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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-04 · 167 added, 300 removed, 227 unchanged (67% of the section changed)

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Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related footnotes contained in Item 1 of this Quarterly Report on Form 10-Q of iHeartMedia, Inc.

(the "Company," "iHeartMedia," "we," or "us").

Beginning on January 1, 2021, we began reporting based on three reportable segments:

▪ the iHeartMedia Multiplatform Group, which includes our Broadcast radio, Networks and Sponsorships and Events businesses;

▪ the iHeartMedia Digital Audio Group, which includes our Digital businesses, including Podcasting;

(the "Company," "iHeartMedia," "we," "our," or "us").

Our reportable segments are:

▪ the Multiplatform Group, which includes our Broadcast radio, Networks and Sponsorships and Events businesses;

▪ the Digital Audio Group, which includes our Digital businesses, including Podcasting;

▪ 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 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.

Additionally, beginning on January 1, 2021, Segment Adjusted EBITDA became the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment.

These reporting segments reflect how senior management operates the Company.

This structure provides visibility into the underlying performance, results, and margin profiles of our distinct businesses and enables senior management to monitor trends at the operational level and address opportunities or issues as they arise via regular review of segment-level results and forecasts with operational leaders.

Additionally, Segment Adjusted EBITDA is the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment.

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

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 operate as a company with multiple platforms including radio, digital, podcasting, networks and events, as well as ad technology capabilities.

We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience.

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Description of our Business

Our strategy centers on delivering entertaining and informative content where our listeners want to find us across our Multiplatform Group, including broadcast and events, and our Digital Audio Group, including podcasting and streaming services.

Our strategy centers on delivering entertaining and informative content where our listeners want to find us across our various platforms.

Multiplatform Group

The primary source of revenue for our Multiplatform Group is from selling local and national advertising time on our radio stations, with contracts typically less than one year in duration.

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Our Multiplatform Group also generates revenue from network syndication, nationally recognized events and other miscellaneous transactions.

Through our Digital Audio Group, we continue to expand the choices for listeners and we derive revenue by delivering our content and selling advertising across multiple digital distribution channels, including via our iHeartRadio mobile application, our station websites and other digital platforms which reach national, regional and local audiences.

Management looks at our Multiplatform Group's operations’ overall revenue as well as the revenue from each type of advertising, including local advertising, which is sold predominately in a station’s local market, and national advertising, which is sold across multiple markets.

Local advertising is sold by each radio station’s sales staff while national advertising is sold by our national sales team.

We periodically review and refine our selling structures in all regions and markets in an effort to maximize the value of our offering to advertisers and, therefore, our revenue.

Management also looks at Multiplatform Group's revenue by region and market size.

Typically, larger markets can reach larger audiences with wider demographics than smaller markets.

Additionally, management reviews our share of audio advertising revenues in markets where such information is available, as well as our share of target demographics listening in an average quarter hour.

This metric gauges how well our formats are attracting and retaining listeners.

Management also monitors revenue generated through our programmatic ad-buying platform, Soundpoint, and our data analytics advertising product, SmartAudio, to measure the success of our enhanced marketing optimization tools.

We have made significant investments so we can provide the same ad-buying experience that once was only available from digital-only companies and enable our clients to better understand how our assets can successfully reach their target audiences.

Management monitors average advertising rates and cost per mille, the cost of every 1,000 advertisement impressions (“CPM”), which are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent ratings service.

In addition, our advertising rates are influenced by the time of day the advertisement airs, with morning and evening drive-time hours typically priced the highest.

Our price and yield information systems enable our station managers and sales teams to adjust commercial inventory and pricing based on local market demand, as well as to manage and monitor different commercial durations in order to provide more effective advertising for our customers at what we believe are optimal prices given market conditions.

Yield is measured by management in a variety of ways, including revenue earned divided by minutes of advertising sold.

A portion of our Multiplatform Group segment’s expenses vary in connection with changes in revenue.

These variable expenses primarily relate to costs in our programming and sales departments, including profit sharing fees and commissions, and bad debt.

Our content costs, including music license fees for music delivered via broadcast, vary with the volume and mix of songs played on our stations.

Digital Audio Group

The primary source of revenue in the Digital Audio Group segment is the sale of advertising on the Company’s iHeartRadio mobile application and website, station websites, and podcast network.

Revenues for advertising spots are recognized over time based on impressions delivered or time elapsed, depending upon the terms of the contract.

Digital Audio Group’s contracts with advertisers are typically a year or less in duration and are generally billed monthly upon satisfaction of the performance obligations.

Through our Digital Audio Group, we continue to expand the choices for listeners.

We derive revenue in this segment by developing and delivering our content and selling advertising across multiple digital distribution channels, including via our iHeartRadio mobile application, our station websites and other digital platforms that reach national, regional and local audiences.

Our strategy has enabled us to extend our leadership in the rapidly growing podcasting sector, and iHeartMedia is the number one podcast publisher in America.

Our reach now extends across more than 250 platforms and 2,000 different connected devices, and our digital business is comprised of streaming, subscription, display advertisements, and other content that is disseminated over digital platforms.

A portion of our Digital Audio Group segment’s expenses vary in connection with changes in revenue.

These variable expenses primarily relate to our content costs including profit sharing fees and third-party content costs, as well as sales commissions and bad debt.

Certain of our content costs, including digital music performance royalties, vary with the volume of listening hours on our digital platforms.

Audio & Media Services Group

Audio & Media Services Group revenue is generated by services provided to broadcast industry participants through our Katz Media and RCS businesses.

As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast and webcast software and technology and services to radio stations, television music channels, cable companies, satellite music networks and Internet stations worldwide.

As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast software and media streaming, along with research services for radio stations, broadcast television stations, cable channels, record labels, ad agencies and Internet stations worldwide.

Our advertising revenue is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP.

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economy could have a significant impact on the Company’s ability to generate revenue.

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 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.

As the business environment continues to build positive momentum, we expect that the traditional promotional use of radio to be a strong benefit to us.

As businesses continue to recover, we believe that we are advantaged by our unparalleled reach and the live and local trusted voices that advertisers need to get their messages out quickly.

In January 2020, we announced key modernization initiatives designed to take advantage of the significant investments that the Company has made in new technologies to build an improved operating infrastructure to upgrade products and deliver incremental cost efficiencies.

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

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

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

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

Beginning in March 2020 and continuing in the following months, we saw a sharp decline in each of our Broadcast radio, Networks and Sponsorships revenue streams as a result of the impact of the coronavirus pandemic ("COVID-19") and the resulting impact on the U.S.

Our Multiplatform Group revenues significantly increased for the first quarter of 2022 compared to the first quarter of 2021 as a result of continued recovery from the impact of the COVID-19 pandemic.

Our Digital Audio Group revenues, including podcasting, have continued to grow each quarter

during the COVID-19 pandemic.

Our Audio & Media Services Group revenues have increased for the first quarter of 2022 compared to the first quarter of 2021 mainly due to the continued recovery from the impact of the COVID-19 pandemic.

Refer to Note 1, Basis of Presentation, for more information regarding COVID-19 and its impact on our financial statements.

Cost Savings Initiatives

We have implemented key modernization initiatives and operating-expense-saving initiatives to take advantage of the significant investments we have made in new technologies to deliver incremental cost efficiencies, including initiatives to streamline our real estate footprint.

We believe these initiatives position the Company for sustainable growth and value creation for stockholders.

Impairment Charges

As part of our operating-expense-savings initiatives, we have taken proactive steps to streamline our real estate footprint and reduce related structural lease expenses incurred by the Company.

As part of our operating-expense-savings initiatives, we have taken proactive steps to streamline our real estate footprint and reduce related lease and operating expenses incurred by the Company.

These strategic actions typically result in impairment charges due to the write-down of the affected right-of-use assets and related fixed assets, including leasehold improvements.

For the 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.

For the three months ended March 31, 2022 and 2021, we recognized non-cash impairment charges of $1.3 million and $37.7 million, respectively, as a result of these cost-savings initiatives.

Executive Summary

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.

Our revenues for the first quarter of 2022 increased significantly across our Multiplatform Group, Digital Audio Group and Audio & Media Services Group segments as a result of the continued recovery from the impacts of the COVID-19 pandemic and the continued increased demand for digital advertising, including podcasting.

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

• Consolidated Revenue of $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.

• Consolidated Revenue of $843.5 million increased $136.8 million, or 19.4% during the quarter ended March 31, 2022 compared to Revenue of $706.7 million in the prior year's first quarter.

• Revenue and Segment Adjusted EBITDA from our Multiplatform Group increased $73.3 million and $29.1 million compared to the prior year's first quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Digital Audio Group increased $56.7 million and $12.5 million compared to the prior year's first quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Audio & Media Services Group increased $5.7 million and $1.0 million compared to the prior year's first quarter, respectively.

• Operating income of $12.3 million was up from an Operating loss of $76.4 million in the prior year’s first quarter.

• Net loss of $48.7 million compared to a Net loss of $242.1 million in the prior year's first quarter.

• Cash flows used for operating activities of $(52.2) million decreased from Cash flows provided by operating activities of $71.7 million in the prior year's first quarter.

• Adjusted EBITDA (1) of $145.2 million, was up $43.0 million from $102.2 million in prior year's first quarter.

• Free cash flow (2) of $(74.8) million decreased from $52.8 million in the prior year's first 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 $ 843,458 $ 706,665

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 %

Operating income (loss) $ 12,335 $ (76,356)

Net loss $ (48,739) $ (242,056)

Cash provided by (used for) operating activities $ (52,212) $ 71,728

Adjusted EBITDA (1)

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$ (74,769) $ 52,778

(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 Income (Loss) to EBITDA and Adjusted EBITDA" in this MD&A.

(1) For a definition of Adjusted EBITDA and a reconciliation to Operating income (loss), the most closely comparable GAAP measure, and to Net loss, please see "Reconciliation of Operating Income (Loss) to Adjusted EBITDA" and "Reconciliation of Net Loss to EBITDA and Adjusted EBITDA" in this MD&A.

(2) For a definition of Free cash flow and a reconciliation to Cash provided by operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash provided by operating activities to Free cash flow” in this MD&A.

Results of Operations

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

The tables below present the comparison of our historical results of operations for the three months ended March 31, 2022 to the three months ended March 31, 2021:

(In thousands) Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Revenue $ 843,458 $ 706,665

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Income tax benefit (expense) 20,209 (79,935)

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

Net loss (48,739) (242,056)

Less amount attributable to noncontrolling interest

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:

Net loss attributable to the Company $ (48,582) $ (241,723)

The tables below present the comparison of our revenue streams for the three months ended March 31, 2022 to the three months ended March 31, 2021:

(In thousands) Three Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

2022 2021 Change

Broadcast Radio $ 416,481 $ 358,536 16.2 %

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Revenue, total $ 843,458 $ 706,665 19.4 %

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.

Consolidated results for the three months ended March 31, 2022 compared to the consolidated results for the three months ended March 31, 2021 were as follows:

Consolidated revenue increased $136.8 million during the three months ended March 31, 2022 compared to the same period of 2021.

The increase in Consolidated revenue is attributable to the continued recovery from the macroeconomic effects of COVID-19 and the continuing growth of our operating businesses.

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

Multiplatform Group revenue increased $73.3 million, or 14.7%, primarily resulting from strengthening demand for broadcast advertising and the return of live events compared to the first quarter of 2021.

Digital Audio Group revenue increased $56.7 million, or 36.0%, driven primarily by continuing increases in demand for digital advertising and the continued growth of podcasting.

Audio & Media Services revenue increased $5.7 million primarily due to the continued recovery from the impact of COVID-19.

Direct Operating Expenses

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.

Consolidated direct operating expenses increased $37.7 million during the three months ended March 31, 2022 compared to the same period of 2021.

The increase in direct operating expenses was primarily driven by higher variable content costs resulting from our significant increase in revenue, including profit sharing expenses, third-party digital costs, and production costs related to the return of local and national live events.

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

Consolidated SG&A expenses increased $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.

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.

Consolidated SG&A expenses increased $42.0 million during the three months ended March 31, 2022 compared to the same period of 2021.

The increase in Consolidated SG&A expenses was driven primarily by higher national trade and barter expenses, including the impact of the timing of the iHeartRadio Music Awards, increased sales commission expenses as a result of higher revenue, and increased employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations.

Depreciation and Amortization

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.

Depreciation and amortization increased $6.7 million during the three months ended March 31, 2022 compared to the same period of 2021, primarily as a result of acquired businesses and increased capital expenditures including IT and real estate optimization-related expenditures.

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.

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.

During the three months ended March 31, 2022 and 2021, we recognized non-cash impairment charges of $1.3 million and $37.7 million related to certain of our right-of-use assets and leasehold improvements as a result of these cost-savings initiatives.

Other Operating Expense, Net

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.

Other operating expense, net of $0.9 million and $2.8 million for the three months ended March 31, 2022 and 2021, respectively, relate primarily to net losses recognized on asset disposals in connection with our real estate optimization initiatives.

Interest Expense

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.

Interest expense decreased $5.9 million during the three months ended March 31, 2022 compared to the same period of 2021, primarily as a result of the interest rate reduction of our incremental term loan facility as amended in July 2021 and the $250.0 million voluntary repayment made in July 2021 on our term loan credit facilities in connection with the repricing transaction.

Gain (Loss) on Investments, Net

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.

During the three months ended March 31, 2022, we recognized a loss on investments, net of $1.8 million in connection with declines in the value of our investments.

During the three months ended March 31, 2021, we recognized a gain of $0.2 million.

Other Expense, Net

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.

Other expense, net was $0.3 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively.

Income Tax Benefit (Expense)

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.

The effective tax rate for the Company for the three months ended March 31, 2022 was 29.3%.

The effective tax rate was primarily impacted by the forecasted increase in valuation allowance against certain deferred tax assets, related primarily to disallowed interest expense carryforwards and net operating loss carryforwards, due to uncertainty regarding the Company’s ability to utilize those assets in future periods.

Net Loss Attributable to the Company

Net loss attributable to the Company decreased $193.1 million to Net loss attributable to the Company of $48.6 million during the three months ended March 31, 2022 compared to a Net loss attributable to the Company of $241.7 million during the three months ended March 31, 2021, primarily as a result of the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the continuing growth of our operating businesses.

Multiplatform Group Results

(In thousands) Three Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

2022 2021 Change

Revenue $ 571,160 $ 497,897 14.7 %

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

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.

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 our Multiplatform Group increased $73.3 million compared to the prior year, primarily as a result of the continued recovery from the impact of the COVID-19 pandemic.

Broadcast revenue grew $57.9 million, or 16.2%, year-over-year, driven by higher spot revenue as well as higher trade and barter revenue including the impact of the timing of the iHeartRadio Music Awards Show, while Networks grew $2.5 million, or 2.1%, year-over-year.

Revenue from Sponsorship and Events increased by $11.2 million, or 50.1%, year-over-year, primarily 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.

Operating expenses increased $44.1 million, driven primarily by higher trade and barter expense and event costs in connection with the return of live events including the impact of the timing of the iHeartRadio Music Awards Show, as well as higher sales commissions in connection with the increase in revenue.

The increase was also impacted by the employee retention credit recognized in the first quarter of 2021 related to the CARES Act.

Digital Audio Group Results

(In thousands) Three Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

2022 2021 Change

Revenue $ 214,219 $ 157,553 36.0 %

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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 $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.

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 $56.7 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew $26.5 million, or 22.2%, year-over-year, driven by increased demand for digital advertising as well as Podcast revenue which increased by $30.2 million, or 78.7%, 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 and the growing popularity of podcasting.

Operating expenses increased $44.2 million in connection with our Digital Audio Group’s significant revenue growth, including the impact of higher variable sales commissions, content and profit share expenses due to higher revenue and the development of new podcasts.

In addition, operating expenses increased due to our investments in increased headcount and key infrastructure to support our growing digital operations.

Audio & Media Services Group Results

(In thousands) Three Months Ended

September 30, % Nine Months Ended

September 30, %

2021 2020 Change 2021 2020 Change

2022 2021 Change

Revenue $ 60,857 $ 55,137 10.4 %

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

Revenue from our Audio & Media Services Group decreased $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.

Revenue from our Audio & Media Services Group increased $5.7 million compared to the comparative period in the prior year due to the continued recovery from the impact of the COVID-19 pandemic.

Operating expenses increased $4.7 million primarily as a result of higher variable employee compensation and bad debt expense.

Reconciliation of Operating Income (Loss) to Adjusted EBITDA

(In thousands) Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Operating income (loss) $ 12,335 $ (76,356)

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(In thousands) Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

Net loss $ (48,739) $ (242,056)

Income tax (benefit) expense (20,209) 79,935

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Equity in loss of nonconsolidated affiliates 29 28

1,056 58 1,115 653

Impairment charges 1,334 37,744

11,647 — 49,391 1,733,235

Other operating expense, net 870 2,771

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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.

Alternatively, Adjusted EBITDA is calculated as 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.

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In addition, we believe this measure is also among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing our operating performance to other companies in our industry.

Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income or net income (loss) as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies.

Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income (loss) or net income (loss) as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies.

Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs.

Because it excludes certain financial information compared with operating income and compared with consolidated net income (loss), the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow

Because it excludes certain financial information compared with operating income (loss) and compared with consolidated net income (loss), the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded.

Reconciliation of Cash Provided by (Used for) Operating Activities to Free Cash Flow

(In thousands) Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Cash provided by operating activities $ 95,736 $ 33,252 $ 196,593 $ 136,161

Cash provided by (used for) operating activities $ (52,212) $ 71,728

Purchases of property, plant and equipment (22,557) (18,950)

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$ (74,769) $ 52,778

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

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

We use Free Cash Flow, among other measures, to evaluate the Company’s liquidity and its ability to generate cash flow.

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In addition, we believe that Free Cash Flow helps improve investors' ability to compare our liquidity with other companies.

Since Free Cash Flow is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, Cash provided by operating activities and may not be comparable to similarly titled measures employed by other companies.

Since Free Cash Flow is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, Cash provided by (used for) operating activities and may not be comparable to similarly titled measures employed by other companies.

Free Cash Flow is not necessarily a measure of our ability to fund our cash needs.

Share-Based Compensation Expense

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 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.

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.

On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the "2021 Plan") was approved by stockholders and replaced the prior plan.

Pursuant to our 2021 Plan, we will grant restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals.

Share-based compensation expenses are recorded in SG&A expenses and were $5.5 million and $5.7 million for the three months ended March 31, 2022 and 2021, respectively.

On March 28, 2022, we issued performance-based restricted stock units (“Performance RSUs”) to certain key employees.

Such Performance RSUs vest upon the achievement of certain total stockholder return goals and continued service, which are being measured over an approximately 50-month period from the date of issuance.

As of March 31, 2022, there was $34.0 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 1.9 years.

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.

In addition, as of March 31, 2022, there was $12.5 million of unrecognized compensation costs related to unvested share-based compensation arrangements that will vest based on performance and service conditions.

This cost will be recognized over a 50-month period from the date of issuance.

LIQUIDITY AND CAPITAL RESOURCES

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

(In thousands) Nine Months Ended

September 30,

(In thousands) Three Months Ended

Cash provided by (used for):

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$ (74,769) $ 52,778

(1) For a definition of Free cash flow from operations and a reconciliation to Cash provided by operating activities from operations, the most closely comparable GAAP measure, please see “Reconciliation of Cash provided by operating activities from operations to Free cash flow from operations” in this MD&A.

(1) For a definition of Free cash flow from operations and a reconciliation to Cash provided by (used for) operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash provided by (used for) operating activities to Free cash flow from operations” in this MD&A.

Operating Activities

Cash provided by operating activities 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.

Cash provided by operating activities decreased from $71.7 million in the three months ended March 31, 2021 to cash used for operating activities of $52.2 million in the three months ended March 31, 2022 primarily due to an increase in the payment of bonuses and commissions in the first quarter of 2022.

The Company did not pay bonuses to the vast majority of employees in the first quarter of 2021.

Investing Activities

Cash used for investing activities of $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.

Cash used for investing activities of $19.7 million during the three months ended March 31, 2022 primarily reflects $22.6 million in cash used for capital expenditures.

We spent $12.3 million for capital expenditures in our Multiplatform Group segment primarily related to our real estate optimization initiatives, $5.2 million in our Digital Audio Group segment primarily related to IT infrastructure, $1.7 million in our Audio & Media Services Group segment, primarily related to software, and $3.4 million in Corporate primarily related to equipment and software purchases.

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

In addition, $19.0 million in cash was 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.

We spent $10.1 million for capital expenditures in our Multiplatform Group segment and $5.4 million for capital expenditures in our Digital Audio Group segment primarily related to IT infrastructure, $1.1 million in our Audio & Media Services Group segment, primarily related to software, and $2.4 million in Corporate primarily related to equipment and software purchases.

Financing Activities

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 $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.

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.

Cash used for financing activities totaled $0.5 million during the three months ended March 31, 2022.

Due to the $250.0 million voluntary repayment of our term loan credit facilities in the third quarter of 2021, our Term Loan Facility no longer requires quarterly principal payments.

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

Sources of Liquidity and Anticipated Cash Requirements

Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $279.7 million as of March 31, 2022, cash flow from operations and borrowing capacity under our $450.0 million ABL Facility.

As of March 31, 2022, iHeartCommunications had no amounts outstanding under the ABL Facility, a borrowing base of $443.6 million and $26.9 million in outstanding letters of credit, resulting in $416.7 million of borrowing base availability.

Together with our cash balance of $279.7 million as of March 31, 2022 and our borrowing capacity under the ABL Facility, our total available liquidity 1 was approximately $696 million.

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.

The challenges that COVID-19 has created for advertisers and consumers had an adverse impact on our revenue for the three months ended March 31, 2021.

For the three months ended March 31, 2022, our revenues increased significantly compared to the three months ended March 31, 2021 due to recovery from the macroeconomic effects of COVID-19, among other factors discussed in the Results of Operations section of the MD&A.

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 $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.

In January 2020, we announced key modernization initiatives designed to take advantage of the significant investments that we have made in new technologies to build an improved operating infrastructure to upgrade products and deliver incremental cost efficiencies.

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

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

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

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

We are a party to many contractual obligations involving commitments to make payments to third parties.

These obligations impact our short-term and long-term liquidity and capital resource needs.

Certain contractual obligations are reflected on the Consolidated Balance Sheet as of March 31, 2022, while others are considered future commitments.

Our contractual obligations primarily consist of long-term debt and related interest payments, commitments under non-cancelable operating lease agreements, and employment and talent contracts.

In addition to our contractual obligations, we expect that our primary anticipated uses of liquidity in 2022 will be to fund our working capital, make interest and tax payments, fund capital expenditures, pursue certain strategic opportunities and maintain operations.

Assuming the current level of borrowings and interest rates in effect at March 31, 2022, we anticipate that we will have approximately $241 million of cash interest payments in the remainder of 2022.

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

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.

We believe that our ability to generate cash flow from operations from our business initiatives, our current cash on hand and availability under the ABL Facility will provide sufficient resources to continue to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt.

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

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

Further, we believe our available liquidity will allow us to fund capital expenditures and other obligations and make interest payments on our long-term debt.

If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities;

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

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

Scripps Company for $228.5 million in cash, excluding transaction costs.

Tax Matters Agreement

In connection with the separation (the "Separation") of Clear Channel Outdoor Holdings, Inc.

("CCOH") as part of the Company's plan of reorganization (the "Plan of Reorganization") for emergence from Chapter 11 bankruptcy, we entered into the Tax Matters Agreement by and among iHeartMedia, iHeartCommunications, iHeart Operations, Inc., Clear Channel Holdings, Inc., 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.

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.

Summary Debt Capital Structure

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

As of March 31, 2022 and December 31, 2021, we had the following debt outstanding, net of cash and cash equivalents:

(In thousands) March 31, 2022 December 31, 2021

Term Loan Facility due 2026 $ 1,864,032 $ 1,864,032

$ 1,864,032 $ 2,080,259

Incremental Term Loan Facility due 2026 401,220 401,220

401,220 447,750

Asset-based Revolving Credit Facility due 2023 — —

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Other Subsidiary Debt 90 90

Purchase accounting adjustments and original issue discount (14,156) (18,817)

Original issue discount (12,745) (13,454)

Long-term debt fees (17,641) (18,370)

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$ 5,460,457 $ 5,386,739

1 On July 16, 2021, iHeartCommunications, Inc.

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

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

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

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

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

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

Exchange of Special Warrants

On July 25, 2019, the Company filed a petition for declaratory ruling ("PDR") with the Federal Communications Commission (the "FCC") to permit up to 100% of the Company’s voting stock to be owned by non-U.S.

individuals and entities.

On November 5, 2020, the FCC issued a declaratory ruling granting the relief requested by the PDR (the "Declaratory Ruling"), subject to certain conditions set forth in the Declaratory Ruling.

On January 8, 2021, the Company exchanged a portion of the outstanding Special Warrants into 45,133,811 shares of iHeartMedia Class A common stock, the Company’s publicly traded equity, and 22,337,312 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.

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

Because neither iHeartMedia nor iHeartMedia Capital II, LLC, a wholly-owned direct subsidiary of iHeartMedia and the parent of Capital I, have any operations or material assets or liabilities, there are no material differences between iHeartMedia’s consolidated financial information for the three months ended March 31, 2022, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same period.

Further, as of March 31, 2022, we were in compliance with all covenants related to our debt agreements in all material respects.

Commitments, Contingencies and Guarantees

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Please refer to “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q.

We have future cash obligations under various types of contracts.

We lease office space, certain broadcast facilities and equipment.

Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance.

We also have non-cancellable contracts in our radio broadcasting operations related to program rights and music license fees.

In the normal course of business, our broadcasting operations have minimum future payments associated with employee and talent contracts.

These contracts typically contain cancellation provisions that allow us to cancel the contract with good cause.

Typically, our businesses experience their lowest financial performance in the first quarter of the calendar year.

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Due to this seasonality and certain other factors, the results for the interim periods may not be indicative of results for the full year.

In addition, our Multiplatform Group and our Audio & Media Services Group are impacted by political cycles and generally experience higher revenues in congressional election years, and particularly in presidential election years.

This cyclicality may affect comparability of results between years.

In addition, we are impacted by political cycles and generally experience higher revenues in congressional election years, and particularly in presidential election years.

This may affect the comparability of results between years.

We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates and inflation.

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

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.

As of March 31, 2022, approximately 39% of our aggregate principal amount of long-term debt bore interest at floating rates.

Assuming the current level of borrowings and assuming a 50% change in LIBOR, it is estimated that our interest expense for the three months ended March 31, 2022 would have changed by $0.3 million.

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

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Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.

Inflation is a factor in the economies in which we do business and we continue to seek ways to mitigate its effect.

Inflation has affected our performance in terms of higher costs for wages, salaries and equipment.

Although the exact impact of inflation is indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our broadcasting stations in our Multiplatform operations.

Inflation is a factor in our business and we continue to seek ways to mitigate its effect.

Inflation has affected our performance in terms of higher costs for employee compensation, equipment and third party services.

We believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial.

Although we are unable to determine the exact impact of inflation, we believe the impact will continue to be immaterial considering the actions we may take in response to these higher costs that may arise as a result of inflation.

Critical Accounting Estimates

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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.

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.

There have been no significant changes to our critical accounting policies and estimates disclosed in “Critical Accounting Estimates” of Item 7, Management’s Discussion and Analysis of our Annual Report on Form 10-K for the year ended December 31, 2021.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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• the impact of our substantial indebtedness;

• the impact of future acquisitions, dispositions and other strategic transactions;

• the impact of acquisitions, dispositions and other strategic transactions;

• legislative or regulatory requirements;

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• regulations and consumer concerns regarding privacy and data protection, and breaches of information security measures;

• risks associated with our emergence from the Chapter 11 Cases;

• risks related to our Class A common stock, including our significant number of outstanding warrants;

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis