What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-06 · 181 added, 131 removed, 277 unchanged (53% of the section changed)

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▪ 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, align with certain leadership and organizational changes implemented in the first quarter of 2021 and provide improved visibility into the underlying performances, results, and margin profiles of our distinct businesses.

These reporting segments reflect how senior management operates the Company, align with certain leadership and organizational changes implemented in the first quarter of 2021.

This structure provides improved visibility into the underlying performances, results, and margin profiles of our distinct businesses and enables senior management to better 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, 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.

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As a result of the impact of the coronavirus pandemic (“COVID-19”) and the resulting impact on the U.S.

economy, our revenue for the three months ended March 31, 2021 has declined compared to the first quarter of 2020.

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.

Although revenue increased substantially from the second quarter of 2020 to the third and fourth quarters of 2020 and the first quarter of 2021, we have continued to experience year-over-year declines

during these quarters in the Broadcast radio, Networks and Sponsorships revenue streams of our Multiplatform Group.

economy, our revenue for the six months ended June 30, 2020 and June 30, 2021 was negatively impacted.

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.

Although revenues significantly increased in the six months ended June 30, 2021 compared to the prior year for our Broadcast radio, Networks and Sponsorships revenue streams of our Multiplatform Group, revenue from these revenue streams has not fully recovered from the impact of COVID-19.

Our Digital Audio Group revenues, including podcasting, have continued to grow each quarter year-over-year during the COVID-19 pandemic.

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This modernization is a multi-pronged set of strategic initiatives that we believe positions the Company for sustainable long-term growth, margin expansion, and value creation for stockholders.

As we had targeted, our investments in modernization delivered approximately $50 million of in-year savings in 2020, and we remain on track to deliver annualized run-rate cost savings of approximately $100 million by mid-year 2021.

Our investments in modernization delivered approximately $50 million of in-year savings in 2020 and remain on track to achieve the target of $100 million of cost savings.

In April 2020, we announced approximately $200 million of incremental in-year operating-expense-saving initiatives in response to the weaker economic environment caused by the COVID-19 pandemic.

As previously announced, the Company has implemented plans to make the majority of these savings permanent.

As previously announced, the Company has implemented plans to make the majority of the savings permanent.

For more information, please see the Liquidity and Capital Resources - Anticipated Cash Requirements section below.

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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 three months ended March 31, 2021, we recognized non-cash impairment charges of $37.7 million as a result of these cost-savings initiatives.

As a result of the changes in the Company's management structure and its reportable segments, we were required to perform interim impairment tests on goodwill as of January 1, 2021.

No impairment charges were recorded in the first quarter of 2021 in connection with the interim impairment test.

While we believe we made reasonable estimates and utilized reasonable assumptions to calculate the fair values of our long-lived assets, indefinite-lived FCC licenses and reporting units, it is possible a material change could occur to the estimated fair value of these assets.

If our actual results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations.

For the six months ended June 30, 2021, we recognized non-cash impairment charges of $37.7 million as a result of these cost-savings initiatives.

Executive Summary

Although we believe economic conditions are improving, our results for the first quarter of 2021 continued to be impacted by the weaker economic conditions as a result of the COVID-19 pandemic.

While Digital revenue, including podcasting, continued to grow year-over-year, our other revenue streams, including broadcast radio, networks and sponsorship and events declined in the first quarter of 2021 compared to the first quarter of 2020.

The year-over-year percentage decline for the first quarter of 2021 is less than the period-over-period declines experienced during 2020, and consolidated revenue for the month of March 2021 grew compared to March 2020.

The extent of the economic downturn and the timing of recovery, as well as the future impact on our operations, are subject to significant uncertainty.

Although our results for the second quarter of 2021 continued to be impacted by the effects of the COVID-19 pandemic, our revenues increased significantly across all of our revenue streams, including revenue from our Multiplatform segment, which includes our broadcast radio, networks and sponsorship and events businesses.

Digital revenue, including podcasting, continued to grow year-over-year and we experienced significant growth in our Audio & Media Services segment.

The key developments that impacted our business during the quarter are summarized below:

• Consolidated Revenue of $706.7 million decreased 9.5% during the quarter ended March 31, 2021 compared to Revenue of $780.6 million in the prior year's first quarter.

• Revenue and Adjusted EBITDA from our Multiplatform Group decreased 20.9% and 30.9% compared to the prior year's first quarter.

• Revenue and Adjusted EBITDA from our Digital Audio Group increased 69.8% and 141.1% compared to the prior year's first quarter.

• Revenue and Adjusted EBITDA from our Audio & Media Services Group decreased 8.5% and 13.3% compared to the prior year's first quarter.

• Operating loss of $76.4 million was down from $1,730.8 million in the prior year’s quarter due to impairment charges of $1,727.9 million recognized in the first quarter of 2020.

• Net loss of $242.1 million decreased from $1,688.7 million in the prior year's quarter.

• Adjusted EBITDA (1) of $102.2 million, was down from $140.3 million compared to prior year's quarter.

• Cash flows provided by operating activities of $71.7 million decreased from Cash flows provided by operating activities of $91.5 million in the prior year's quarter.

