What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 226 added, 157 removed, 301 unchanged (56% 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.

These reporting segments reflect how senior management operates the Company and 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.

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Segment Adjusted EBITDA is calculated as Revenue less operating expenses, excluding Restructuring expenses (as defined below) and share-based compensation expenses.

Over the past ten years, we have transitioned our business from a single platform radio broadcast operator to a company with multiple platforms including podcasting, networks and live events.

Over the past ten years, we have transitioned our business from a single platform radio broadcast operator to a company with multiple platforms including 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 12 months.

Description of our Business

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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 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.

economy, our revenue for the nine months ended September 30, 2021 was negatively impacted.

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 our results for the third quarter of 2021 continued to be impacted by the effects of the COVID-19 pandemic, our revenue for both the three months ended June 30, 2021 and September 30, 2021 increased significantly compared to the three months ended June 30, 2020 and September 30, 2020.

Although revenues significantly increased in the nine months ended September 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.

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.

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 2021.

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

For the nine months ended September 30, 2021, we recognized non-cash impairment charges of $49.4 million as a result of these cost-savings initiatives.

We perform our annual impairment test on goodwill and indefinite-lived intangible assets, including FCC licenses, as of July 1 of each year.

No impairment was required as part of the 2021 annual impairment testing.

As a result of the COVID-19 pandemic and the economic downturn starting in March 2020, the Company performed interim impairment tests as of March 31, 2020 on its indefinite-lived FCC licenses and goodwill, resulting in non-cash impairment charges of $502.7 million and $1.2 billion on its FCC licenses and goodwill, respectively.

For more information, see Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill to the consolidated financial statements located in Item 1 of this Quarterly Report on Form 10-Q for a further description of the impairment charges and annual impairment tests.

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.

Executive Summary

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.

Although our results for the third quarter of 2021 continued to be impacted by the effects of the COVID-19 pandemic, our revenues increased significantly, 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.

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

• 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.

• Consolidated Revenue of $928.1 million increased $183.6 million, or 24.7% during the quarter ended September 30, 2021 compared to Revenue of $744.4 million in the prior year's third quarter.

• Revenue and Segment Adjusted EBITDA from our Multiplatform Group increased $103.9 million and $69.5 million compared to the prior year's third quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Digital Audio Group increased $89.6 million and $32.0 million compared to the prior year's third quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Audio & Media Services Group decreased $9.0 million and $6.4 million compared to the prior year's third quarter, respectively.

• Operating income of $80.1 million was up from $39.4 million in the prior year’s third quarter.

• Net income of $3.7 million compared to a Net loss of $32.1 million in the prior year's third quarter.

• Adjusted EBITDA (1) of $230.2 million, was up $68.1 million from $162.1 million in prior year's third quarter.

• Cash flows provided by operating activities of $95.7 million increased from Cash flows provided by operating activities of $33.3 million in the prior year's third quarter.

• Free cash flow (2) of $45.5 million improved from $14.3 million in the prior year's third quarter.

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

(In thousands) Three Months Ended

September 30, %

2021 2020 Change

Revenue $ 928,051 $ 744,406 24.7 %

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

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

Operating income $ 80,111 $ 39,395 103.4 %

Net income (loss) $ 3,673 $ (32,112) NM

Cash provided by operating activities $ 95,736 $ 33,252 187.9 %

Adjusted EBITDA (1)

$ 184,508 $ (29,283) NM

$ 230,213 $ 162,124 42.0 %

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.

$ 45,462 $ 14,275 218.5 %

(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, 2021 to the three and six months ended June 30, 2020:

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

(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Income tax benefit (expense) 27,147 15,228 (77,237) 209,481

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

Net income (loss) 3,673 (32,112) (270,343) (1,918,165)

Less amount attributable to noncontrolling interest

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 three and six months ended June 30, 2021 to the three and six months ended June 30, 2020:

Net income (loss) attributable to the Company $ 3,180 $ (32,112) $ (270,829) $ (1,918,165)

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

(In thousands) Three Months Ended

June 30, % Six Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

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Revenue, total $ 928,051 $ 744,406 24.7 % $ 2,496,321 $ 2,012,688 24.0 %

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.

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

Consolidated revenue increased $183.6 million during the three months ended September 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 and the continuing growth of our operating businesses.

Multiplatform revenue increased $103.9 million, or 18.7%, primarily resulting from strengthening demand for broadcast advertising compared to the third quarter of 2020, partially offset by lower political advertising revenue compared to the same period of 2020, which was a presidential election year.

Digital Audio revenue increased $89.6 million, or 77.1%, driven primarily by continuing increases in demand for digital advertising and the continued growth of podcasting.

Audio & Media Services revenue decreased $9.0 million due to lower political advertising revenue, partially offset by the continued recovery from the impact of COVID-19.

Consolidated revenue increased $483.6 million during the nine months ended September 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 and the continuing growth of our operating businesses.

Multiplatform revenue increased $220.9 million, primarily resulting from strengthening demand for broadcast advertising.

Digital Audio revenue increased $259.0 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.

Audio & Media Services revenue increased $7.9 million primarily due to the continued recovery from the impact of COVID-19, partially offset by decreases in political advertising revenue.

Direct Operating Expenses

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.

Consolidated direct operating expenses increased $54.9 million during the three months ended September 30, 2021 compared to the same period of 2020, primarily as a result of the expenses directly associated with the significant increase in revenue.

The increase in direct operating expenses was driven primarily by higher content and talent and profit sharing expenses, third-party digital costs, and costs related to the return of local and national live events.

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

Consolidated direct operating expenses increased $130.2 million during the nine months ended September 30, 2021 compared to the same period of 2020.

The increase in Direct operating expenses was driven primarily by higher variable 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 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.

Consolidated SG&A expenses increased $57.0 million during the three months ended September 30, 2021 compared to the same period of 2020.

The increase in Consolidated SG&A expenses was driven primarily by increased employee compensation expenses resulting primarily from higher variable 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.

These increases were partially offset by lower trade expense due to the timing of expenses incurred in connection with the iHeartRadio Music Festival, as well as decreases in employee compensation and other expenses resulting from modernization and cost-reduction initiatives taken in response to the COVID-19 pandemic.

Consolidated SG&A expenses increased $86.8 million during the nine months ended September 30, 2021 compared to the same period of 2020.

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

Sales commission expenses also increased as a result of higher revenue.

These increases were partially offset by lower bad debt expense, lower trade expense due to the timing of expenses incurred in connection with the iHeartRadio Music Festival, as well as decreases in employee compensation and other expenses resulting from modernization and cost-reduction initiatives taken in response to the COVID-19 pandemic.

Depreciation and Amortization

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.

Depreciation and amortization increased $8.7 million and $43.9 million during the three and nine months ended September 30, 2021 compared to the same periods of 2020, primarily as a result of increased capital expenditures and the impact of acquired businesses, and accelerated amortization of certain intangible assets.

Impairment Charges

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 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.

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.

During the three and nine months ended September 30, 2021, we recognized non-cash impairment charges of $11.6 million and $49.4 million related to certain of our right-of-use assets and leasehold improvements as a result of these cost-savings initiatives.

No impairment charges were recorded in the third quarter of 2021 or 2020 in connection with our annual impairment testing of goodwill and FCC licenses.

In the nine months ended September 30, 2020, we recognized non-cash impairment charges to our goodwill and FCC licenses 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 2020.

Other Operating Expense, Net

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.

Other operating expense, net of $12.3 million and $1.7 million for the three months ended September 30, 2021 and 2020, respectively, and Other operating expense, net of $27.5 million and $3.2 million for the nine months ended September 30, 2021 and 2020, respectively, relate primarily to net losses recognized on asset disposals in connection with our real estate optimization initiatives.

Interest Expense

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.

Interest expense decreased $3.1 million during the three months ended September 30, 2021 compared to the same period of 2020, primarily as a result of the interest rate reduction of our amended incremental term loan facility and the $250.0 million voluntary repayment made in July 2021 on our term loan credit facilities in connection with the repricing transaction.

Interest expense decreased $5.1 million during the nine months ended September 30, 2021 compared to the same period of 2020, primarily as a result of the impact of lower LIBOR rates and the $250.0 million voluntary repayment of our term loan facilities and amended incremental term loan facility in July 2021, 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 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.

During the three months ended September 30, 2021, we recognized a loss on investments, net of $10.4 million in connection with estimated credit losses and declines in the value of our investments.

During the nine months ended September 30, 2021, we recognized a gain of $39.5 million, primarily related to the sale of our investment in the San Antonio Spurs.

In the three months ended September 30, 2020 we recognized a gain of $0.1 million.

In the nine months ended September 30, 2020 we recognized a loss of $8.6 million 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.

Other expense, net was $9.7 million and $1.2 million for the three months ended September 30, 2021 and 2020, respectively, and $10.9 million and $10.3 million for the nine months ended September 30, 2021 and 2020, respectively.

Other expense, net for the three and nine months ended September 30, 2021 related primarily to the write-off of unamortized debt issuance costs upon our voluntary partial prepayment of our Term Loan Facilities in July 2021, and finance lease termination payments.

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

Income Tax Benefit (Expense)

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 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.

The effective tax rate for the Company for the three and nine months ended September 30, 2021 was 115.6% and (40.0)%, 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, due to uncertainty regarding the Company’s ability to utilize those assets in future periods.

The effective tax rate for the three and nine months ended September 30, 2020 was 32.2% and 9.8%, respectively.

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

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

Net Income (Loss) Attributable to the Company

Net income attributable to the Company increased $35.3 million to Net income attributable to the Company of $3.2 million during the three months ended September 30, 2021 compared to a Net loss attributable to the Company of $32.1 million during the three months ended September 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 continuing growth of our operating businesses.

Net loss attributable to the Company decreased $1,647.3 million to $270.8 million during the nine months ended September 30, 2021 compared to Net loss attributable to the Company of $1,918.2 million during the nine months ended September 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 and the continuing growth of our operating businesses.

Multiplatform Group Results

(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

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450,549 416,131 8.3 % 1,268,107 1,265,094 0.2 %

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

Segment Adjusted EBITDA $ 208,430 $ 138,966 50.0 % $ 494,619 $ 276,729 78.7 %

Segment Adjusted EBITDA margin 31.6 % 25.0 % 28.1 % 17.9 %

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

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.

Revenue from our Multiplatform Group increased $103.9 million compared to the prior year, primarily as a result of the continued recovery from the negative impact of the COVID-19 pandemic in 2020.

Broadcast revenue grew $79.0 million, or 19.5%, year-over-year, while Networks grew $8.9 million, or 7.5%, year-over-year.

Revenue from Sponsorship and Events increased by $13.8 million, or 47.6%, 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.

These increases were partially offset by a $15.1 million decrease in political revenue compared to the same period in 2020, which was a presidential election year.

Operating expenses increased $34.4 million, driven primarily by higher variable employee compensation expenses, including commission and bonus expense, as well as higher talent and profit-sharing fees, both as a result of higher revenue, and higher expenses related to the return of live events, which were partially offset by lower trade expenses resulting from the timing of expenses incurred in connection with the iHeartRadio Music Festival.

These increases were partially offset by lower employee compensation and other expenses resulting from our modernization and cost-reduction initiatives executed in 2020 and early 2021.

Revenue from our Multiplatform Group increased $220.9 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.

Broadcast revenue increased $183.0 million, or 16.5%, year-over-year, while Networks grew $16.7 million, or 4.8%, year-over-year.

Revenue from Sponsorship and Events increased by $20.6 million, or 28.2%, 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.

Operating expenses increased $3.0 million, driven primarily by higher variable employee compensation expense including commission and bonus expense, as well as higher talent and profit share fees, both driven by higher revenue, and higher expenses related to the return of live events.

The increase was partially offset by lower bad debt expense as well as lower employee compensation and other expenses resulting from our modernization and cost-reduction initiatives.

Digital Audio Group Results

(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

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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 $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.

Revenue from our Digital Audio Group increased $89.6 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew $48.0 million, or 51.3%, year-over-year, driven by increased demand for digital advertising, and Podcast revenue which increased by $41.6 million, or 183.7%, 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, 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 leveraging our prior strategic investments in the digital space.

Operating expenses increased $57.6 million in connection with our Digital Audio Group’s significant revenue growth, including the impact of higher variable employee compensation expense, variable content and third-party digital costs due to higher revenue and the development of new podcasts.

In addition, operating expenses increased due to increased headcount resulting from our investments in key infrastructure to support our growing digital operations, as well as higher variable compensation expenses including sales commissions and bonus arrangements.

Revenue from our Digital Audio Group increased $259.0 million compared to the prior year, led by Digital, excluding Podcast revenue, which grew $162.8 million, or 67.1%, year-over-year, driven by increased demand for digital advertising.

Podcast revenue also increased by $96.3 million, or 161.2%, 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 $168.2 million in connection with our Digital Audio Group’s significant revenue growth, including the impact of variable employee compensation expense, 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.

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(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

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43,656 46,247 (5.6) % 124,148 127,774 (2.8) %

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

Segment Adjusted EBITDA $ 22,422 $ 28,792 (22.1) % $ 58,242 $ 46,743 24.6 %

Segment Adjusted EBITDA margin 33.9 % 38.4 % 31.9 % 26.8 %

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

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.

Revenue from our Audio & Media Services Group decreased $9.0 million compared to the comparative period in the prior year due to lower political advertising revenue compared to 2020, which was a presidential election year, partially offset by the continued recovery from the impact of the COVID-19 pandemic.

Operating expenses decreased $2.6 million primarily as a result of lower expenses due to our modernization and cost-reduction initiatives.

Revenue from our Audio & Media Services Group increased $7.9 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, partially offset by lower political advertising revenue.

Operating expenses decreased $3.6 million primarily as a result of lower expenses due to our modernization and cost-reduction initiatives.

Reconciliation of Operating Income (Loss) to Adjusted EBITDA

(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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$ 230,213 $ 162,124 $ 516,968 $ 273,180

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

Net income (loss) $ 3,673 $ (32,112) $ (270,343) $ (1,918,165)

Income tax (benefit) expense (27,147) (15,228) 77,237 (209,481)

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Equity in loss of nonconsolidated affiliates

1,056 58 1,115 653

Impairment charges

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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 (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.

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, 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.

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(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Historically, we had granted restricted shares of the Company's Class A common stock to certain key individuals.

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.

Pursuant to our 2019 Equity Incentive Plan (the "2019 Plan"), we 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 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.

Pursuant to our 2021 Plan, we will continue to 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 $6.0 million and $5.9 million for the three months ended September 30, 2021 and 2020, respectively, and $17.6 million and $14.7 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, there was $45.0 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 2.3 years.

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.

In addition, as of September 30, 2021, there was $0.3 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) Six Months Ended

(In thousands) Nine Months Ended

September 30,

Cash provided by (used for):

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Operating Activities

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.

Cash provided by operating activities increased from $136.2 million in the nine months ended September 30, 2020 to $196.6 million in the nine months ended September 30, 2021 primarily as a result of an increase in cash flows generated from higher revenues and operating profitability as the Company's businesses continue to recover from the impact of the COVID-19 pandemic.

The increase in cash provided by operating activities was partially offset by changes in working capital balances, particularly accounts receivable, which was impacted by the timing of collections.

Investing Activities

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.

Cash used for investing activities of $259.9 million during the nine months ended September 30, 2021 primarily reflects the net cash payment made to acquire Triton Digital for $228.5 million.

In addition, $101.3 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 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 $66.5 million for capital expenditures in our Multiplatform Group segment primarily related to our real estate optimization initiatives, and $17.9 million in our Digital Audio Group segment primarily related to IT infrastructure, $6.2 million in our Audio & Media Services Group segment, primarily related to software and $10.7 million in Corporate primarily related to equipment and software purchases.

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

Cash used for investing activities of $71.2 million during the nine months ended September 30, 2020 primarily reflects $58.5 million in cash used for capital expenditures.

We spent $34.8 million for capital expenditures in our Multiplatform Group segment primarily related to IT infrastructure, $10.7 million in our Digital Audio Group segment primarily related to investments in our digital platform, $2.5 million in our Audio & Media Services Group segment, primarily related to acquired software and $10.5 million in Corporate primarily related to equipment and software purchases.

Financing Activities

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.

Cash used for financing activities of $288.1 million during the nine months ended September 30, 2021 primarily resulted from the $250.0 million voluntary repayment of our term loan credit facilities in connection with the repricing transaction, and required quarterly principal payments made on our Term Loan Facility and repayment of a subsidiary note payable.

As a result of our voluntary prepayment, our Term Loan Facility no longer requires quarterly principal payments.

Cash provided by financing activities of $248.6 million during the nine months ended September 30, 2020 primarily resulted from the net proceeds of $425.8 million from the issuance of incremental term loan commitments, offset by the $150.0 million prepayment on our Term Loan Facility in the first quarter of 2020, along with required quarterly principal payments made on the Term Loan Facility.

Anticipated Cash Requirements

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.

Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $369.1 million as of September 30, 2021, cash flow from operations and borrowing capacity under our $450.0 million ABL Facility.

As of September 30, 2021, iHeartCommunications had no amounts outstanding under the ABL Facility, a facility size of $450.0 million and $28.5 million in outstanding letters of credit, resulting in $421.5 million of borrowing base availability.

Together with our cash balance of $369.1 million as of September 30, 2021 and our borrowing capacity under the ABL Facility, our total available liquidity 1 was approximately $791 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 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.

On October 27, 2021, iHeart Operations repurchased all of the iHeart Operations Preferred Stock with cash on hand for an aggregate price of $64.4 million (“Redemption Price”), including accrued dividends, upon obtaining consent from the third party investor.

The Redemption Price included a negotiated make-whole premium as the redemption occurred prior to the optional redemption date set forth in the Certificate of Designation governing the iHeart Operations Preferred Stock.

Subsequent to the transaction, the preferred shares were retired and cancelled and are no longer outstanding.

We continue to evaluate the ongoing impact of COVID-19 on our business.

The challenges that COVID-19 has created for advertisers and consumers have had a significant impact on our revenue for the nine months ended September 30, 2021 and have created a business outlook that is less clear in the near term.

Although our results continued to be impacted by the effects of the COVID-19 pandemic, our revenue for both the three months ended June 30, 2021 and September 30, 2021 increased significantly compared to the three months ended June 30, 2020 and September 30, 2020.

We believe that we have sufficient liquidity to continue to fund our operations for at least the next twelve months.

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.

We anticipate that we will have approximately $162 million of cash interest payments in the remainder of 2021.

We anticipate that we will have approximately $81 million of cash interest payments in the remainder of 2021 and $312 million of cash interest payments in 2022.

Over the past several years, we have transitioned our business from a single-platform radio broadcast operator to a company with multiple platforms, including digital, podcasting, networks and live and virtual events.

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As previously announced, we have implemented plans to make the majority of these savings permanent.

We believe that our cash balance, our cash flow from operations and availability under our ABL Facility provide us with sufficient liquidity to fund our core operations, maintain key personnel and meet our other material obligations.

In addition, none of our long-term debt includes maintenance covenants that could trigger early repayment.

In addition, none of our long-term debt includes maintenance covenants that could trigger early

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.

We fully appreciate the unprecedented challenges posed by the COVID-19 pandemic, however, we remain confident in our business, our employees and our strategy.

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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

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.

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 $228.5 million in cash, excluding transaction costs.

Tax Matters Agreement

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Summary Debt Capital Structure

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

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

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

Term Loan Facility due 2026 1

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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 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

There were 120,189,029 shares of Class A common stock, 21,622,510 shares of Class B common stock and 5,304,430 Special Warrants outstanding on November 1, 2021.

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, 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 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.

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 nine months ended September 30, 2021, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same periods.

Commitments, Contingencies and Guarantees

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

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.

As of September 30, 2021, 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 nine months ended September 30, 2021 would have changed by $0.8 million.

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

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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, 2020 except as disclosed in Note 1, Basis of Presentation to our consolidated financial statements.

Our significant accounting policies are discussed in the notes to our consolidated financial statements included in Note 1 of Item 8, Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2020.

Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

The following narrative describes these critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions.

The Company performs its annual impairment test on goodwill and indefinite-lived intangible assets as of July 1 of each year.

Indefinite-lived Intangible Assets

In connection with our Plan of Reorganization, we applied fresh start accounting as required by ASC 852 and recorded all of our assets and liabilities at estimated fair values, including our FCC licenses, which are included within our Multiplatform Group reporting unit.

Indefinite-lived intangible assets, such as our FCC licenses, are reviewed annually for possible impairment using the direct valuation method as prescribed in ASC 805-20-S99.

Under the direct valuation method, the estimated fair value of the indefinite-lived intangible assets was calculated at the market level as prescribed by ASC 350-30-35.

Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived intangible assets and builds a new operation with similar attributes from scratch.

Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value.

Initial capital costs are deducted from the discounted cash flows model, which results in value that is directly attributable to the indefinite-lived intangible assets.

Our key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs, the risk-adjusted discount rate and terminal values.

This data is populated using industry normalized information representing an average asset within a market.

On July 1, 2021, we performed our annual impairment test in accordance with ASC 350-30-35 and we concluded no impairment of the indefinite-lived intangible assets was required.

In determining the fair value of our FCC licenses, the following key assumptions were used:

• Revenue forecasts published by BIA Financial Network, Inc.

(“BIA”), varying by market, and revenue growth projections made by industry analysts were used for the initial four-year period;

• 2.0% revenue growth was assumed beyond the initial four-year period;

• Revenue was grown proportionally over a build-up period, reaching market revenue forecast by year 3;

• Operating margins of 8.0% in the first year gradually climb to the industry average margin in year 3 of up to 20.2%, depending on market size;

• Assumed discount rates of 8.0% for the 15 largest markets and 8.5% for all other markets.

While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the fair value of our indefinite-lived intangible assets, it is possible a material change could occur.

If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future.

The following table shows the decrease in

the fair value of our indefinite-lived intangible assets that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions and a 100 basis point increase in our discount rate assumption:

(In thousands)

Description Revenue

Growth Rate Profit

Margin Discount

FCC licenses $ 405,630 $ 213,548 $ 459,449

The estimated fair value of our FCC licenses at July 1, 2021 was $2.2 billion, while the carrying value was $1.8 billion.

Given the difference between the carrying values of our FCC licenses and their estimated fair values, an increase in discount rates or a decrease in revenue growth rates or profit margins could result in an impairment to our FCC licenses.

Upon application of fresh start accounting in accordance with ASC 852 in connection with our emergence from bankruptcy, we recorded goodwill of $3.3 billion, which represented the excess of estimated enterprise fair value over the estimated fair value of our assets and liabilities.

Goodwill was further allocated to our reporting units based on the relative fair values of our reporting units as of May 1, 2019.

As a result of the changes in the Company's management structure and its reportable segments, we performed 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.

We test goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired.

The fair value of our reporting units is used to apply value to the net assets of each reporting unit.

To the extent that the carrying amount of net assets would exceed the fair value, an impairment charge may be required to be recorded.

The discounted cash flow approach we use for valuing goodwill involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate.

Terminal values are also estimated and discounted to their present value.

On July 1, 2021, we performed our annual impairment test in accordance with ASC 350-30-35, resulting in no impairment of goodwill.

In determining the fair value of our reporting units, we used the following assumptions:

• Expected cash flows underlying our business plans for the periods 2021 through 2025.

Our cash flow assumptions are based on detailed, multi-year forecasts performed by each of our operating reporting units, and reflect the current advertising outlook across our businesses.

• Cash flows beyond 2025 are projected to grow at a perpetual growth rate, which we estimated at 2.0% for our Multiplatform and RCS Reporting units, 3% for our Digital Audio Reporting unit, and 2.0% for our Katz Media reporting unit (beyond 2029).

• In order to risk adjust the cash flow projections in determining fair value, we utilized discounts rates between 11% and 14% for each of our reporting units.

Based on our annual assessment using the assumptions described above, a hypothetical 5% reduction in the estimated fair value in each of our reporting units would not result in a material impairment condition.

While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the estimated fair value of our reporting units, it is possible a material change could occur.

If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future.

The following table shows the decline in the fair value of each of our reporting units that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions and a 100 basis point increase in our discount rate assumption:

(In thousands)

Description Revenue

Growth Rate Profit

Margin Discount

Multiplatform $ 670,000 $ 240,000 $ 650,000

Digital $ 330,000 $ 100,000 $ 270,000

Katz Media $ 60,000 $ 20,000 $ 50,000

Other $ 30,000 $ 10,000 $ 20,000

An increase in discount rates or a decrease in revenue growth rates or profit margins could result in impairment charges being required to be recorded for one or more of our reporting units.

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, 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.

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 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.

26 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis