economic conditions or the impact of any potential contraction of economic growth on our business, we believe that we have sufficient liquidity to continue to fund our operations for at least the next twelve months.
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of June 30, 2022, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, commitments under non-cancelable operating lease agreements, and employment and talent contracts. In addition to our contractual obligations, we expect that our primary anticipated uses of liquidity in 2022 will be to fund our working capital, make interest and tax payments, fund capital expenditures, pursue certain strategic opportunities and maintain operations.
Assuming the current level of borrowings and interest rates in effect at June 30, 2022, we anticipate that we will have approximately $168 million of cash interest payments in the remainder of 2022.
We believe that our cash balance, our cash flow from operations and availability under our New ABL Facility provide us with sufficient liquidity to fund our core operations, maintain key personnel and meet our other material obligations for at least the next twelve months. We acknowledge the challenges posed by the COVID-19 pandemic and any potential slow down in economic activity, rising inflation and interest rates, and other macroeconomic trends, however, we remain confident in our business, our employees and our strategy. Further, we believe our available liquidity will allow us to fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next twelve months. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms or at all in the future.
We frequently evaluate strategic opportunities. During the three months ended June 30, 2022, we conducted open market repurchases of $113.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash, reflecting a discounted purchase price from the face value of the notes. We expect from time to time to pursue other strategic opportunities such as acquisitions or disposals of certain businesses, which may or may not be material.
1 Total available liquidity is defined as cash and cash equivalents plus available borrowings under the New ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.
Summary Debt Capital Structure
As of June 30, 2022 and December 31, 2021, we had the following debt outstanding, net of cash and cash equivalents:
| | | | | | | | | | | |
| (In thousands) | June 30, 2022 | | December 31, 2021 |
| Term Loan Facility due 2026 | $ | 1,864,032 | | | $ | 1,864,032 | |
| Incremental Term Loan Facility due 2026 | 401,220 | | | 401,220 | |
Asset-based Revolving Credit Facility due 20231 | — | | | — | |
Asset-based Revolving Credit Facility due 20271 | — | | | — | |
| 6.375% Senior Secured Notes due 2026 | 800,000 | | | 800,000 | |
| 5.25% Senior Secured Notes due 2027 | 750,000 | | | 750,000 | |
| 4.75% Senior Secured Notes due 2028 | 500,000 | | | 500,000 | |
| Other Secured Subsidiary Debt | 4,577 | | | 5,350 | |
| Total Secured Debt | $ | 4,319,829 | | | $ | 4,320,602 | |
| | | |
8.375% Senior Unsecured Notes due 20272 | 1,336,450 | | | 1,450,000 | |
| Other Subsidiary Debt | 69 | | | 90 | |
| Original issue discount | (12,027) | | | (13,454) | |
| Long-term debt fees | (16,902) | | | (18,370) | |
| Total Debt | $ | 5,627,419 | | | $ | 5,738,868 | |
| Less: Cash and cash equivalents | 294,831 | | | 352,129 | |
| $ | 5,332,588 | | | $ | 5,386,739 | |
1On May 17, 2022, we entered into a $450.0 million New ABL Facility, maturing in 2027, which refinanced and replaced in its entirety the Existing ABL Facility. For more information about the New ABL Facility, refer to Note 5, Long-Term Debt.
2 During the three months ended June 30, 2022, we repurchased $113.5 million aggregate principal amount of iHeartCommunications, Inc.’s 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash, excluding accrued interest, via open market transactions. The repurchased notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $8.2 million.
Our New ABL Facility contains a springing fixed charge coverage ratio that is effective if certain triggering events related to borrowing capacity under the New ABL Facility occur. As of June 30, 2022, no triggering event had occurred and, as a result, we were not required to comply with any fixed charge coverage ratio as of or for the periods ended June 30, 2022. Other than our New ABL Facility, none of our long-term debt includes maintenance covenants that could trigger early repayment. As of June 30, 2022, we were in compliance with all covenants related to our debt agreements in all material respects. For additional information regarding our debt, refer to Note 5, Long-Term Debt.
Our subsidiaries have from time to time repurchased certain debt obligations of iHeartCommunications, and may in the future, as part of various financing and investment strategies, purchase additional outstanding indebtedness of iHeartCommunications or its subsidiaries or our outstanding equity securities, in tender offers, open market purchases, privately negotiated transactions or otherwise. We or our subsidiaries may also sell certain assets, securities, or properties. These purchases or sales, if any, could have a material positive or negative impact on our liquidity available to repay outstanding debt obligations or on our consolidated results of operations. These transactions could also require or result in amendments to the agreements governing outstanding debt obligations or changes in our leverage or other financial ratios, which could have a material positive or negative impact on our ability to comply with the covenants contained in iHeartCommunications’ debt agreements. These transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Supplemental Financial Information under Debt Agreements
Pursuant to iHeartCommunications' material debt agreements, Capital I, the parent guarantor and a subsidiary of iHeartMedia, is permitted to satisfy its reporting obligations under such agreements by furnishing iHeartMedia’s consolidated financial information and an explanation of the material differences between iHeartMedia’s consolidated financial information, on the one hand, and the financial information of Capital I and its consolidated restricted subsidiaries, on the other hand. Because neither iHeartMedia nor iHeartMedia Capital II, LLC, a wholly-owned direct subsidiary of iHeartMedia and the parent of Capital I, have any operations or material assets or liabilities, there are no material differences between iHeartMedia’s consolidated financial information for the three and six months ended June 30, 2022, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same period. Further, as of June 30, 2022, we were in compliance with all covenants related to our debt agreements in all material respects.
Commitments, Contingencies and Guarantees
We are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued our estimate of the probable costs for resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. Please refer to “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q.
We have future cash obligations under various types of contracts. We lease office space, certain broadcast facilities and equipment. Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance. We also have non-cancellable contracts in our radio broadcasting operations related to program rights and music license fees. In the normal course of business, our broadcasting operations have minimum future payments associated with employee and talent contracts. These contracts typically contain cancellation provisions that allow us to cancel the contract with good cause.
SEASONALITY
Typically, our businesses experience their lowest financial performance in the first quarter of the calendar year. We expect this trend to continue in the future. Due to this seasonality and certain other factors, the results for the interim periods may not be indicative of results for the full year. In addition, we are impacted by political cycles and generally experience higher revenues in congressional election years, and particularly in presidential election years. This may affect the comparability of results between years.
MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates and inflation.
Interest Rate Risk
A significant amount of our long-term debt bears interest at variable rates. Additionally, certain assumptions used within management's estimates are impacted by changes in interest rates. Accordingly, our earnings will be affected by changes in interest rates. As of June 30, 2022, approximately 40% of our aggregate principal amount of long-term debt bore interest at floating rates. Assuming the current level of borrowings and assuming a 50% change in LIBOR, it is estimated that our interest expense for the six months ended June 30, 2022 would have changed by $2.5 million.
In the event of an adverse change in interest rates, management may take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.
Inflation
Inflation is a factor in our business and we continue to seek ways to mitigate its effect. Inflation has affected our performance in terms of higher costs for employee compensation, equipment and third party services. We believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. Although we are unable to determine the exact impact of inflation, we believe the impact will continue to be immaterial considering the actions we may take in response to these higher costs that may arise as a result of inflation.
Critical Accounting Estimates
The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material. There have been no significant changes to our critical accounting policies and estimates disclosed in “Critical Accounting Estimates” of Item 7, Management’s Discussion and Analysis of our Annual Report on Form 10-K for the year ended December 31, 2021.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, the anticipated impacts of and recovery from the COVID-19 pandemic on our business, financial position and results of operations, economic trends including inflation and potential recessionary indicators, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, debt repurchases, our business plans, strategies and initiatives, benefits of acquisitions, our expectations about certain markets and businesses, expected cash interest payments and our anticipated financial performance and liquidity. Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables which could impact our future performance. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance. There can be no assurance, however, that management’s expectations will necessarily come to pass. Actual future events and performance may differ materially from the expectations reflected in our forward-looking statements. We do not intend, nor do we undertake any duty, to update any forward-looking statements.
A wide range of factors could materially affect future developments and performance, including but not limited to:
•risks associated with weak or uncertain global economic conditions and their impact on the level of expenditures for advertising;
•the impact of the COVID-19 pandemic on our business, financial position and results of operations;
•intense competition including increased competition from alternative media platforms and technologies;
•dependence upon the performance of on-air talent, program hosts and management as well as maintaining or enhancing our master brand;
•fluctuations in operating costs;
•technological changes and innovations;
•shifts in population and other demographics;
•the impact of our substantial indebtedness;
•the impact of acquisitions, dispositions and other strategic transactions;
•legislative or regulatory requirements;
•the impact of legislation or ongoing litigation on music licensing and royalties;
•regulations and consumer concerns regarding privacy and data protection, and breaches of information security measures;
•risks related to our Class A common stock, including our significant number of outstanding warrants;
•regulations impacting our business and the ownership of our securities; and
•certain other factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as updated by other filings with the Securities and Exchange Commission (“SEC”).
This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.