iHeartMedia, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) September 30, 2021 December 31, 2020 (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 369,094 $ 720,662 Accounts receivable, net of allowance of $ 29,881 in 2021 and $ 38,777 in 2020 857,970 801,380 Prepaid expenses 98,204 79,508 Other current assets 30,748 17,426 Total Current Assets 1,356,016 1,618,976 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net 769,769 811,702 INTANGIBLE ASSETS AND GOODWILL Indefinite-lived intangibles - licenses 1,778,045 1,770,345 Other intangibles, net 1,729,365 1,924,492 Goodwill 2,313,824 2,145,935 OTHER ASSETS Operating lease right-of-use assets 747,707 825,887 Other assets 115,888 105,624 Total Assets $ 8,810,614 $ 9,202,961 CURRENT LIABILITIES Accounts payable $ 190,125 $ 149,333 Current operating lease liabilities 96,830 76,503 Accrued expenses 298,679 265,651 Accrued interest 69,820 68,054 Deferred revenue 126,108 123,488 Current portion of long-term debt 725 34,775 Total Current Liabilities 782,287 717,804 Long-term debt 5,736,650 5,982,155 Series A Mandatorily Redeemable Preferred Stock, par value $ 0.001 , authorized 60,000 shares, 60,000 shares issued in 2021 and 2020 60,000 60,000 Noncurrent operating lease liabilities 721,126 764,491 Deferred income taxes 633,805 556,477 Other long-term liabilities 78,725 71,217 Commitments and contingent liabilities (Note 6) STOCKHOLDERS’ EQUITY Noncontrolling interest 8,274 8,350 Preferred stock, par value $ .001 per share, 100,000,000 shares authorized, no shares issued and outstanding — — Class A Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued 119,669,831 and 64,726,864 shares in 2021 and 2020, respectively 119 65 Class B Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued 22,505,661 and 6,886,925 shares in 2021 and 2020, respectively 23 7 Special Warrants, 5,304,430 and 74,835,899 issued and outstanding in 2021 and 2020, respectively — — Additional paid-in capital 2,870,394 2,849,020 Accumulated deficit ( 2,074,449 ) ( 1,803,620 ) Accumulated other comprehensive income (loss) ( 193 ) 194 Cost of shares ( 383,847 in 2021 and 254,066 in 2020) held in treasury ( 6,147 ) ( 3,199 ) Total Stockholders' Equity 798,021 1,050,817 Total Liabilities and Stockholders' Equity $ 8,810,614 $ 9,202,961 See Notes to Consolidated Financial Statements 1 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (In thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue $ 928,051 $ 744,406 $ 2,496,321 $ 2,012,688 Operating expenses: Direct operating expenses (excludes depreciation and amortization) 325,766 270,862 939,094 808,925 Selling, general and administrative expenses (excludes depreciation and amortization) 390,086 333,095 1,105,056 1,018,258 Depreciation and amortization 108,100 99,379 343,408 299,494 Impairment charges 11,647 — 49,391 1,733,235 Other operating expense, net 12,341 1,675 27,491 3,247 Operating income (loss) 80,111 39,395 31,881 ( 1,850,471 ) Interest expense, net 82,481 85,562 252,489 257,614 Gain (loss) on investments, net ( 10,367 ) 62 39,468 ( 8,613 ) Equity in loss of nonconsolidated affiliates ( 1,056 ) ( 58 ) ( 1,115 ) ( 653 ) Other expense, net ( 9,681 ) ( 1,177 ) ( 10,851 ) ( 10,295 ) Loss before income taxes ( 23,474 ) ( 47,340 ) ( 193,106 ) ( 2,127,646 ) Income tax benefit (expense) 27,147 15,228 ( 77,237 ) 209,481 Net income (loss) 3,673 ( 32,112 ) ( 270,343 ) ( 1,918,165 ) Less amount attributable to noncontrolling interest 493 — 486 — Net income (loss) attributable to the Company $ 3,180 $ ( 32,112 ) $ ( 270,829 ) $ ( 1,918,165 ) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ( 131 ) 267 ( 387 ) 455 Other comprehensive income (loss), net of tax ( 131 ) 267 ( 387 ) 455 Comprehensive income (loss) 3,049 ( 31,845 ) ( 271,216 ) ( 1,917,710 ) Less amount attributable to noncontrolling interest — — — — Comprehensive income (loss) attributable to the Company $ 3,049 $ ( 31,845 ) $ ( 271,216 ) $ ( 1,917,710 ) Net income (loss) attributable to the Company per common share: Basic $ 0.02 $ ( 0.22 ) $ ( 1.85 ) $ ( 13.15 ) Weighted average common shares outstanding - Basic 147,040 146,152 146,591 145,911 Diluted $ 0.02 $ ( 0.22 ) $ ( 1.85 ) $ ( 13.15 ) Weighted average common shares outstanding - Diluted 150,397 146,152 146,591 145,911 See Notes to Consolidated Financial Statements 2 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at June 30, 2021 118,261,575 23,636,512 5,365,128 $ 7,968 $ 142 $ 2,863,657 $ ( 2,077,629 ) $ ( 62 ) $ ( 5,231 ) $ 788,845 Net income 493 — — 3,180 — — 3,673 Vesting of restricted stock and other 216,707 — ( 1 ) 745 — — ( 916 ) ( 172 ) Share-based compensation — — 5,993 — — — 5,993 Conversion of Special Warrants to Class A and Class B Shares 60,698 ( 60,698 ) — 1 ( 1 ) — — — — Conversion of Class B Shares to Class A Shares 1,130,851 ( 1,130,851 ) — — — — — — — Other ( 187 ) — — — — — ( 187 ) Other comprehensive loss — — — — ( 131 ) — ( 131 ) Balances at September 30, 2021 119,669,831 22,505,661 5,304,430 $ 8,274 $ 142 $ 2,870,394 $ ( 2,074,449 ) $ ( 193 ) $ ( 6,147 ) $ 798,021 (1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2021. See Notes to Consolidated Financial Statements 3 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at June 30, 2020 61,432,341 6,900,195 78,038,412 $ 9,123 $ 68 $ 2,835,005 $ ( 1,774,974 ) $ ( 562 ) $ ( 3,018 ) $ 1,065,642 Net loss — — — ( 32,112 ) — — ( 32,112 ) Vesting of restricted stock 21,270 — — — — — ( 34 ) ( 34 ) Share-based compensation — — 5,885 — — — 5,885 Conversion of Special Warrants to Class A and Class B Shares 1,986,278 704 ( 1,986,982 ) — 2 ( 2 ) — — — — Conversion of Class B Shares to Class A Shares 7,263 ( 7,263 ) — — — — — — — Other comprehensive income — — — — 267 — 267 Balances at September 30, 2020 63,447,152 6,893,636 76,051,430 $ 9,123 $ 70 $ 2,840,888 $ ( 1,807,086 ) $ ( 295 ) $ ( 3,052 ) $ 1,039,648 (1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2020. See Notes to Consolidated Financial Statements 4 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at December 31, 2020 64,726,864 6,886,925 74,835,899 $ 8,350 $ 72 $ 2,849,020 $ ( 1,803,620 ) $ 194 $ ( 3,199 ) $ 1,050,817 Net income (loss) 486 — — ( 270,829 ) — — ( 270,343 ) Vesting of restricted stock and other 1,027,252 — — 3,863 — — ( 2,948 ) 915 Share-based compensation — — 17,581 — — — 17,581 Conversion of Special Warrants to Class A and Class B Shares 47,197,139 22,337,312 ( 69,534,451 ) — 70 ( 70 ) — — — — Conversion of Class B Shares to Class A Shares 6,718,576 ( 6,718,576 ) — — — — — — — Other 2,982 ( 562 ) — — — — — ( 562 ) Other comprehensive loss — — — — ( 387 ) — ( 387 ) Balances at September 30, 2021 119,669,831 22,505,661 5,304,430 $ 8,274 $ 142 $ 2,870,394 $ ( 2,074,449 ) $ ( 193 ) $ ( 6,147 ) $ 798,021 (1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2021 or 2020. See Notes to Consolidated Financial Statements 5 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at December 31, 2019 57,776,204 6,904,910 81,046,593 $ 9,123 $ 65 $ 2,826,533 $ 112,548 $ ( 750 ) $ ( 2,078 ) $ 2,945,441 Net loss — — — ( 1,918,165 ) — — ( 1,918,165 ) Vesting of restricted stock 667,493 — — ( 23 ) — — ( 974 ) ( 997 ) Share-based compensation — — 14,383 — — — 14,383 Conversion of Special Warrants and Class B Shares to Class A Shares 4,990,132 2,049 ( 4,992,181 ) — 5 ( 5 ) — — — — Conversion of Class B Shares to Class A Shares 13,323 ( 13,323 ) — — — — — — — Other ( 2,982 ) — — — ( 1,469 ) — — ( 1,469 ) Other comprehensive income — — — — 455 — 455 Balances at September 30, 2020 63,447,152 6,893,636 76,051,430 $ 9,123 $ 70 $ 2,840,888 $ ( 1,807,086 ) $ ( 295 ) $ ( 3,052 ) $ 1,039,648 (1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2019 or 2020. See Notes to Consolidated Financial Statements 6 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net loss $ ( 270,343 ) $ ( 1,918,165 ) Reconciling items: Impairment charges 49,391 1,733,235 Depreciation and amortization 343,408 299,494 Deferred taxes 64,520 ( 214,615 ) Provision for doubtful accounts 2,919 23,593 Amortization of deferred financing charges and note discounts, net 4,508 3,000 Share-based compensation 17,581 14,383 Loss on disposal of operating and other assets 22,771 704 (Gain) Loss on investments ( 39,468 ) 8,613 Equity in loss of nonconsolidated affiliates 1,115 653 Barter and trade income ( 9,418 ) ( 7,500 ) Other reconciling items, net 8,660 775 Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: (Increase) decrease in accounts receivable ( 37,776 ) 224,044 Increase in prepaid expenses and other current assets ( 33,486 ) ( 7,228 ) Increase in other long-term assets ( 7,392 ) ( 165 ) Increase (decrease) in accounts payable and accrued expenses 74,534 ( 31,343 ) Increase (decrease) in accrued interest 1,766 ( 13,959 ) Increase in deferred income 2,500 1,919 Increase in other long-term liabilities 803 18,723 Cash provided by operating activities 196,593 136,161 Cash flows from investing activities: Business combinations ( 245,462 ) ( 12,656 ) Proceeds from sale of other investments 50,757 — Purchases of property, plant and equipment ( 101,335 ) ( 58,523 ) Proceeds from disposal of assets 36,330 1,742 Change in other, net ( 188 ) ( 1,735 ) Cash used for investing activities ( 259,898 ) ( 71,172 ) Cash flows from financing activities: Proceeds from long-term debt and credit facilities — 779,750 Payments on long-term debt and credit facilities ( 288,484 ) ( 525,362 ) Change in other, net 366 ( 5,751 ) Cash provided by (used for) financing activities ( 288,118 ) 248,637 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 244 ) ( 115 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 351,667 ) 313,511 Cash, cash equivalents and restricted cash at beginning of period 721,187 411,618 Cash, cash equivalents and restricted cash at end of period $ 369,520 $ 725,129 SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 247,513 $ 270,963 Cash paid for income taxes 7,900 5,263 See Notes to Consolidated Financial Statements 7 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 – BASIS OF PRESENTATION Preparation of Interim Financial Statements All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to iHeartMedia, Inc. and its consolidated subsidiaries. The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. As of January 1, 2021, the Company began reporting based on three reportable segments: ▪ the iHeartMedia Multiplatform Group, which includes the Company's Broadcast radio, Networks and Sponsorships and Events businesses; ▪ the iHeartMedia Digital Audio Group, which includes all of the Company's Digital businesses, including Podcasting; and ▪ the Audio & Media Services Group, which includes Katz Media Group (“Katz Media”), a full-service media representation business, and RCS Sound Software ("RCS"), a provider of scheduling and broadcast software and services. These reporting segments reflect how senior management operates the Company and align with certain leadership and organizational changes implemented in the first quarter 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, as of January 1, 2021, Segment Adjusted EBITDA is the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as Revenue less operating expenses, excluding restructuring expenses and share-based compensation 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. The corresponding current and prior period segment disclosures have been recast to reflect the current segment presentation. See Note 9, Segment Data . The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling interest or is the primary beneficiary. Investments in companies which the Company does not control, but exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process. COVID-19 Our business has been adversely impacted by the novel coronavirus pandemic (“COVID-19”), its impact on the operating and economic environment and related, near-term advertiser spending decisions. The Company's revenue in the latter half of the month ended March 31, 2020, through the remainder of 2020 and into 2021 was significantly and negatively impacted as a result of a decline in advertising spend driven by COVID-19, and the Company's management took proactive actions during 2020, which are continuing into 2021, to expand the Company’s financial flexibility by reducing expenses and preserving cash as a result of such impact. 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 8 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) significantly compared to the three months ended June 30, 2020 and September 30, 2020, including revenue from our Multiplatform segment, which includes our broadcast radio, networks and sponsorship and events businesses. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES Act”) was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The provisions of the CARES Act resulted in an increase to allowable interest deductions of $ 179.4 million during 2020. In addition, the Company was able to defer the payment of $ 29.3 million in certain employment taxes during 2020, half of which will be due on December 31, 2021 and the other half will be due on December 31, 2022. As of September 30, 2021, the Company has claimed $ 12.4 million in refundable payroll tax credits related to the CARES Act provisions. As of September 30, 2021, the Company had approximately $ 369.1 million in cash and cash equivalents. While the Company expects COVID-19 to continue to negatively impact the results of operations, cash flows and financial position of the Company, the related financial impact cannot be reasonably estimated at this time. Based on current available liquidity, the Company expects to be able to meet its obligations as they become due over the coming year. Reclassifications and New Segment Presentation Certain prior period amounts have been reclassified to conform to the 2021 presentation. In connection with the organization and leadership changes resulting in the realignment of its reportable segments as discussed above, the Company also determined that all selling, general and administrative expenses incurred by its reportable segments and by its corporate functions would be reported together as Selling, general and administrative expenses. Amounts presented in prior years as Corporate expenses have been reclassified as Selling, general and administrative expenses to conform to the current presentation. Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the amounts reported in the Consolidated Statements of Cash Flows: (In thousands) September 30, 2021 December 31, 2020 Cash and cash equivalents $ 369,094 $ 720,662 Restricted cash included in: Other current assets 426 — Other assets — 525 Total cash, cash equivalents and restricted cash in the Statement of Cash Flows $ 369,520 $ 721,187 Certain Relationships and Related Party Transactions From time to time, certain companies in which the Company holds minority equity interests, purchase advertising in the ordinary course. None of these ordinary course transactions have a material impact on the Company. New Accounting Pronouncements Recently Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting to provide optional relief from applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. In addition, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848) – Scope, to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the future impact of adoption of this standard. 9 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2 – REVENUE Disaggregation of Revenue The following tables show revenue streams for the three and nine months ended September 30, 2021 and 2020: (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Eliminations Consolidated Three Months Ended September 30, 2021 Revenue from contracts with customers: Broadcast Radio (1) $ 483,456 $ — $ — $ — $ 483,456 Networks (2) 127,920 — — — 127,920 Sponsorship and Events (3) 42,663 — — — 42,663 Digital, excluding Podcast (4) — 141,573 — ( 1,475 ) 140,098 Podcast (5) — 64,196 — — 64,196 Audio & Media Services (6) — — 66,078 ( 1,188 ) 64,890 Other (7) 4,636 — — ( 112 ) 4,524 Total 658,675 205,769 66,078 ( 2,775 ) 927,747 Revenue from leases (8) 304 — — — 304 Revenue, total $ 658,979 $ 205,769 $ 66,078 $ ( 2,775 ) $ 928,051 Three Months Ended September 30, 2020 Revenue from contracts with customers: Broadcast Radio (1) $ 404,460 $ — $ — $ — $ 404,460 Networks (2) 118,982 — — — 118,982 Sponsorship and Events (3) 28,898 — — — 28,898 Digital, excluding Podcast (4) — 93,574 — — 93,574 Podcast (5) — 22,626 — — 22,626 Audio & Media Services (6) — — 75,039 ( 1,762 ) 73,277 Other (7) 2,180 — — ( 168 ) 2,012 Total 554,520 116,200 75,039 ( 1,930 ) 743,829 Revenue from leases (8) 577 — — — 577 Revenue, total $ 555,097 $ 116,200 $ 75,039 $ ( 1,930 ) $ 744,406 10 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Eliminations Consolidated Nine Months Ended September 30, 2021 Revenue from contracts with customers: Broadcast Radio (1) $ 1,293,134 $ — $ — $ — $ 1,293,134 Networks (2) 366,592 — — — 366,592 Sponsorship and Events (3) 93,641 — — — 93,641 Digital, excluding Podcast (4) — 405,276 — ( 4,547 ) 400,729 Podcast (5) — 155,976 — — 155,976 Audio & Media Services (6) — — 182,390 ( 5,053 ) 177,337 Other (7) 8,226 — — ( 447 ) 7,779 Total 1,761,593 561,252 182,390 ( 10,047 ) 2,495,188 Revenue from leases (8) 1,133 — — — 1,133 Revenue, total $ 1,762,726 $ 561,252 $ 182,390 $ ( 10,047 ) $ 2,496,321 Nine Months Ended September 30, 2020 Revenue from contracts with customers: Broadcast Radio (1) $ 1,110,155 $ — $ — $ — $ 1,110,155 Networks (2) 349,889 — — — 349,889 Sponsorship and Events (3) 73,055 — — — 73,055 Digital, excluding Podcast (4) — 242,479 — — 242,479 Podcast (5) — 59,724 — — 59,724 Audio & Media Services (6) — — 174,517 ( 5,352 ) 169,165 Other (7) 7,284 — — ( 503 ) 6,781 Total 1,540,383 302,203 174,517 ( 5,855 ) 2,011,248 Revenue from leases (8) 1,440 — — — 1,440 Revenue, total $ 1,541,823 $ 302,203 $ 174,517 $ ( 5,855 ) $ 2,012,688 (1) Broadcast Radio revenue is generated through the sale of advertising time on the Company’s domestic radio stations. (2) Networks revenue is generated through the sale of advertising on the Company’s Premiere and Total Traffic & Weather network programs and through the syndication of network programming to other media companies. (3) Sponsorship and events revenue is generated through local events and major nationally-recognized tent pole events and include sponsorship and other advertising revenue, ticket sales, and licensing, as well as endorsement and appearance fees generated by on-air talent. (4) Digital, excluding Podcast revenue is generated through the sale of streaming and display advertisements on digital platforms and through subscriptions to iHeartRadio streaming services. (5) Podcast revenue is generated through the sale of advertising on the Company's podcast network. (6) Audio & Media Services revenue is generated by services provided to broadcast industry participants through the Company’s Katz Media and RCS businesses. As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast and webcast software and technology and services to radio stations, television music channels, cable companies, satellite music networks and Internet stations worldwide. (7) Other revenue represents fees earned for miscellaneous services, including on-site promotions, activations, and local marketing agreements. (8) Revenue from leases is primarily generated by the lease of towers to other media companies, which are all categorized as operating leases. 11 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Trade and Barter Trade and barter transactions represent the exchange of advertising spots for merchandise, services, advertising and promotion or other assets in the ordinary course of business. The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the advertising spots promised to the customer. Trade and barter revenues and expenses, which are included in consolidated revenue and selling, general and administrative expenses, respectively, were as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Trade and barter revenues $ 49,200 $ 41,430 $ 127,654 $ 113,861 Trade and barter expenses 33,955 44,109 101,998 116,182 The Company recognized barter revenue of $ 4.9 million and $ 2.3 million during the three months ended September 30, 2021 and 2020, respectively, and $ 9.4 million and $ 7.5 million during the nine months ended September 30, 2021 and 2020, respectively, in connection with investments made in companies in exchange for advertising services. The following tables show the Company’s deferred revenue balance from contracts with customers: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Deferred revenue from contracts with customers: Beginning balance (1) $ 149,731 $ 178,030 $ 145,493 $ 162,068 Revenue recognized, included in beginning balance ( 52,406 ) ( 79,261 ) ( 84,375 ) ( 86,419 ) Additions, net of revenue recognized during period, and other 56,799 73,352 93,006 96,472 Ending balance $ 154,124 $ 172,121 $ 154,124 $ 172,121 (1) Deferred revenue from contracts with customers, which excludes other sources of deferred revenue that are not related to contracts with customers, is included within deferred revenue and other long-term liabilities on the Consolidated Balance Sheets, depending upon when revenue is expected to be recognized. The Company’s contracts with customers generally have terms of one year or less; however, as of September 30, 2021, the Company expects to recognize $ 220.5 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration greater than one year, with substantially all of this amount to be recognized over the next five years . Commissions related to the Company’s media representation business have been excluded from this amount as they are contingent upon future sales. 12 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Revenue from Leases As of September 30, 2021, the future lease payments to be received by the Company are as follows: (In thousands) 2021 $ 277 2022 910 2023 759 2024 579 2025 394 Thereafter 1,828 Total $ 4,747 NOTE 3 – LEASES The Company enters into operating lease contracts for land, buildings, structures and other equipment. Arrangements are evaluated at inception to determine whether such arrangements contain a lease. Operating leases primarily include land and building lease contracts and leases of radio towers. Arrangements to lease building space consist primarily of the rental of office space, but may also include leases of other equipment, including automobiles and copiers. Operating leases are reflected on the Company's balance sheet within Operating lease right-of-use assets ("ROU assets") and the related short-term and long-term liabilities are included within Current and Noncurrent operating lease liabilities, respectively. The Company's finance leases are included within Property, plant and equipment with the related liabilities included within Long-term debt. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term. The Company tests for impairment of assets whenever events and circumstances indicate that such assets might be impaired. During the nine months ended September 30, 2021, the Company recognized non-cash impairment charges of $ 49.4 million, including $ 38.0 million related to ROU assets, and $ 11.4 million related to leasehold improvements as a result of proactive decisions by management to abandon and sublease a number of operating leases in connection with strategic actions to streamline the Company’s real estate footprint as part of the Company’s modernization initiatives. The implicit rate within the Company's lease agreements is generally not determinable. As such, the Company uses the incremental borrowing rate ("IBR") to determine the present value of lease payments at the commencement of the lease. The IBR, as defined in ASC 842, is "the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment." 13 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table provides supplemental cash flow information related to leases for the periods presented: Nine Months Ended September 30, (In thousands) 2021 2020 Cash paid for amounts included in measurement of operating lease liabilities $ 100,815 $ 99,634 Lease liabilities arising from obtaining right-of-use assets (1) 35,317 41,982 (1) Lease liabilities from obtaining right-of-use assets include new leases entered into during the nine months ended September 30, 2021 and 2020, respectively. The Company reflects changes in the lease liability and changes in the ROU asset on a net basis in the Statements of Cash Flows. The non-cash operating lease expense was $ 75.8 million and $ 78.2 million for the nine months ended September 30, 2021 and September 30, 2020, respectively. NOTE 4– PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL Acquisitions On March 31, 2021, the Company acquired 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. The assets acquired as part of this transaction consisted of $ 69.4 million in current and fixed assets, consisting primarily of accounts receivable and technology, and $ 191.5 million in intangible assets, consisting primarily of customer relationships, along with $ 168.2 million in goodwill (of which $ 6.9 million is tax-deductible). The Company also assumed liabilities of $ 32.4 million, consisting primarily of accounts payable and deferred tax liabilities. The assessment of fair value of assets acquired and liabilities assumed is preliminary and is based on information that was available to management at the time these consolidated financial statements were prepared. The finalization of the Company’s acquisition accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed, which could be material. Property, Plant and Equipment The Company’s property, plant and equipment consisted of the following classes of assets as of September 30, 2021 and December 31, 2020, respectively: (In thousands) September 30, 2021 December 31, 2020 Land, buildings and improvements $ 337,696 $ 386,980 Towers, transmitters and studio equipment 174,461 169,788 Computer equipment and software 489,027 398,084 Furniture and other equipment 31,711 45,711 Construction in progress 64,769 25,073 1,097,664 1,025,636 Less: accumulated depreciation 327,895 213,934 Property, plant and equipment, net $ 769,769 $ 811,702 Indefinite-lived Intangible Assets The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses in its Multiplatform Group segment. 14 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company performs its annual impairment test on goodwill and indefinite-lived intangible assets, including FCC licenses, as of July 1 of each year. The impairment tests for indefinite-lived intangible assets consist of a comparison between the fair value of the indefinite-lived intangible asset at the market level with its carrying amount. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the indefinite-lived asset is its new accounting basis. The fair value of the indefinite-lived asset is determined using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed by ASC 350-30-35. The Company engaged a third-party valuation firm to assist it in the development of the assumptions and the Company’s determination of the fair value of its indefinite-lived intangible assets. The application of the direct valuation method attempts to isolate the income that is attributable to the indefinite-lived intangible asset alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. The Company forecasts revenue, expenses, and cash flows over a ten-year period for each of its markets in its application of the direct valuation method. The Company also calculates a “normalized” residual year which represents the perpetual cash flows of each market. The residual year cash flow was capitalized to arrive at the terminal value of the licenses in each market. Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops 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 flow model which results in value that is directly attributable to the indefinite-lived intangible assets. The key assumptions used in applying 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 and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average FCC license within a market. No impairment was recognized as a result of the Company's annual impairment test on indefinite-lived intangible assets. In addition, the Company tests for impairment of intangible assets whenever events and circumstances indicate that such assets might be impaired. As a result of the COVID-19 pandemic and the economic downturn starting in March 2020, the Company performed an interim impairment test as of March 31, 2020 on its indefinite-lived FCC licenses, resulting in a non-cash impairment charge of $ 502.7 million on its FCC licenses. Other Intangible Assets Other intangible assets consists of definite-lived intangible assets, which primarily include customer and advertiser relationships, talent and representation contracts, trademarks and tradenames and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time that the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at amortized cost. The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value. The Company performed interim impairment tests as of March 31, 2020 on its other intangible assets as a result of the COVID-19 pandemic and economic slowdown. Based on the Company’s test of recoverability using estimated undiscounted future cash flows, the carrying values of the Company’s definite-lived intangible assets were determined to be recoverable, and no impairment was recognized. 15 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of September 30, 2021 and December 31, 2020, respectively: (In thousands) September 30, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer / advertiser relationships $ 1,636,357 $ ( 415,720 ) $ 1,620,509 $ ( 286,066 ) Talent and other contracts 338,900 ( 106,266 ) 375,900 ( 84,065 ) Trademarks and tradenames 335,861 ( 79,714 ) 326,061 ( 54,358 ) Other 27,994 ( 8,047 ) 31,351 ( 4,840 ) Total $ 2,339,112 $ ( 609,747 ) $ 2,353,821 $ ( 429,329 ) Total amortization expense related to definite-lived intangible assets for the Company for the three months ended September 30, 2021 and 2020 was $ 64.3 million and $ 64.5 million, respectively. Total amortization expense related to definite-lived intangible assets for the Company for the nine months ended September 30, 2021 and 2020 was $ 218.0 million and $ 193.0 million, respectively. As acquisitions and dispositions occur in the future, amortization expense may vary. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets: (In thousands) 2022 $ 254,720 2023 246,014 2024 244,589 2025 213,396 2026 201,474 16 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Goodwill The following table presents the changes in the carrying amount of goodwill: (In thousands) Audio Audio & Media Services Consolidated Balance as of December 31, 2019 $ 3,221,468 $ 104,154 $ 3,325,622 Impairment ( 1,224,374 ) — ( 1,224,374 ) Acquisitions 44,606 — 44,606 Dispositions ( 164 ) — ( 164 ) Foreign currency — 245 245 Balance as of December 31, 2020 $ 2,041,536 $ 104,399 $ 2,145,935 (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Consolidated Balance as of January 1, 2021 $ 1,462,217 $ 579,319 $ 104,399 $ 2,145,935 Acquisitions 1,267 168,224 — 169,491 Dispositions ( 1,446 ) — — ( 1,446 ) Foreign currency — — ( 156 ) ( 156 ) Balance as of September 30, 2021 $ 1,462,038 $ 747,543 $ 104,243 $ 2,313,824 As a result of the leadership and organizational changes implemented in the first quarter 2021, as described in Note 1, Basis of Presentation , the Company re-evaluated its reporting units and allocated goodwill to these new reporting units. Refer to Note 9, Segment Data, for additional information on our segments. Goodwill was allocated to these new reporting units based on the relative fair values of these reporting units. Fair value was calculated using the expected present value of future cash flows, and included estimates, judgments and assumptions consistent with those of a market participant that management believes were appropriate in the circumstances. The estimates and judgments that most significantly affect the fair value calculations are assumptions related to long-term growth rates, expected profit margins and discount rates. The Company did not recast prior-period goodwill balances to the new reporting units as it was impractical to do so. Goodwill Impairment The Company performs its annual impairment test on goodwill as of July 1 of each year. The Company also tests goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired. The goodwill impairment test requires measurement of the fair value of the Company's reporting units, which is compared to the carrying value of the reporting units, including goodwill. Each reporting unit is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value. Assessing the recoverability of goodwill requires estimates and assumptions about sales, operating margins, growth rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data. As with the impairment testing performed on the Company’s FCC licenses described above, the significant deterioration in market conditions and uncertainty in the markets impacted the assumptions used to estimate the discounted future cash flows of the 17 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Company’s reporting units for purposes of performing the interim goodwill impairment test. There are inherent uncertainties related to these factors and management’s judgment in applying these factors. The Company engaged a third-party valuation firm to assist it in the development of the assumptions and the Company’s determination of the fair value of its reporting units as of July 1 as part of the annual impairment test. No impairment was recognized as a result of the Company's annual impairment test on goodwill. As a result of the changes in the Company's management structure and its reportable segments effective at the beginning of 2021, the Company 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. The Company performed an interim impairment test on goodwill in the first quarter of 2020 and recognized a non-cash impairment charge of $ 1.2 billion to reduce goodwill as a result of the COVID-19 pandemic and its adverse effect on the U.S. economy. NOTE 5 – LONG-TERM DEBT Long-term debt outstanding for the Company as of September 30, 2021 and December 31, 2020 consisted of the following: (In thousands) September 30, 2021 December 31, 2020 Term Loan Facility due 2026 $ 1,864,032 $ 2,080,259 Incremental Term Loan Facility due 2026 401,220 447,750 Asset-based Revolving Credit Facility due 2023 (1) — — 6.375 % Senior Secured Notes due 2026 800,000 800,000 5.25 % Senior Secured Notes due 2027 750,000 750,000 4.75 % Senior Secured Notes due 2028 500,000 500,000 Other secured subsidiary debt (2) 5,369 22,753 Total consolidated secured debt 4,320,621 4,600,762 8.375 % Senior Unsecured Notes due 2027 1,450,000 1,450,000 Other unsecured subsidiary debt — 6,782 Original issue discount ( 14,156 ) ( 18,817 ) Long-term debt fees ( 19,090 ) ( 21,797 ) Total debt 5,737,375 6,016,930 Less: Current portion 725 34,775 Total long-term debt $ 5,736,650 $ 5,982,155 (1) As of September 30, 2021, the senior secured asset-based revolving credit facility (the “ABL Facility”) had a facility size of $ 450.0 million, no outstanding borrowings and $ 28.5 million of outstanding letters of credit, resulting in $ 421.5 million of borrowing base availability. (2) Other secured subsidiary debt consists of finance lease obligations maturing at various dates from 2022 through 2045. The Company’s weighted average interest rate was 5.4 % and 5.5 % as of September 30, 2021 and December 31, 2020, respectively. The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $ 5.9 billion and $ 6.2 billion as of September 30, 2021 and December 31, 2020, respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as either Level 1 or Level 2. On July 16, 2021, iHeartCommunications, Inc. ("iHeartCommunications") entered into an amendment to the credit agreement governing its Term Loan credit facilities. The amendment reduced 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 18 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. Under the terms of the Term Loan Facility Credit Agreement, iHeartCommunications made quarterly principal payments of $ 6.4 million during the three months ended March 31, 2021, June 30, 2021 and September 30, 2020, and previously made payments of $ 5.25 million during the three months ended March 31, 2020 and June 30, 2020. Following the prepayment of $ 250.0 million of borrowings outstanding under the Term Loan credit facilities on July 16, 2021, iHeartCommunications is no longer required to make such quarterly payments. Mandatorily Redeemable Preferred Stock As previously disclosed, on March 14, 2018, the Company, iHeartCommunications and certain of the Company's direct and indirect domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"). On April 28, 2018, the Company and the other Debtors filed a plan of reorganization (as amended, the “Plan of Reorganization”) and a related disclosure statement with the Bankruptcy Court. On January 22, 2019, the Plan of Reorganization was confirmed by the Bankruptcy Court. On May 1, 2019 (the “Effective Date”), in accordance with the Plan of Reorganization, iHeart Operations issued 60,000 shares of its Series A Perpetual Preferred Stock, par value $ 0.001 per share (the "iHeart Operations Preferred Stock"), having an aggregate initial liquidation preference of $ 60.0 million for a cash purchase price of $ 60.0 million. The iHeart Operations Preferred Stock was purchased by a third party investor. As of September 30, 2021, the liquidation preference of the iHeart Operations Preferred Stock was $ 60.0 million. The iHeart Operations Preferred Stock was mandatorily redeemable for cash at a date certain and therefore is classified as a liability in the Company's balance sheet. 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. Holders of the iHeart Operations Preferred Stock were entitled to receive, as declared by the board of directors of iHeart Operations, in respect of each share, cumulative dividends accruing daily and payable quarterly. Dividends were payable on March 31, June 30, September 30 and December 31 of each year (or on the next business day if such date is not a business day). During the three months ended September 30, 2021 and 2020 the Company recognized $ 2.3 million and $ 2.7 million, respectively, of interest expense related to dividends on mandatorily redeemable preferred stock. During the nine months ended September 30, 2021 and 2020 the Company recognized $ 6.9 million and $ 6.9 million, respectively, of interest expense related to dividends on mandatorily redeemable preferred stock. Surety Bonds, Letters of Credit and Guarantees As of September 30, 2021, the Company and its subsidiaries had outstanding surety bonds, commercial standby letters of credit and bank guarantees of $ 8.8 million, $ 28.9 million and $ 0.2 million, respectively. These surety bonds, letters of credit and bank guarantees relate to various operational matters including insurance, lease and performance bonds as well as other items. NOTE 6 – COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings. Additionally, due to the inherent uncertainty of 19 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations. Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial/contract disputes; defamation matters; employment and benefits related claims; intellectual property claims; real estate matters; governmental investigations; and tax disputes. Alien Ownership Restrictions and FCC Petitions for Declaratory Ruling The Communications Act and FCC regulation prohibit foreign entities and individuals from having direct or indirect ownership or voting rights of more than 25 percent in a corporation controlling the licensee of a radio broadcast station unless the FCC finds greater foreign ownership to be in the public interest. Under the Plan of Reorganization, the Company committed to file a petition for declaratory ruling (the “PDR”) requesting the FCC to permit the Company to be up to 100% foreign-owned. On November 5, 2020, the FCC issued a declaratory ruling granting the relief requested by the PDR (the “Declaratory Ruling”), subject to certain conditions, as described further in Note 8, Stockholder's Equity below. On November 9, 2020, the Company notified the holders of Special Warrants of the commencement of an exchange process (the “Exchange Notice”). On January 8, 2021, the Company exchanged a portion of the outstanding Special Warrants into Class A common stock or Class B common stock, in compliance with the Declaratory Ruling, the Communications Act and FCC rules (the “Exchange”). 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. See “Item 1. Business – Regulation of Our Business, Alien Ownership Restrictions” of our Annual Report on Form 10-K for the year ended December 31, 2020 and "Part II, Item 1A. Risk Factors - Regulatory, Legislative and Litigation Risks, Regulations imposed by the Communications Act and the FCC limit the amount of foreign individuals or entities that may invest in our capital stock without FCC approval" in this Quarterly Report on Form 10-Q for additional information. On March 8, 2021, the Company filed a remedial petition for declaratory ruling (the “Remedial PDR”) with the FCC. The Remedial PDR relates to the acquisition by Global Media & Entertainment Investments Ltd (f/k/a Honeycomb Investments Limited) (“Global Investments”) of the Company’s Class A Common Stock. Specifically, on February 5, 2021, Global Investments, The Global Media & Entertainment Investments Trust (the “GMEI Trust”), James Hill (as trustee of the GMEI Trust), Simon Groom (as trustee of the GMEI Trust) and Michael Tabor (as beneficiary of the GMEI Trust) (together with Global Investments and any affiliates or third parties to whom they may assign or transfer any of their rights or interests, the “GMEI Investors”) filed a Schedule 13D with the SEC, in which the GMEI Investors disclosed beneficial ownership of 9,631,329 shares of the Company’s Class A Common Stock, which at that time represented approximately 8.7 % of the Company’s outstanding Class A Common Stock. This ownership interest is inconsistent with the FCC’s foreign ownership rules and the Declaratory Ruling issued by the FCC relating to the Company’s foreign ownership on November 5, 2020, both of which limit a foreign investor in the GMEI Investors’ position to holding no more than 5 % of the Company’s voting equity or total equity without prior FCC approval. The Remedial PDR, which was filed pursuant to the rules and regulations of the FCC, seeks (a) specific approval for the more than 5 % equity and voting interests in the Company presently held by the GMEI Investors and (b) as amended, advance approval for the GMEI Investors to increase their equity and voting interest in the Company up to any non-controlling amount not to exceed 14.99 %. The Remedial PDR remains pending before the FCC. On March 26, 2021, the FCC conditioned the approval of applications by the Company to acquire certain radio stations, which were pending prior to the GMEI Investors’ Schedule 13D filing, on the Company taking certain actions with respect to the GMEI Investors' rights as stockholders of the Company. On that same date, and in order to implement the conditions required by the FCC, the Company’s Board of Directors (the “Board”) resolved to take certain actions to limit the rights of the GMEI Investors, including, but not limited to, suspending all voting rights of GEMI Investors until and unless the FCC releases a declaratory ruling granting specific approval for each of the GMEI Investors to hold more than 5 percent of the equity and/or voting interests of the Company. 20 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Tax Matters Agreement On the Effective Date, the Company emerged from Chapter 11 and effectuated a series of transactions through which Clear Channel Outdoor Holdings, Inc. ("CCOH"), its parent Clear Channel Holdings, Inc. (“CCH”) and its subsidiaries (collectively with CCOH and CCH, the “Outdoor Group”) were separated from, and ceased to be controlled by, the Company and its subsidiaries (the “Separation”). In connection with the Separation, the Company entered into the Tax Matters Agreement by and among iHeartMedia, iHeartCommunications, iHeart Operations, Inc., CCH, CCOH and Clear Channel Outdoor, Inc., to allocate the responsibility of iHeartMedia and its subsidiaries, on the one hand, and CCOH and its subsidiaries, on the other, for the payment of taxes arising prior and subsequent to, and in connection with, the Separation. The Tax Matters Agreement requires that iHeartMedia and iHeartCommunications indemnify CCOH and its subsidiaries, and their respective directors, officers and employees, and hold them harmless, on an after-tax basis, from and against certain tax claims related to the Separation. In addition, the Tax Matters Agreement requires that CCOH indemnify iHeartMedia for certain income taxes paid by iHeartMedia on behalf of CCOH and its subsidiaries. NOTE 7 – INCOME TAXES On March 11, 2021 the President signed into law the American Rescue Plan Act, which included provisions on taxes, health care, unemployment benefits, direct payments, state and local funding and other issues. The tax provisions will not have a material impact on the Company’s tax provision calculations. The Company’s income tax benefit (expense) for the three and nine months ended September 30, 2021 and the three and nine months ended September 30, 2020 consisted of the following components: (In thousands) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Current tax expense $ ( 7,651 ) $ ( 1,698 ) $ ( 12,717 ) $ ( 5,134 ) Deferred tax benefit (expense) 34,798 16,926 ( 64,520 ) 214,615 Income tax benefit (expense) $ 27,147 $ 15,228 $ ( 77,237 ) $ 209,481 The effective tax rates for the three and nine months ended September 30, 2021 were 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 rates for the three and nine months ended September 30, 2020 were 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 to non-deductible goodwill. The deferred tax benefit primarily consists of $ 125.5 million related to the FCC license impairment charges recorded during the period. NOTE 8 – STOCKHOLDER'S EQUITY Pursuant to the Company's 2019 Eq uity Incentive Plan (the "2019 Plan"), the Company historically granted restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals. On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the “2021 Plan”) was approved by stockholders and replaced the 2019 Plan. Pursuant to our 2021 Plan, we will continue to grant restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals. 21 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Share-based Compensation Share-based compensation expenses are recorded in Selling, general and administrative expenses and were $ 6.0 million and $ 5.9 million for the Company for the three months ended September 30, 2021 and the three months ended September 30, 2020, respectively. Share-based compensation expenses are recorded in Selling, general and administrative expenses and were $ 17.6 million and $ 14.7 million for the Company for the nine months ended September 30, 2021 and September 30, 2020, respectively. In August 2020, the Company issued performance-based restricted stock units ("Performance RSUs") to certain key employees. Such Performance RSUs vest upon the achievement of critical operational (cost savings) improvements and specific environmental, social and governance initiatives, which are being measured over an approximately 18-month period from the date of issuance. In the three and nine months ended September 30, 2021, the Company recognized $ 0.4 million and $ 1.4 million in relation to these Performance RSUs. In the three and nine months ended September 30, 2020, the Company recognized $ 1.1 million in relation to these Performance RSUs. 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 September 30, 2021, there was $ 0.3 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on certain performance conditions. Common Stock and Special Warrants The Company is authorized to issue 2,100,000,000 shares, consisting of (a) 1,000,000,000 shares of Class A Common Stock, par value $ 0.001 per share (the “Class A Common Stock”), (b) 1,000,000,000 shares of Class B Common Stock, par value $ 0.001 per share (the “Class B Common Stock”), and (c) 100,000,000 shares of preferred stock, par value $ 0.001 per share (the “Preferred Stock”). The following table presents the Company's Class A Common Stock, Class B Common Stock and Special Warrants issued and outstanding as of September 30, 2021: September 30, 2021 (Unaudited) Class A Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized 119,669,831 Class B Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized 22,505,661 Special Warrants 5,304,430 Total Class A Common Stock, Class B Common Stock and Special Warrants issued 147,479,922 During the three and nine months ended September 30, 2021, stockholders converted 1,130,851 and 6,718,576 shares of the Class B common stock into Class A common stock. During the three and nine months ended September 30, 2020, stockholders converted 7,263 and 13,323 shares of the Class B common stock into Class A common stock. Special Warrants Each Special Warrant issued under the special warrant agreement entered into in connection with the Reorganization may be exercised by its holder to purchase one share of Class A common stock or Class B common stock at an exercise price of $ 0.001 per share, unless the Company in its sole discretion believes such exercise would, alone or in combination with any other existing or proposed ownership of common stock, result in, subject to certain exceptions, (a) such exercising holder owning more than 4.99 percent of the Company's outstanding Class A common stock, (b) more than 22.5 percent of the Company's capital stock or voting interests being owned directly or indirectly by foreign individuals or entities, (c) the Company exceeding any other applicable foreign ownership threshold or (d) violation of any provision of the Communications Act or restrictions on ownership or transfer imposed by the Company's certificate of incorporation or the decisions, rules and policies of the FCC. Any holder exercising Special Warrants must complete and timely deliver to the warrant agent the required exercise forms and 22 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) certifications required under the special warrant agreement. The Communications Act and FCC regulations prohibit foreign entities or individuals from indirectly (i.e., through a parent company) owning or voting more than 25 percent of a licensee’s equity, unless the FCC determines that greater indirect foreign ownership is in the public interest. As described further in Note 6 above, on July 25, 2019, the Company filed a PDR requesting FCC consent to exceed the 25 percent foreign ownership and voting benchmarks. On November 5, 2020, the FCC issued the Declaratory Ruling granting the relief requested by the PDR. On November 9, 2020, the Company sent Exchange Notices to the holders of Special Warrants, notifying them of the Exchange process. On January 8, 2021, the Company exchanged a portion of the outstanding Special Warrants into Class A common stock or Class B common stock, in compliance with the Declaratory Ruling, the Communications Act and FCC rules. 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. See "Part II, Item 1A. Risk Factors - Regulations imposed by the Communications Act and the FCC limit the amount of foreign individuals or entities that may invest in our capital stock without FCC approval" of this Quarterly Report on Form 10-Q and "Part I, Item 1. Business – Regulation of Our Business, Alien Ownership Restrictions" of our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information. During the three and nine months ended September 30, 2021, stockholders exercised 60,698 and 47,197,139 Special Warrants for an equivalent number of shares of Class A common stock, respectively. There were no Special Warrants exercised for an equivalent number of shares of Class B common stock during the three months ended September 30, 2021. During the nine months ended September 30, 2021, stockholders exercised 22,337,312 Special Warrants for an equivalent number of shares of Class B common stock. During the three and nine months ended September 30, 2020 , stockholders exercised 1,986,278 and 4,990,132 Special Warrants for an equivalent number of shares of Class A common stock. During the three and nine months ended September 30, 2020, stockholders exercised 704 and 2,049 Special Warrants for an equivalent number of shares of Class B common stock. As further described in Note 6, Commitments and Contingencies above, on March 26, 2021, the Company’s Board resolved to take certain actions to limit the rights of the GMEI Investors in order to implement certain conditions required by the FCC. Such actions, included, but are not limited to, suspending all voting rights of GMEI Investors until and unless the FCC releases a declaratory ruling granting specific approval for each of the GMEI Investors to hold more than 5% of the equity and/or voting interests of the Company. 23 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Computation of Loss per Share (In thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 NUMERATOR: Net income (loss) attributable to the Company – common shares $ 3,180 $ ( 32,112 ) $ ( 270,829 ) $ ( 1,918,165 ) DENOMINATOR (1) : Weighted average common shares outstanding - basic 147,040 146,152 146,591 145,911 Stock options and restricted stock (2) : 3,357 — — — Weighted average common shares outstanding - diluted 150,397 146,152 146,591 145,911 Net income (loss) attributable to the Company per common share: Basic $ 0.02 $ ( 0.22 ) $ ( 1.85 ) $ ( 13.15 ) Diluted $ 0.02 $ ( 0.22 ) $ ( 1.85 ) $ ( 13.15 ) (1) All of the outstanding Special Warrants are included in both the basic and diluted weighted average common shares outstanding of the Company for the three and nine months ended September 30, 2021 and 2020. (2) Outstanding equity awards representing 0.3 million and 9.6 million shares of Class A common stock of the Company for the three months ended September 30, 2021 and 2020, respectively, and 10.6 million and 8.5 million for the nine months ended September 30, 2021 and 2020, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive. On May 5, 2021, the Company’s short-term stockholder rights plan expired in accordance with its terms and the rights are no longer outstanding. NOTE 9 – SEGMENT DATA As discussed in Note 1, in connection with certain leadership and organizational changes implemented in the first quarter 2021, the Company revised its segment reporting as of January 1, 2021. The corresponding current and prior period segment disclosures were recast to reflect the current segment presentation. Segment Adjusted EBITDA is the segment profitability metric reported to the Company’s Chief Operating Decision Maker for purposes of decisions about allocation of resources to, and assessing performance of, each reportable segment. The Company’s primary businesses are included in its Multiplatform Group and Digital Audio Group segments. Revenue and expenses earned and charged between Multiplatform Group, Digital Audio Group, Corporate and the Company's Audio & Media Services Group are eliminated in consolidation. The Multiplatform Group provides media and entertainment services via broadcast delivery and also includes the Company’s events and national syndication businesses. The Digital Audio Group provides media and entertainment services via digital delivery. The Audio & Media Services Group provides other audio and media services, including the Company’s media representation business (Katz Media) and its provider of scheduling and broadcast software (RCS). Corporate includes infrastructure and support, including executive, information technology, human resources, legal, finance and administrative functions for the Company’s businesses. Share-based payments are recorded in Selling, general and administrative expense. 24 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following tables present the Company's segment results for the Company for the three and nine months ended September 30, 2021 and 2020: Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Three Months Ended September 30, 2021 Revenue $ 658,979 $ 205,769 $ 66,078 $ — $ ( 2,775 ) $ 928,051 Operating expenses (1) 450,549 138,646 43,656 67,762 ( 2,775 ) 697,838 Segment Adjusted EBITDA (2) $ 208,430 $ 67,123 $ 22,422 $ ( 67,762 ) $ — $ 230,213 Depreciation and amortization ( 108,100 ) Impairment charges ( 11,647 ) Other operating expense, net ( 12,341 ) Restructuring expenses ( 12,021 ) Share-based compensation expense ( 5,993 ) Operating income $ 80,111 Intersegment revenues $ 112 $ 1,475 $ 1,188 $ — $ — $ 2,775 Capital expenditures $ 35,082 $ 6,223 $ 3,967 $ 5,002 $ — $ 50,274 Share-based compensation expense $ — $ — $ — $ 5,993 $ — $ 5,993 Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Three Months Ended September 30, 2020 Revenue $ 555,097 $ 116,200 $ 75,039 $ — $ ( 1,930 ) $ 744,406 Operating expenses (1) 416,131 81,042 46,247 40,792 ( 1,930 ) 582,282 Segment Adjusted EBITDA (2) $ 138,966 $ 35,158 $ 28,792 $ ( 40,792 ) $ — $ 162,124 Depreciation and amortization ( 99,379 ) Other operating expense, net ( 1,675 ) Restructuring expenses ( 15,790 ) Share-based compensation expense ( 5,885 ) Operating income $ 39,395 Intersegment revenues $ 168 $ — $ 1,762 $ — $ — $ 1,930 Capital expenditures $ 12,056 $ 4,029 $ 850 $ 2,042 $ — $ 18,977 Share-based compensation expense $ — $ — $ — $ 5,885 $ — $ 5,885 25 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Nine Months Ended September 30, 2021 Revenue $ 1,762,726 $ 561,252 $ 182,390 $ — $ ( 10,047 ) $ 2,496,321 Operating expenses (1) 1,268,107 399,828 124,148 197,317 ( 10,047 ) 1,979,353 Segment Adjusted EBITDA (2) $ 494,619 $ 161,424 $ 58,242 $ ( 197,317 ) $ — $ 516,968 Depreciation and amortization ( 343,408 ) Impairment charges ( 49,391 ) Other operating expense, net ( 27,491 ) Restructuring expenses ( 47,216 ) Share-based compensation expense ( 17,581 ) Operating income $ 31,881 Intersegment revenues $ 447 $ 4,547 $ 5,053 $ — $ — $ 10,047 Capital expenditures $ 66,522 $ 17,934 $ 6,158 $ 10,721 $ — $ 101,335 Share-based compensation expense $ — $ — $ — $ 17,581 $ — $ 17,581 Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Nine Months Ended September 30, 2020 Revenue $ 1,541,823 $ 302,203 $ 174,517 $ — $ ( 5,855 ) $ 2,012,688 Operating expenses (1) 1,265,094 231,589 127,774 120,906 ( 5,855 ) 1,739,508 Segment Adjusted EBITDA (2) $ 276,729 $ 70,614 $ 46,743 $ ( 120,906 ) $ — $ 273,180 Depreciation and amortization ( 299,494 ) Impairment charges ( 1,733,235 ) Other operating expense, net ( 3,247 ) Restructuring expenses ( 72,947 ) Share-based compensation expense ( 14,728 ) Operating loss $ ( 1,850,471 ) Intersegment revenues $ 503 $ — $ 5,352 $ — $ — $ 5,855 Capital expenditures $ 34,843 $ 10,714 $ 2,473 $ 10,493 $ — $ 58,523 Share-based compensation expense $ — $ — $ — $ 14,728 $ — $ 14,728 (1) Consolidated operating expenses consist of Direct operating expenses and Selling, general and administrative expenses and exclude Restructuring expenses, share-based compensation expenses and depreciation and amortization. (2) For a definition of Adjusted EBITDA for the consolidated company and a reconciliation to Operating income, the most closely comparable GAAP measure, and to Net income (loss), please see "Reconciliation of Operating Loss to Adjusted EBITDA" and "Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA" in Item 2 of this Quarterly Report on Form 10-Q. Beginning on January 1, 2021, Segment Adjusted EBITDA became the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. 26