• Free cash flow (2) from operations of $52.8 million decreased from $69.9 million in the prior year's quarter.

• Consolidated Revenue of $861.6 million increased $374.0 million, or 76.7% during the quarter ended June 30, 2021 compared to Revenue of $487.6 million in the prior year's second quarter.

• Revenue and Adjusted EBITDA from our Multiplatform Group increased $248.7 million and $195.8 million compared to the prior year's second quarter, respectively.

• Revenue and Adjusted EBITDA from our Digital Audio Group increased $104.7 million and $35.4 million compared to the prior year's second quarter, respectively.

• Revenue and Adjusted EBITDA from our Audio & Media Services Group increased $21.9 million and $20.2 million compared to the prior year's second quarter, respectively.

• Operating income of $28.1 million was up from an Operating loss of $159.1 million in the prior year’s second quarter.

• Net loss of $32.0 million improved from a Net loss of $197.3 million in the prior year's second quarter.

• Adjusted EBITDA (1) of $184.5 million, was up $213.8 million from $(29.3) million in prior year's second quarter.

• Cash flows provided by operating activities of $29.1 million increased from Cash flows provided by operating activities of $11.4 million in the prior year's second quarter.

• Free cash flow (2) of $(3.0) million improved from $(6.5) million in the prior year's second quarter.

The table below presents a summary of our historical results of operations for the periods presented:

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Revenue $ 861,605 $ 487,648 76.7 %

Operating loss $ (76,356) $ (1,730,779) NM

Operating income (loss) $ 28,126 $ (159,087) NM

Net loss $ (31,960) $ (197,317) NM

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Adjusted EBITDA (1)

$ 102,247 $ 140,339 (27.1) %

Free cash flow from operations (2)

$ 52,778 $ 69,876 (24.5) %

(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 Loss to Adjusted EBITDA" and "Reconciliation of Net Loss to EBITDA and Adjusted EBITDA" in this MD&A.

(2) For a definition of Free cash flow from operations 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 from operations” in this MD&A.

$ 184,508 $ (29,283) NM

Free cash flow (2)

$ (2,982) $ (6,513) NM

(1) For a definition of Adjusted EBITDA 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 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 periods presented:

The tables below present the comparison of our historical results of operations for the three and six months ended June 30, 2021 to the three and six months ended June 30, 2020:

(In thousands) Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Revenue $ 861,605 $ 487,648 $ 1,568,270 $ 1,268,282

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Other operating expense, net 12,379 506 15,150 1,572

Operating loss (76,356) (1,730,779)

Operating income (loss) 28,126 (159,087) (48,230) (1,889,866)

Interest expense, net 84,887 81,963 170,008 172,052

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Net loss attributable to the Company $ (32,286) $ (197,317) $ (274,009) $ (1,886,053)

The tables below present the comparison of our revenue streams for the periods presented:

The tables below present the comparison of our revenue streams for the three and six months ended June 30, 2021 to the three and six months ended June 30, 2020:

(In thousands) Three Months Ended

2021 2020 Change

June 30, % Six Months Ended

2021 2020 Change 2021 2020 Change

Broadcast Radio $ 451,142 $ 244,035 84.9 % $ 809,678 $ 705,695 14.7 %

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Revenue, total $ 861,605 $ 487,648 76.7 % $ 1,568,270 $ 1,268,282 23.7 %

Consolidated results for the three months ended March 31, 2021 compared to the consolidated results for the three months ended March 31, 2020 were as follows:

Consolidated Revenue decreased $74.0 million during the three months ended March 31, 2021 compared to the same period of 2020.

The decrease in Consolidated revenue is attributable to the macroeconomic effects of COVID-19, which began to unfold into a global pandemic in early March 2020, resulting in a significant economic downturn due to the shut-down of

non-essential businesses and shelter-in-place orders.

The impact continued through 2020 and the first quarter of 2021, resulting in revenue declines impacting most of our revenue streams primarily as a result of a decrease in broadcast radio advertising spend.

Multiplatform revenue decreased $131.7 million, primarily resulting from a decrease in Broadcast revenue.

Digital Audio revenue increased $64.8 million, driven primarily by increased demand for digital advertising, as well as continued growth in podcasting.

Audio & Media Services revenue decreased $5.1 million primarily due to a $5.4 million decrease in political revenue as a result of 2020 being a presidential election year.

Consolidated results for the three and six months ended June 30, 2021 compared to the consolidated results for the three and six months ended June 30, 2020 were as follows:

Consolidated revenue increased $374.0 million during the three months ended June 30, 2021 compared to the same period of 2020.

The increase in Consolidated revenue is attributable to the continued recovery from the macroeconomic effects of COVID-19, which began to unfold into a global pandemic in early March 2020, resulting in a significant economic downturn due to the shut-down of non-essential businesses and shelter-in-place orders.

The impact continued through 2020 and the first and second quarters of 2021, resulting in revenue declines impacting most of our revenue streams primarily as a result of a decrease in broadcast radio advertising spend.

The most significant quarterly revenue decline was felt in the second quarter of 2020.

We experienced significant increases in all of our revenue streams in the three months ended June 30, 2021 compared to the same period in 2020.

Multiplatform revenue increased $248.7 million, primarily resulting from strengthening demand for broadcast advertising compared to the second quarter of 2020.

Digital Audio revenue increased $104.7 million, driven primarily by continuing increases in demand for digital advertising, including continued growth in podcasting.

Audio & Media Services revenue increased $21.9 million primarily due to the continued recovery from the impact of COVID-19.

Consolidated revenue increased $300.0 million during the six months ended June 30, 2021 compared to the same period of 2020.

The most significant quarterly revenue decline was felt in the second quarter of 2020.

We experienced significant increases in most of our revenue streams in the six months ended June 30, 2021 compared to the same period of 2020.

Multiplatform revenue increased $117.0 million, primarily resulting from strengthening demand for broadcast advertising.

Digital Audio revenue increased $169.5 million, driven primarily by continuing increases in demand for digital advertising, including continued growth in podcasting.

Audio & Media Services revenue increased $16.8 million primarily due to the continued recovery from the impact of COVID-19.

Direct Operating Expenses

Consolidated direct operating expenses decreased $1.1 million during the three months ended March 31, 2021 compared to the same period of 2020.

The decrease in Consolidated direct operating expenses was driven primarily by lower employee compensation expenses resulting from our modernization initiatives and cost reduction initiatives.

In addition, variable operating expenses, including music license and performance royalty fees, decreased in relation to lower revenue recognized during the period.

Variable expenses related to events also decreased as a result of the postponement or cancellation of events in response to the COVID-19 pandemic.

The decrease in Consolidated direct operating expenses was partially offset by higher variable digital costs, resulting from an increase in digital revenue.

Consolidated direct operating expenses increased $76.4 million during the three months ended June 30, 2021 compared to the same period of 2020, primarily as a result of the significant increase in revenue.

The increase in Direct operating expenses was driven by higher talent and profit sharing expenses, third-party digital costs, music license fees and performance royalty fees.

Variable expenses related to events also increased as a result of the return of certain live events.

The increase in Consolidated direct operating expenses was partially offset by lower employee compensation expenses resulting from our modernization initiatives and cost-reduction initiatives executed in 2020 and 2021.

Consolidated direct operating expenses increased $75.3 million during the six months ended June 30, 2021 compared to the same period of 2020.

The increase in Direct operating expenses was driven primarily by higher variable compensation expenses, along with higher third-party digital costs and talent and profit sharing expenses due to higher revenue.

In addition, variable operating expenses, including music license and performance royalty fees, also increased as a result of higher revenue.

Variable expenses related to events also increased as a result of the return of live events.

The increase in Consolidated direct operating expenses was partially offset by lower employee compensation expenses resulting from our modernization initiatives and cost reduction initiatives executed in 2020 and early 2021.

Selling, General and Administrative (“SG&A”) Expenses

Consolidated SG&A expenses decreased $49.5 million during the three months ended March 31, 2021 compared to the same period of 2020.

The decrease in Consolidated SG&A expenses was driven primarily by lower employee compensation expenses resulting from cost reduction initiatives, along with lower sales commissions, which were impacted by the decrease in revenue.

Trade and barter expenses also decreased primarily as a result of the cancellation / postponement of events, in addition to lower travel and entertainment expenses resulting from operating-expense-saving initiatives put into place in response to the COVID-19 pandemic.

These decreases, which primarily impacted our Multiplatform Group, were partially offset by higher expenses for our Digital Audio Group and other increases compared to the first quarter of 2020 including higher variable compensation across our businesses and corporate functions.

Consolidated SG&A expenses increased $79.3 million during the three months ended June 30, 2021 compared to the same period of 2020.

The increase in Consolidated SG&A expenses was driven primarily by increased employee compensation expenses due to higher variable employee compensation resulting primarily from higher bonus expense based on financial performance and higher sales commission expenses as a result of higher revenue.

In the prior year the Company did not pay bonuses to the vast majority of employees.

In addition, increased headcount resulting from investments in our digital businesses contributed to the increase in Consolidated SG&A expenses.

Trade expenses also increased, primarily as a result of the return of live events.

These increases were partially offset by lower employee compensation expenses resulting from cost reduction initiatives taken in response to the COVID-19 pandemic and lower bad debt expense.

Consolidated SG&A expenses increased $29.8 million during the six months ended June 30, 2021 compared to the same period of 2020.

The increase in SG&A expenses was driven primarily by higher employee compensation expenses, due to an increase in variable employee compensation resulting from higher bonus accruals based on financial performance as well as an increase in headcount resulting from investments in our digital businesses.

In addition, sales commission expenses increased as a result of higher revenue.

These increases were partially offset by lower employee compensation expenses resulting from cost reduction initiatives taken in response to the COVID-19 pandemic and lower bad debt expense.

Depreciation and Amortization

Depreciation and amortization increased $10.6 million during the three months ended March 31, 2021 compared to the same period of 2020, primarily as a result of accelerated amortization of certain intangible assets and accelerated depreciation related to leasehold improvements related to our cost-saving initiatives, as well as higher depreciation resulting from our investments in IT infrastructure and amortization recognized on intangible assets of businesses acquired in 2020.

Depreciation and amortization increased $24.6 million and $35.2 million during the three and six months ended June 30, 2021 compared to the same periods of 2020, primarily as a result of accelerated amortization of certain intangible assets and accelerated depreciation related to leasehold improvements related to our cost-saving 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.

For the three months ended March 31, 2021, we recognized non-cash impairment charges of $37.7 million as a result of these cost-savings initiatives.

We perform our annual impairment test on our goodwill and FCC licenses as of July 1 of each year.

In addition, we test for impairment of intangible assets whenever events and circumstances indicate that such assets might be impaired.

As discussed above, as a result of the changes in the Company's management structure and its reportable segments, we performed an interim impairment test on goodwill as of January 1, 2021.

No impairment charges were recorded in the first quarter of 2021 in connection with the interim impairment test.

In the three months ended March 31, 2020, we recognized non-cash impairment charges to our indefinite-lived intangible assets and goodwill of $1.7 billion as a result of the adverse effects caused by the COVID-19 pandemic on estimated future cash flows.

In the first quarter of 2021, we recognized non-cash impairment charges of $37.7 million as a result of these cost-savings initiatives.

We recognized no impairment charges in the three months ended June 30, 2021.

In the first quarter of 2020, we recognized non-cash impairment charges to our indefinite-lived intangible assets and goodwill of $1.7 billion as a result of the adverse effects caused by the COVID-19 pandemic on estimated future cash flows.

We recognized impairment charges of $5.4 million in the three months ended June 30, 2020 related to the write-down of right-of use assets.

Other Operating Expense, Net

Other operating expense, net of $2.8 million and $1.1 million for the three months ended March 31, 2021 and 2020, respectively, relate to net losses recognized on asset disposals.

Other operating expense, net of $12.4 million and $0.5 million for the three months ended June 30, 2021 and 2020, respectively, and Other operating expense, net of $15.2 million and $1.6 million for the six months ended June 30, 2021 and 2020, respectively, relate primarily to net losses recognized on asset disposals.

Interest Expense

Interest expense decreased $5.0 million during the three months ended March 31, 2021 compared to the same period of 2020, primarily as a result of the impact of lower LIBOR rates.

Interest expense increased $2.9 million during the three months ended June 30, 2021 compared to the same period of 2020, primarily as a result of the issuance of incremental term loans in the third quarter of 2020, partially offset by the impact of lower LIBOR rates.

Interest expense decreased $2.0 million during the six months ended June 30, 2021 compared to the same period of 2020, primarily as a result of the impact of lower LIBOR rates, partially offset by the issuance of incremental term loans in the third quarter of 2020.

Gain (Loss) on Investments, Net

During the three months ended March 31, 2021 and 2020, we recognized a gain on investments, net of $0.2 million and a loss on investments of $10.0 million, respectively.

The loss on investments, net recognized during the three months ended March 31, 2020 was primarily in connection with estimated credit losses and declines in the value of our investments.

Other Income (Expense), Net

Other expense, net was $0.8 million and $7.9 million for the three months ended March 31, 2021 and 2020, respectively.

Other expense, net for the three months ended March 31, 2020 related primarily to costs incurred to amend our Term Loan Facility and professional fees incurred.

During the three months ended June 30, 2021 and 2020, we recognized a gain on investments, net of $49.6 million and $1.3 million, respectively.

During the six months ended June 30, 2020, we recognized a gain of $49.8 million and a loss of $8.7 million, respectively.

The gain on investments, net recognized during the three and six months ended June 30, 2021 was driven primarily by the sale of our investment in the San Antonio Spurs.

The loss on investments, net recognized during the six months ended June 30, 2020 was primarily in connection with estimated credit losses and declines in the value of our investments.

Other Expense, Net

Other expense, net was $0.4 million and $1.3 million for the three months ended June 30, 2021 and 2020, respectively, and $1.2 million and $9.1 million for the six months ended June 30, 2021 and 2020, respectively.

Other expense, net for the six months ended June 30, 2020 related primarily to costs incurred to amend our Term Loan Facility and professional fees incurred.

Income Tax Benefit (Expense)

The effective tax rate for the Company for the three months ended March 31, 2021 was (49.3)%.

The effective tax rate for the three months ended March 31, 2021 was 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.

The effective tax rate for the three months ended March 31, 2020 was 8.2%.

The effective tax rate for the period was primarily impacted by the impairment charges discussed above.

The effective tax rate for the Company for the three and six months ended June 30, 2021 was (325.5)% and (61.5)%, respectively.

The effective tax rate for the six months ended June 30, 2021 was 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.

The effective tax rate for the three and six months ended June 30, 2020 was 18.1% and 9.3%, respectively.

The effective tax rate for the six months ended June 30, 2020 was primarily impacted by the impairment charges discussed above.

The deferred tax benefit primarily consists of $125.5 million related to the FCC license impairment charges recorded during the period.

Net Income (Loss) Attributable to the Company

Net loss attributable to the Company decreased $1,447.0 million to $241.7 million during the three months ended March 31, 2021 compared to Net loss attributable to the Company of $1,688.7 million during the three months ended March 31, 2020, primarily as a result of the impairment charge recognized during the first quarter of 2020.

First Quarter 2021 Multiplatform Group Results

Net Loss Attributable to the Company

Net loss attributable to the Company decreased $165.0 million to $32.3 million during the three months ended June 30, 2021 compared to a Net loss attributable to the Company of $197.3 million during the three months ended June 30, 2020, primarily as a result of the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the gain on the sale of our investment in the San Antonio Spurs.

Net loss attributable to the Company decreased $1,612.0 million to $274.0 million during the six months ended June 30, 2021 compared to Net loss attributable to the Company of $1,886.1 million during the six months ended June 30, 2020, primarily as a result of the impairment charge recognized during the first quarter of 2020 and the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic.

Multiplatform Group Results

(In thousands) Three Months Ended

2021 2020 % Change

June 30, Six Months Ended

2021 2020 % Change 2021 2020 Change

Revenue $ 605,850 $ 357,117 69.7 % $ 1,103,747 $ 986,726 11.9 %

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424,452 371,498 14.3 % 817,558 848,963 (3.7) %

Segment Adjusted EBITDA $ 104,791 $ 151,605 (30.9) %

Segment Adjusted EBITDA $ 181,398 $ (14,381) NM $ 286,189 $ 137,763 107.7 %

Segment Adjusted EBITDA margin 29.9 % (4.0) % 25.9 % 14.0 %

(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.

Revenue from our Multiplatform Group decreased 20.9% compared to the comparative period in prior year, primarily as a result of the negative impact of the COVID-19 pandemic on our traditional radio business.

Broadcast revenue declined 22.3% year-over-year, while Networks declined 14.5% year-over-year.

Revenue from Sponsorship and Events decreased by 23.7% year-over-year, primarily as a result of the postponement or cancellations of events in response to the COVID-19 pandemic.

However, we continue to see sequential recovery from the low-point in 2020.

Revenue for the Multiplatform Group was down 4.6% in March 2021 compared to the same month in the prior year.

Operating expenses decreased 17.8%, driven primarily by lower employee compensation expenses resulting from our modernization and cost-reduction initiatives.

In addition, variable operating expenses, including music license fees, sales commissions and trade and barter expenses, decreased in relation to lower revenue recognized during the period.

Variable expenses related to events also decreased as a result of the postponement or cancellation of events in response to the COVID-19 pandemic.

First Quarter 2021 Digital Audio Group Results

Revenue from our Multiplatform Group increased $248.7 million compared to the comparative period in the prior year, primarily as a result of the continued recovery from the negative impact of the COVID-19 pandemic in 2020 on our traditional radio business.

Broadcast revenue grew $207.1 million, or 84.9%, year-over-year, while Networks grew $27.3 million, or 28.3%, year-over-year.

Revenue from Sponsorship and Events increased by $13.8 million, or 93.0%, year-over-year, primarily as a result of the return of live events.

Operating expenses increased $53.0 million, driven primarily by higher variable compensation expenses and talent and profit sharing fees related to revenue growth and higher trade expense due to the return of live events, along with higher variable operating expenses, including music license fees and sales commissions, resulting from higher revenue.

These increases were partially offset by lower employee compensation expenses resulting from our cost-reduction initiatives executed in 2020 and early 2021, as well as lower bad debt expense as a result of improved economic conditions.

Revenue from our Multiplatform Group increased $117.0 million compared to the comparative period in the prior year, primarily as a result of the continued recovery from the negative impact of the COVID-19 pandemic on our traditional radio business in 2020.

Broadcast revenue increased $104.0 million, or 14.7%, year-over-year, while Networks grew $7.8 million, or 3.4%, year-over-year.

Revenue from Sponsorship and Events increased by $6.8 million, or 15.4%, year-over-year, primarily as a result of the return of live events.

Operating expenses decreased $31.4 million, driven primarily by lower bad debt expense and lower employee compensation expenses resulting from our modernization and cost-reduction initiatives.

The decrease was partially offset by higher variable operating expenses, including variable compensation, which consisted primarily of talent and profit sharing fees, music license fees and sales commissions, resulting from higher revenue recognized during the period.

Variable expenses related to events also increased as a result of the return of live events.

Digital Audio Group Results

(In thousands) Three Months Ended

2021 2020 % Change

June 30, Six Months Ended

2021 2020 % Change 2021 2020 Change

Revenue $ 197,930 $ 93,227 112.3 % $ 355,483 $ 186,003 91.1 %

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(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.

Revenue from our Digital Audio Group increased 69.8% compared to the comparative period in the prior year, led by continued growth in Podcast, which increased by 141.9% year-over-year.

Digital, excluding Podcast revenue grew 55.0%, driven by increased demand for digital advertising.

Digital revenues increased as a result of general increased demand for digital advertising, the continued addition of premium content to our industry-leading podcast business, our improving ability to monetize our digital audiences and inventory, as well as a general improvement to the macroeconomic environment.

Operating expenses increased 54.3%, in connection with our Digital Audio Group’s significant revenue growth, including the impact of variable content and 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 additional headcount resulting from recent acquisitions, as well as higher variable compensation expenses including sales commissions and bonus arrangements.

First Quarter 2021 Audio & Media Services Group Results

Revenue from our Digital Audio Group increased $104.7 million compared to the comparative period in the prior year, led by Digital, excluding Podcast revenue, which grew $72.5 million, or 100.7%, year-over-year, driven by increased demand for digital advertising.

Podcast revenue also increased by $32.2 million, or 151.5%, year-over-year, driven by higher revenues from the development of our podcast slate as well as growth from existing podcasts.

Digital Audio Group revenue 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, partially driven by investments in the digital space.

Operating expenses increased $69.3 million in connection with our Digital Audio Group’s significant revenue growth, including the impact of variable content and 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 additional headcount resulting from investments in the digital space, as well as higher variable compensation expenses including sales commissions and bonus arrangements.

Revenue from our Digital Audio Group increased $169.5 million compared to the comparative period in the prior year, led by Digital, excluding Podcast revenue, which grew $114.8 million, or 77.1%, year-over-year, driven by increased demand for digital advertising.

Podcast revenue also increased by $54.7 million, or 147.4%, year-over-year, driven by higher revenues from the development of our podcast slate as well as 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, partially driven by investments in the digital space.

Operating expenses increased $110.6 million, in connection with our Digital Audio Group’s significant revenue growth, including the impact of variable content and 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.

Audio & Media Services Group Results

(In thousands) Three Months Ended

2021 2020 % Change

June 30, Six Months Ended

2021 2020 % Change 2021 2020 Change

Revenue $ 61,175 $ 39,251 55.9 % $ 116,312 $ 99,478 16.9 %

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40,704 39,000 4.4 % 80,492 81,527 (1.3) %

Segment Adjusted EBITDA $ 15,349 $ 17,700 (13.3) %

Segment Adjusted EBITDA $ 20,471 $ 251 NM $ 35,820 $ 17,951 99.5 %

Segment Adjusted EBITDA margin 33.5 % 0.6 % 30.8 % 18.0 %

(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.

Revenue from our Audio & Media Services Group decreased 8.5% compared to the comparative period in prior year, as a result of the presidential election in the prior year, which significantly impacted revenue from our Katz business.

Operating expenses decreased 6.4% driven primarily by lower employee compensation expenses resulting from our modernization and cost-reduction initiatives.

In addition, variable operating expenses, including sales commissions, decreased in relation to lower revenue recognized during the period.

Reconciliation of Operating Loss to Adjusted EBITDA

Revenue from our Audio & Media Services Group increased $21.9 million compared to the comparative period in the prior year, as a result of the continued recovery from the negative impact of the COVID-19 pandemic.

Operating expenses increased $1.7 million driven primarily by higher variable employee compensation and sales commissions, due to the increase in revenue, partially offset by lower employee compensation expenses resulting from our cost-reduction initiatives.

Revenue from our Audio & Media Services Group increased $16.8 million compared to the comparative period in the prior year, as a result of the continued recovery from the negative impact of the COVID-19 pandemic.

Operating expenses decreased $1.0 million driven primarily by lower rent expense and lower employee compensation expenses resulting from our modernization and cost-reduction initiatives, partially offset by higher variable employee compensation and sales commissions, due to the increase in revenue.

Reconciliation of Operating Income (Loss) to Adjusted EBITDA

(In thousands) Three Months Ended

Operating loss $ (76,356) $ (1,730,779)

June 30, Six Months Ended

2021 2020 2021 2020

Operating income (loss) $ 28,126 $ (159,087) $ (48,230) $ (1,889,866)

Depreciation and amortization 127,945 103,347 235,308 200,115

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(In thousands) Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net loss $ (31,960) $ (197,317) $ (274,016) $ (1,886,053)

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(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 (income), net.

Alternatively, Adjusted EBITDA is calculated as Net income (loss), adjusted to exclude Income tax (benefit) expense, Interest expense (income), net, Depreciation and amortization, (Gain) Loss on investments, net, Other (income) expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating expense (income), net, Share-based compensation expense, and restructuring expenses.

Depreciation and amortization, Impairment charges and Other operating (income) expense, net.

Alternatively, Adjusted EBITDA is calculated as Net income (loss), adjusted to exclude Income tax (benefit) expense, Interest expense (income), net, Depreciation and amortization, (Gain) Loss on investments, net, Other (income) expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating (income) expense, net, Share-based compensation expense, and restructuring expenses.

Restructuring expenses primarily include severance 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.

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Because it excludes certain financial information compared with operating income 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 from Operations

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow

(In thousands) Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Cash provided by operating activities $ 29,129 $ 11,369 $ 100,857 $ 102,909

Purchases of property, plant and equipment (32,111) (17,882) (51,061) (39,546)

Free cash flow from operations (1)

Free cash flow (1)

$ (2,982) $ (6,513) $ 49,796 $ 63,363

(1) We define Free cash flow from operations ("Free Cash Flow") as Cash provided by operating activities less capital expenditures, which is disclosed as Purchases of property, plant and equipment in the Company's Consolidated Statements of Cash Flows.

(1) We define Free cash flow ("Free Cash Flow") as Cash provided by 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.

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Pursuant to our 2019 Equity Incentive Plan (the "2019 Plan"), we 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 was approved by stockholders and replaced the 2019 Plan.

Share-based compensation expenses are recorded in SG&A expenses and were $5.7 million and $4.6 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was $48.4 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions.

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 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 $5.9 million and $4.2 million for the three months ended June 30, 2021 and 2020, respectively, and $11.6 million and $8.8 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, there was $48.7 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 2.5 years.

In addition, as of March 31, 2021, there was $1.1 million of unrecognized compensation costs related to unvested share-based compensation arrangements that will vest based on performance conditions.

In addition, as of June 30, 2021, there was $0.6 million of unrecognized compensation costs related to unvested share-based compensation arrangements that will vest based on performance conditions.

LIQUIDITY AND CAPITAL RESOURCES

The following discussion highlights cash flow activities during the periods presented:

(In thousands) Three Months Ended

(In thousands) Six Months Ended

Cash provided by (used for):

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Operating Activities

Cash provided by operating activities decreased from $91.5 million in the three months ended March 31, 2020 to $71.7 million in the three months ended March 31, 2021 primarily as a result of a decrease in Revenue driven by the decline in advertising spend resulting from the economic slow-down impacted by the COVID-19 pandemic.

The decrease was offset by changes in working capital balances, particularly accrued expenses, which was impacted by the timing of payments.

Cash provided by operating activities decreased from $102.9 million in the six months ended June 30, 2020 to $100.9 million in the six months ended June 30, 2021 primarily as a result of changes in working capital balances, particularly accounts receivable, which was impacted by the timing of collections, and accrued expenses, which was impacted by the timing of payments.

The decrease in cash provided by operating activities was partially offset by an increase in cash flows from operations as the Company's businesses continue to recover from the impact of the COVID-19 pandemic.

Investing Activities

Cash used for investing activities of $249.3 million during the three months ended March 31, 2021 primarily reflects the net cash payment made to acquire Triton Digital for $228.4 million.

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 of $31.8 million during the three months ended March 31, 2020 primarily reflects $21.7 million in cash used for capital expenditures.

Cash used for investing activities was offset by cash from investing activities primarily related to proceeds received of $50.8 million from the sale of our investment in the San Antonio Spurs.

Cash used for investing activities of $50.7 million during the six months ended June 30, 2020 primarily reflects $39.5 million in cash used for capital expenditures.

We spent $22.8 million for capital expenditures in our Multiplatform Group segment primarily related to IT infrastructure, $6.7 million in our Digital Audio Group segment primarily related to investments in our digital platform, $1.6 million in our Audio & Media Services Group segment, primarily related to acquired software and $8.4 million in Corporate primarily related to equipment and software purchases.

Financing Activities

Cash used for financing activities of $13.8 million during the three months ended March 31, 2021 primarily resulted from required quarterly principal payments made on the Term Loan Facility and repayment of a subsidiary note payable.

Cash provided by financing activities of $187.3 million during the three months ended March 31, 2020 primarily resulted from a $350.0 million draw on our ABL Facility, partially offset by a $150.0 million prepayment on our Term Loan Facility.

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.

Cash provided by financing activities of $65.5 million during the six months ended June 30, 2020 primarily resulted from a $350.0 million draw on our ABL Facility, partially offset by a $150.0 million prepayment on our Term Loan Facility and repayments of $115.0 million of amounts drawn under the ABL Facility.

Anticipated Cash Requirements

Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $529.1 million as of March 31, 2021, cash flow from operations and borrowing capacity under our $450.0 million ABL Facility.

As of March 31, 2021, iHeartCommunications had no amounts outstanding under the ABL Facility, a borrowing base of $348.5 million and $32.1 million in outstanding letters of credit, resulting in $316.4 million of borrowing base availability.

As a result of certain restrictions in the Company's debt and preferred stock agreements, as of March 31, 2021, approximately $178 million was available to be drawn upon under the ABL Facility.

Together with our cash balance of $529.1 million as of March 31, 2021 and our borrowing capacity under the ABL Facility, our total available liquidity 1 was approximately $707 million.

Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $583.3 million as of June 30, 2021, cash flow from operations and borrowing capacity under our $450.0 million ABL Facility.

As of June 30, 2021, iHeartCommunications had no amounts outstanding under the ABL Facility, a borrowing base of $437.8 million and $32.8 million in outstanding letters of credit, resulting in $405.0 million of borrowing base availability.

As a result of certain restrictions in the Company's debt and preferred stock agreements, as of June 30, 2021, approximately $185 million was available to be drawn upon under the ABL Facility.

Together with our cash balance of $583.3 million as of June 30, 2021 and our borrowing capacity under the ABL Facility, our total available liquidity 1 was approximately $768 million.

On July 16, 2021, we amended the Term Loan credit facilities and voluntarily prepaid $250.0 million of borrowings outstanding under these facilities using cash on hand.

The impact of these transactions on our available liquidity as of June 30, 2021 was a net reduction of approximately $30.0 million.

We continue to evaluate the full extent of COVID-19’s impact on our business.

While the challenges that COVID-19 has created for advertisers and consumers have had a significant impact on our revenue for the three months ended March 31, 2021 and have created a business outlook that is less clear in the near term, we believe that we have sufficient liquidity to continue to fund our operations.

While the challenges that COVID-19 has created for advertisers and consumers have had a significant impact on our revenue for the six months ended June 30, 2021 and have created a business outlook that is less clear in the near term, we believe that we have sufficient liquidity to continue to fund our operations.

We expect that our primary anticipated uses of liquidity will be to fund our working capital, make interest payments, fund capital expenditures, pursue certain strategic opportunities and maintain operations and other obligations.

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This modernization is a multi-pronged set of strategic initiatives that we believe positions the Company for sustainable long-term growth, margin expansion, and value creation for stockholders.

Our investments in modernization delivered approximately $50 million of in-year savings in 2020 and remain on track to achieve the target of $100 million of cost savings.

In April 2020, we announced approximately $200 million of incremental in-year operating-expense-saving initiatives in response to the weaker economic environment caused by the COVID-19 pandemic.

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We frequently evaluate strategic opportunities, and we expect from time to time to pursue acquisitions or dispose of certain businesses, which may or may not be material.

For example, on March 31, 2021, we used a portion of our cash on hand to acquire Triton Digital, a global leader in digital audio and podcast technology and measurement services, from The E.W.

Scripps Company for $228.4 million in cash, excluding transaction costs, which we believe will be a transaction accretive to stockholder value.

For example, on March 31, 2021, we used a portion of our cash on hand

1 Total available liquidity is defined as cash and cash equivalents plus available borrowings under the ABL Facility.

We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.

to acquire Triton Digital, a global leader in digital audio and podcast technology and measurement services, from The E.W.

Scripps Company for $228.5 million in cash, excluding transaction costs, which we believe will be a transaction accretive to stockholder value.

Tax Matters Agreement

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Summary Debt Capital Structure

As of March 31, 2021 and December 31, 2020, we had the following debt outstanding, net of cash and cash equivalents:

(In millions) March 31, 2021 December 31, 2020

As of June 30, 2021 and December 31, 2020, we had the following debt outstanding, net of cash and cash equivalents:

(In thousands) June 30, 2021 December 31, 2020

Term Loan Facility due 2026 1

$ 2,069,752 $ 2,080,259

Incremental Term Loan Facility due 2026 1

445,500 447,750

Asset-based Revolving Credit Facility due 2023 — —

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$ 5,416,039 $ 5,296,268

1 On July 16, 2021, iHeartCommunications, Inc.

("iHeartCommunications") entered into an amendment to the credit agreement governing its Term Loan credit facilities.

The amendment reduces the interest rate of its Incremental Term Loan Facility due 2026 to a Eurocurrency Rate of LIBOR plus a margin of 3.25% and floor of 0.50% (from LIBOR plus a margin of 4.00% and floor of 0.75%).

The Base Rate interest amount was reduced to Base Rate plus a margin of 2.25% and floor of 1.50%.

In connection with the amendment, iHeartCommunications voluntarily prepaid $250.0 million of borrowings outstanding under the Term Loan credit facilities with cash on hand, resulting in a reduction of $44.3 million of the existing Incremental Term Loan Facility due 2026 and $205.7 million of the Term Loan Facility due 2026.

We expect to save $12.7 million in annual interest payments as a result of the repricing and repayment.

For additional information regarding our debt refer to Note 5, Long-Term Debt.

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Following the Exchange, the Company's remaining Special Warrants continue to be exercisable for shares of Class A common stock or Class B common stock.

There were 111,841,698 shares of Class A common stock, 29,065,297 shares of Class B common stock and 5,373,519 Special Warrants outstanding on May 3, 2021.

There were 119,067,917 shares of Class A common stock, 22,507,120 shares of Class B common stock and 5,365,086 Special Warrants outstanding on August 2, 2021.

Supplemental Financial Information under Debt Agreements and Certificate of Designation Governing the iHeart Operations Preferred Stock

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 months ended March 31, 2021, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same periods.

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, 2021, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same periods.

According to the certificate of designation governing the iHeart Operations Preferred Stock, iHeart Operations is required to provide certain supplemental financial information of iHeart Operations in comparison to the Company and its consolidated subsidiaries.

iHeart Operations and its subsidiaries comprised 87.3% of the Company's consolidated assets as of March 31, 2021.

For the three months ended March 31, 2021, iHeart Operations and its subsidiaries comprised 84.9% of the Company's consolidated revenue.

iHeart Operations and its subsidiaries comprised 86.6% of the Company's consolidated assets as of June 30, 2021.

For the three and six months ended June 30, 2021, iHeart Operations and its subsidiaries comprised 85.1% and 85.0% of the Company's consolidated revenue.

Commitments, Contingencies and Guarantees

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Accordingly, our earnings will be affected by changes in interest rates.

As of March 31, 2021, approximately 42% 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 three months ended March 31, 2021 would have changed by $0.4 million.

As of June 30, 2021, approximately 42% 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, 2021 would have changed by $0.7 million.

In the event of an adverse change in interest rates, management may take actions to mitigate our exposure.

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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, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, our business plans, strategies and initiatives, benefits of acquisitions, our expectations about certain markets, expected cash interest payments and our anticipated financial performance and liquidity.

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, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, expected interest rate savings from our recent amendment to and $250 million voluntary prepayment on our Term Loan credit facilities, our business plans, strategies and initiatives, benefits of acquisitions, our expectations about certain markets, 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis