What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 204 added, 112 removed, 343 unchanged (48% of the section changed)

54 unchanged sentences

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

A recession or downturn in the U.S.

GDP decreased in the first and second quarters of 2022 and increased in the third quarter of 2022 while there was an increase in GDP in each quarter in 2021.

The rise in interest rates and historically high inflation have also contributed to a more challenging macroeconomic environment.

This challenging environment has led to market uncertainty which impacted 2022 Multiplatform Group revenues, particularly during the third quarter.

These current macroeconomic conditions, a recession, or downturn in the U.S.

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

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 during 2021, and continued to increase in the first half of 2022 compared to the first half of 2021 as a result of continued recovery from the impact of COVID-19.

Our Digital Audio Group revenues, including podcasting, have continued to grow each quarter during COVID-19 and throughout the recovery.

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

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

Cost Savings Initiatives

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Impairment Charges

We perform our annual impairment test on our goodwill and indefinite-lived Federal Communication Commission ("FCC") licenses as of July 1 of each year.

As discussed above, the current macroeconomic conditions have led to uncertainty, resulting in slowing broadcast revenue growth and declines in margins as inflation and interest rates continue to rise.

These factors have negatively impacted the key assumptions used in the discounted cash flow models which are utilized to value our FCC licenses and goodwill, particularly the discount rates used in estimating fair values.

This has resulted in a significant decrease in the fair values of certain of our FCC licenses and reporting units.

Our FCC licenses are valued using a direct valuation approach, with the key assumptions being market revenue growth rates, profit margin, and the risk-adjusted discount rate as well as other assumptions including market share, duration and profile of the build-up period, and estimated start-up capital costs.

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

We obtained recent broadcast radio industry revenue projections which it considered along with various other sources of data in developing the assumptions used for purposes of performing impairment testing on our FCC licenses as of July 1, 2022.

Considerations in developing these assumptions included the extent of the economic downturn, ranges of expected timing of recovery, discount rates and other factors.

Based on our testing, the estimated fair value of the FCC licenses was below their carrying values.

As a result, we recognized a non-cash impairment charge of $302.1 million on our FCC licenses.

The fair values of our reporting units were reevaluated as of July 1, 2022 as part of our annual impairment assessment and no goodwill impairment was recorded as the estimated fair values of our reporting units exceeded the carrying values of the reporting units’ net assets, including goodwill.

As discussed above, our annual impairment testing resulted in a significant decrease in the fair values of our reporting units.

However, the decrease in fair values did not result in carrying amounts exceeding fair values of our reporting units, accordingly, the annual impairment test did not result in any impairment of our goodwill balance.

The goodwill impairment test requires us to measure the fair value of our reporting units and compare the estimated fair value to the carrying value, including goodwill.

Each of our reporting units 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 were also estimated and discounted to their present value.

Assessing the recoverability of goodwill requires us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

There are inherent uncertainties related to these factors and in management’s judgment in applying these factors.

As with the impairment testing we performed on our FCC licenses described above, the deterioration in market conditions and uncertainty in the markets impacted the assumptions used to estimate the discounted future cash flows of our reporting units for purposes of performing the interim goodwill impairment test.

While we believe we have 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 as a result of the uncertainty regarding current economic conditions.

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.

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

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

For the six months ended June 30, 2022 and 2021, we recognized non-cash impairment charges of $1.6 million and $37.7 million, respectively, as a result of these cost-savings initiatives.

For the nine months ended September 30, 2022 and 2021, we recognized non-cash impairment charges of $9.2 million and $49.4 million, respectively, as a result of these cost-savings initiatives.

Executive Summary

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

Our revenues for the third quarter of 2022 increased across our Multiplatform Group, Digital Audio Group and Audio & Media Services Group segments as a result of the continued increased demand for digital advertising, including podcasting and political revenue as 2022 is a midterm election year.

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

• Consolidated Revenue of $954.0 million increased $92.4 million, or 10.7% during the quarter ended June 30, 2022 compared to Consolidated Revenue of $861.6 million in the prior year's second quarter.

• Revenue and Segment Adjusted EBITDA from our Multiplatform Group increased $27.5 million and $13.1 million compared to the prior year's second quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Digital Audio Group increased $54.6 million and $24.6 million compared to the prior year's second quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Audio & Media Services Group increased $9.9 million and $1.6 million compared to the prior year's second quarter, respectively.

• Operating income of $82.9 million increased $54.8 million from $28.1 million in the prior year’s second quarter.

• Net income of $15.2 million increased $47.2 million from a Net loss of $32.0 million in the prior year's second quarter.

• Cash flows provided by operating activities of $155.8 million increased from $29.1 million in the prior year's second quarter.

• Adjusted EBITDA (1) of $237.2 million, was up $52.7 million from $184.5 million in prior year's second quarter.

• Free cash flow (2) of $106.1 million increased from $(3.0) million in the prior year's second quarter.

• Consolidated Revenue of $988.9 million increased $60.9 million, or 6.6% during the quarter ended September 30, 2022 compared to Consolidated Revenue of $928.1 million in the prior year's third quarter.

• Revenue and Segment Adjusted EBITDA from our Multiplatform Group increased $0.9 million and decreased $1.2 million compared to the prior year's third quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Digital Audio Group increased $48.2 million and $11.2 million compared to the prior year's third quarter, respectively.

• Revenue and Segment Adjusted EBITDA from our Audio & Media Services Group increased $11.7 million and $7.3 million compared to the prior year's third quarter, respectively.

• Operating loss of $211.2 million, a decrease of $291.3 million from Operating income of $80.1 million in the prior year’s third quarter due to the $302.1 million impairment of FCC licenses.

• Net loss of $309.8 million, a decrease of $313.5 million from Net income of $3.7 million in the prior year's third quarter.

• Cash flows provided by operating activities of $103.1 million increased from $95.7 million in the prior year's third quarter.

• Adjusted EBITDA (1) of $252.2 million, was up $22.0 million from $230.2 million in prior year's third quarter.

• Free cash flow (2) of $62.8 million increased from $45.5 million in the prior year's third quarter.

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

(In thousands) Three Months Ended

September 30,

Revenue $ 988,930 $ 928,051

Operating income 82,869 28,126

Operating income (loss) (211,187) 80,111

Net income (loss) (309,776) 3,673

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Results of Operations

The tables below present the comparison of our historical results of operations for the three and six months ended June 30, 2022 to the three and six months ended June 30, 2021:

The tables below present the comparison of our historical results of operations for the three and nine months ended September 30, 2022 to the three and nine months ended September 30, 2021:

(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Interest expense, net 87,890 82,481 248,603 252,489

Gain on investments, net 9,590 49,644 7,825 49,835

Gain (loss) on investments, net (3,466) (10,367) 4,359 39,468

Equity in loss of nonconsolidated affiliates (132) (1,056) (190) (1,115)

Gain on extinguishment of debt 8,203 — 8,203 —

Gain (loss) on extinguishment of debt 6,892 (7,896) 15,095 (7,896)

Other expense, net (581) (1,785) (3,026) (2,955)

Income (loss) before income taxes 16,964 (7,511) (51,984) (169,632)

Loss before income taxes (296,364) (23,474) (348,348) (193,106)

Income tax benefit (expense) (13,412) 27,147 5,015 (77,237)

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Net income (loss) attributable to the Company $ (310,363) $ 3,180 $ (344,544) $ (270,829)

The tables below present the comparison of our revenue streams for the three and six months ended June 30, 2022 to the three and six months ended June 30, 2021:

The tables below present the comparison of our revenue streams for the three and nine months ended September 30, 2022 to the three and nine months ended September 30, 2021:

(In thousands) Three Months Ended

June 30, % Six Months Ended

September 30, % Nine Months Ended

September 30, %

2022 2021 Change 2022 2021 Change

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Revenue, total $ 988,930 $ 928,051 6.6 % $ 2,786,393 $ 2,496,321 11.6 %

Consolidated results for the three and six months ended June 30, 2022 compared to the consolidated results for the three and six months ended June 30, 2021 were as follows:

Consolidated revenue increased $92.4 million during the three months ended June 30, 2022 compared to the same period of 2021.

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

Multiplatform Group revenue increased $27.5 million, or 4.5%, primarily resulting from strengthening demand for broadcast advertising, the return of live events and an increase in political advertising revenue as 2022 is a midterm election year.

Consolidated results for the three and nine months ended September 30, 2022 compared to the consolidated results for the three and nine months ended September 30, 2021 were as follows:

Consolidated revenue increased $60.9 million during the three months ended September 30, 2022 compared to the same period of 2021.

Multiplatform Group revenue increased $0.9 million, or 0.1%, primarily resulting from increased political advertising revenue as 2022 is a midterm election year, partially offset by a decrease in revenue due to a more challenging macroeconomic environment as discussed above.

Digital Audio Group revenue increased $48.2 million, or 23.4%, driven primarily by continuing increases in demand for digital advertising and the continued growth of podcasting.

Audio & Media Services revenue increased $9.9 million primarily due to the increase in political advertising revenue as 2022 is a midterm election year and the continued recovery from the impact of COVID-19.

Consolidated revenue increased $229.2 million during the six months ended June 30, 2022 compared to the same period of 2021.

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

Multiplatform Group revenue increased $100.7 million, primarily resulting from strengthening demand for broadcast advertising, the return of live events during the six months ended June 30, 2022 compared to the same period of 2021, and an increase in political advertising revenue as 2022 is a midterm election year.

Audio & Media Services revenue increased $11.7 million due to the increase in political advertising revenue.

Consolidated revenue increased $290.1 million during the nine months ended September 30, 2022 compared to the same period of 2021.

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

Multiplatform Group revenue increased $101.6 million, primarily resulting from strengthening demand for broadcast advertising, the return of live events during the nine months ended September 30, 2022 compared to the same period of 2021, and an increase in political advertising revenue as 2022 is a midterm election year.

Digital Audio Group revenue increased $159.5 million, driven primarily by continuing increases in demand for digital advertising, including continued growth in podcasting.

Audio & Media Services revenue increased $15.6 million primarily due to the continued recovery from the impact of COVID-19 and an increase in political advertising revenue as 2022 is a midterm election year.

Audio & Media Services revenue increased $27.3 million primarily due to the continued recovery from the impact of COVID-19 and an increase in political advertising revenue.

Direct Operating Expenses

Consolidated direct operating expenses increased $44.9 million during the three months ended June 30, 2022 compared to the same period of 2021.

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

Consolidated direct operating expenses increased $82.6 million during the six months ended June 30, 2022 compared to the same period of 2021.

Consolidated direct operating expenses increased $46.0 million during the three months ended September 30, 2022 compared to the same period of 2021.

The increase in direct operating expenses was primarily driven by higher variable content, talent and profit sharing expenses in our Digital Audio Group and Multiplatform Group.

Consolidated direct operating expenses increased $128.5 million during the nine months ended September 30, 2022 compared to the same period of 2021.

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

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

Consolidated SG&A expenses increased $6.4 million during the three months ended June 30, 2022 compared to the same period of 2021.

The increase in Consolidated SG&A expenses was driven primarily by increased employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations, increased sales commission expenses as a result of higher revenue, and increased bad debt expense.

These increases were partially offset by lower variable bonus accruals and a decrease in national trade and barter expenses primarily related to the timing of the iHeartRadio Music Awards show.

Consolidated SG&A expenses increased $48.4 million during the six months ended June 30, 2022 compared to the same period of 2021.

Consolidated SG&A expenses increased $9.8 million during the three months ended September 30, 2022 compared to the same period of 2021.

The increase in Consolidated SG&A expenses was driven primarily by costs incurred in connection with executing on our cost reduction initiatives, as well as increased sales commission expenses as a result of higher revenue, and a general increase in certain expenses due to inflation.

These increases were partially offset by lower variable bonus expense.

Consolidated SG&A expenses increased $58.2 million during the nine months ended September 30, 2022 compared to the same period of 2021.

The increase in SG&A expenses was driven primarily by higher employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations, increased sales commission expenses as a result of higher revenue, increased bad debt and higher trade and barter expense.

These increases were partially offset by lower variable bonus accruals.

These increases were partially offset by lower variable bonus expense.

Depreciation and Amortization

Depreciation and amortization decreased $17.2 million and $10.5 million during the three and six months ended June 30, 2022 compared to the same periods of 2021, primarily as a result of certain intangible assets being fully amortized, partially offset by increased capital expenditures related to IT and real estate optimization initiatives.

Depreciation and amortization increased $1.2 million during the three months ended September 30, 2022 compared to the same period of 2021, primarily as a result of increased capital expenditures related to IT and real estate optimization initiatives, partially offset by a decrease related to certain intangible assets being fully amortized.

Depreciation and amortization decreased $9.3 million during the nine months ended September 30, 2022 compared to the same period of 2021, primarily as a result of certain intangible assets being fully amortized, partially offset by increased capital expenditures related to IT and real estate optimization initiatives.

Impairment Charges

As part of our operating expense-savings initiatives, we have taken strategic actions to streamline our real estate footprint and related expenses, resulting in impairment charges due to the write-down of right-of-use assets and related fixed

assets, including leasehold improvements.

During the six months ended June 30, 2022 and 2021, we recognized non-cash impairment charges of $1.6 million and $37.7 million, respectively, as a result of these cost-savings initiatives.

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

We recognized non-cash impairment charges of $302.1 million on our indefinite-lived FCC licenses during the three and nine months ended September 30, 2022 primarily as a result of an increase in the discount rate used in our fair value calculations due to higher market interest rates compared to the prior year.

See Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill ,

for further discussion of the impairment charges.

No impairment charges were recorded for our goodwill for the three and nine months ended September 30, 2022.

The annual impairment test performed on our goodwill and FCC licenses as of July 1, 2021 did not result in impairment.

In addition, 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 months ended September 30, 2022 and 2021, we recognized non-cash impairment of $7.7 million and $11.6 million, respectively, as a result of these cost-savings initiatives.

During the nine months ended September 30, 2022 and 2021, we recognized non-cash impairment charges of $9.2 million and $49.4 million, respectively, as a result of these cost-savings initiatives.

Other Operating Expense, Net

Other operating expense, net of $15.7 million and $12.4 million for the three months ended June 30, 2022 and 2021, respectively, and Other operating expense, net of $16.5 million and $15.2 million for the six months ended June 30, 2022 and 2021, respectively, relate primarily to non-cash net book losses recognized on asset disposals in connection with our real estate optimization initiatives.

Other operating expense, net of $9.5 million and $12.3 million for the three months ended September 30, 2022 and 2021, respectively, and Other operating expense, net of $26.0 million and $27.5 million for the nine months ended September 30, 2022 and 2021, respectively, relate primarily to non-cash net book losses recognized on asset disposals in connection with our real estate optimization initiatives.

Interest Expense

Interest expense decreased $3.4 million and $9.3 million, respectively, during the three and six months ended June 30, 2022 compared to the same periods of 2021, primarily as a result of the interest rate reduction of our incremental term loan facility as amended in July 2021 and the $250.0 million voluntary repayment made in July 2021 on our term loan credit facilities in connection with the repricing transaction.

Gain on Investments, Net

During the three and six months ended June 30, 2022, we recognized a gain on investments, net of $9.6 million and $7.8 million, respectively, in connection with increases in the value of our investments.

During the three and six months ended June 30, 2021, we recognized a gain of $49.6 million and $49.8 million, respectively, primarily related to the sale of our investment in the San Antonio Spurs.

Gain on Extinguishment of Debt

During the three and six months ended June 30, 2022, we recognized a gain on extinguishment of debt of $8.2 million in connection with the open market repurchases of $113.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash.

Interest expense increased $5.4 million during the three months ended September 30, 2022 compared to the same period of 2021, primarily as a result of the increase in LIBOR borrowing rates during 2022, partially offset by the second and third quarter 2022 open market repurchases of $188.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $173.4 million in cash.

Interest expense decreased $3.9 million during the nine months ended September 30, 2022 compared to the same period of 2021, primarily as a result of the $250.0 million voluntary repayment made in July 2021 on our term loan credit facilities in connection with a repricing transaction and the second and third quarter 2022 open market repurchases of $188.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $173.4 million in cash, partially offset by an increase in LIBOR borrowing rates during 2022.

Gain (Loss) on Investments, Net

During the three and nine months ended September 30, 2022, we recogn ized a loss on in vestments, net of $3.5 million and a gain on investment, net of $4.4 million, respectively, in connection with changes in the value of our investments.

During the three months ended September 30, 2021, we recognized a loss on investments, net of $10.4 million primarily related to the impairment of certain investments.

During the nine months ended September 30, 2021, we recognized a gain on investments, net of $39.5 million, respectively, primarily related to the sale of our investment in the San Antonio Spurs, partially offset by the impairment of certain investments.

Gain (Loss) on Extinguishment of Debt

During the three and nine months ended September 30, 2022, we recognized a gain on extinguishment of debt of $6.9 million and $15.1 million, respectively, in connection with the open market repurchases of $75.0 million and $188.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $68.1 million and $173.4 million in cash, respectively.

During the three and nine months ended September 30, 2021, we recognized a loss on extinguishment of debt of $7.9 million primarily related to the write-off of unamortized debt issuance costs related to the $250.0 million voluntary repayment made in July 2021 on our term loan credit facilities in connection with a repricing transaction and finance lease termination payments.

Income Tax Benefit (Expense)

The effective tax rate for the Company for the three and six months ended June 30, 2022 was 10.5% and 35.4%, respectively.

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

The effective tax rate for the Company for the three and nine months ended September 30, 2022 was (4.5)% and 1.4%, respectively.

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

Net Income (Loss) Attributable to the Company

Net income attributable to the Company of $14.4 million during the three months ended June 30, 2022 increased $46.7 million compared to a Net loss attributable to the Company of $32.3 million during the three months ended June 30, 2021, primarily as a result of the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the continuing growth of our operating businesses.

Net loss attributable to the Company decreased $239.8 million to $34.2 million during the six months ended June 30, 2022 compared to Net loss attributable to the Company of $274.0 million during the six months ended June 30, 2021, primarily as a result of the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the continuing growth of our operating businesses.

Net loss attributable to the Company of $310.4 million during the three months ended September 30, 2022 decreased $313.5 million compared to Net income attributable to the Company of $3.2 million during the three months ended September 30, 2021, primarily as a result of the impairment of FCC licenses of $302.1 million.

Net loss attributable to the Company decreased $73.7 million to $344.5 million during the nine months ended September 30, 2022 compared to Net loss attributable to the Company of $270.8 million during the nine months ended September 30, 2021, primarily as a result of the impairment of FCC licenses of $302.1 million, partially offset by the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the continuing growth of our operating businesses.

Multiplatform Group Results

(In thousands) Three Months Ended

June 30, % Six Months Ended

September 30, % Nine Months Ended

September 30, %

2022 2021 Change 2022 2021 Change

5 unchanged sentences

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

Revenue from our Multiplatform Group increased $27.5 million compared to the prior year, primarily as a result of the continued recovery from the impact of COVID-19.

Broadcast revenue grew $12.2 million, or 2.7%, year-over-year, driven by higher spot revenue and political advertising revenue as 2022 is a midterm election year, partially offset by lower trade and barter revenue due to the impact of the timing of the iHeartRadio Music Awards show, while Networks grew $3.9 million, or 3.2%, year-over-year.

Revenue from Sponsorship and Events increased by $9.5 million, or 33.2%, year-over-year, primarily as a result of the return of live events.

Operating expenses increased $14.4 million, driven primarily by event costs related to the return of live events including the iHeart Country Festival, higher sales commissions in connection with the increase in revenue, and an increase in bad debt expense due to a credit in Q2 2021 related to the recovery of COVID-19 reserves recorded in 2020.

These increases were partially offset by a decrease in trade and barter expense due to the impact of the timing of the iHeartRadio Music Awards show and lower variable bonus accruals based on financial performance.

Revenue from our Multiplatform Group increased $100.7 million compared to the prior year, primarily as a result of the continued recovery from the impact of COVID-19.

Revenue from our Multiplatform Group increased $0.9 million compared to the prior year as a result of increased political advertising revenue as 2022 is a midterm election year, partially offset by a decrease in revenue due to a more challenging macroeconomic environment.

Broadcast revenue grew $2.1 million, or 0.4%, year-over-year, driven by higher political advertising revenue and an increase in trade and barter revenue, partially offset by lower spot revenue, while Networks declined $(0.7) million, or 0.5%, year-over-year.

Revenue from Sponsorship and Events decreased by $(0.1) million, or 0.2%, year-over-year.

Operating expenses increased $2.1 million, driven primarily by higher content costs, as well as higher talent and profit-sharing fees, partially offset by a decrease in variable bonus expense which is lower in the third quarter of 2022 compared to the prior year based on financial performance compared to targets.

Revenue from our Multiplatform Group increased $101.6 million compared to the prior year, primarily as a result of the continued recovery from the impact of COVID-19 and political advertising revenue.

Broadcast revenue increased $72.2 million, or 5.6%, year-over-year, while Networks grew $5.7 million, or 1.6%, year-over-year.

Revenue from Sponsorship and Events increased by $20.6 million, or 22.0%, year-over-year, primarily as a result of the return of live events.

Operating expenses increased $58.5 million, driven primarily by higher event costs in connection with the return of live events including the iHeart Country Festival, as well as higher sales commission, talent and profit share costs, all driven by higher revenue, and an increase in bad debt expense due to a credit in 2021 related to the recovery of COVID-19 reserves recorded in 2020.

These increases were partially offset by lower rent and utilities in connection with our real estate optimization initiatives as well as lower variable bonus accruals based on financial performance.

Operating expenses increased $60.6 million, driven primarily by higher travel and event costs in connection with the return of live events including the iHeart Country Festival, as well as higher sales commission, talent and profit share costs, all driven by higher revenue.

These increases were partially offset by lower variable bonus expenses based on financial performance and by lower rent and utilities in connection with our real estate optimization initiatives.

Digital Audio Group Results

(In thousands) Three Months Ended

June 30, % Six Months Ended

September 30, % Nine Months Ended

September 30, %

2022 2021 Change 2022 2021 Change

7 unchanged sentences

Digital Audio Group revenue increased as a result of general increased demand for digital advertising and the growing popularity of podcasting.

Operating expenses increased $30.0 million due to higher employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations and higher variable content costs, third-party digital costs and profit share expenses due to higher revenue and the development of new podcasts.

Operating expenses increased $37.0 million due to higher variable content and production costs primarily resulting from the development of new podcasts and higher third-party digital costs and profit share expenses primarily resulting from higher revenue.

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

Revenue from our Digital Audio Group increased $159.5 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew $70.0 million, or 17.3%, year-over-year, driven by increased demand for digital advertising.

Podcast revenue also increased by $62.4 million, or 68.0%, year-over-year, driven by higher revenues from the development of new podcasts and growth from existing podcasts.

Podcast revenue increased by $89.5 million, or 57.4%, year-over-year, driven by higher revenues from the development of new podcasts and growth from existing podcasts.

Digital Audio Group revenues increased as a result of general increased demand for digital advertising, the growing popularity of podcasting, the continued addition of premium content to our industry-leading podcast business and our improving ability to monetize our digital audiences and inventory utilizing our sales force and advertising technology platforms, partially driven by investments in the digital space.

Operating expenses increased $74.2 million in connection with our Digital Audio Group’s significant revenue growth, including the impact of variable employee compensation expense, talent costs and third-party digital costs due to higher revenue, as well as increased content and production costs primarily resulting from the development of new podcasts.

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

Operating expenses increased $111.2 million in connection with our Digital Audio Group’s significant revenue growth, including the increase in content and production costs primarily resulting from the development of new podcasts and higher variable employee compensation expense, talent costs and third-party digital costs due to higher revenue.

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

Audio & Media Services Group Results

(In thousands) Three Months Ended

June 30, % Six Months Ended

September 30, % Nine Months Ended

September 30, %

2022 2021 Change 2022 2021 Change

5 unchanged sentences

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

Revenue from our Audio & Media Services Group increased $9.9 million compared to the comparative period in the prior year due to an increase in political advertising revenue as 2022 is a midterm election year and the continued recovery from the impact of COVID-19.

Revenue from our Audio & Media Services Group increased $11.7 million compared to the comparative period in the prior year due to an increase in political advertising revenue as 2022 is a midterm election year.

Operating expenses increased $4.4 million primarily as a result of higher employee compensation related to seasonal (political) staffing, higher merchandising costs and a new purchase agreement with third-parties for specific inventory spots.

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(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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EBITDA $ (99,169) $ 167,107 $ 234,399 $ 402,791

Gain on investments, net (9,590) (49,644) (7,825) (49,835)

Gain on extinguishment of debt (8,203) — (8,203) —

(Gain) loss on investments, net 3,466 10,367 (4,359) (39,468)

(Gain) loss on extinguishment of debt (6,892) 7,896 (15,095) 7,896

Other expense, net 581 1,785 3,026 2,955

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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, Gain on extinguishment of debt, Other expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating expense, net, Share-based compensation expense, and restructuring expenses.

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

Restructuring expenses primarily include expenses incurred in connection with cost-saving initiatives, as well as certain expenses, which, in the view of management, are outside the ordinary course of business or otherwise not representative of the Company's operations during a normal business cycle.

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We believe the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management.

believe it helps improve investors’ ability to understand our operating performance and makes it easier to compare our results with other companies that have different capital structures or tax rates.

We believe it helps improve investors’ ability to understand our operating performance and makes it easier to compare our results with other companies that have different capital structures or tax rates.

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

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(In thousands) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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

Share-based compensation expenses are recorded in SG&A expenses and were $8.6 million and $5.9 million for the three months ended June 30, 2022 and 2021, respectively, and $14.1 million and $11.6 million for the six months ended June 30, 2022 and 2021, respectively.

Share-based compensation expenses are recorded in SG&A expenses and were $10.4 million and $6.0 million for the three months ended September 30, 2022 and 2021, respectively, and $24.6 million and $17.6 million for the nine months ended September 30, 2022 and 2021, respectively.

On March 28, 2022, we issued performance-based restricted stock units ("Q1 2022 Performance RSUs") to certain key employees.

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The 2022 RSUs are being recognized ratably over a 3-year period from the date of issuance.

As of June 30, 2022, there was $62.0 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions.

As of September 30, 2022, there was $54.3 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based solely on service conditions.

This cost is expected to be recognized over a weighted average period of approximately 3.4 years.

In addition, as of June 30, 2022, there were unrecognized compensation costs of $11.7 million of Q1 2022 Performance RSUs and $14.7 million of Q2 2022 Performance RSUs related to unvested share-based compensation arrangements that will vest based on performance and service conditions.

In addition, as of September 30, 2022, there were unrecognized compensation costs of $11 million of Q1 2022 Performance RSUs and $13.4 million of Q2 2022 Performance RSUs related to unvested share-based compensation arrangements that will vest based on performance and service conditions.

These costs will be recognized over a 50-month period from the date of issuance for the Q1 2022 Performance RSUs and over a 3-year period from the date of issuance for the Q2 2022 Performance RSUs.

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

(In thousands) Six Months Ended

(In thousands) Nine Months Ended

September 30,

Cash provided by (used for):

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Operating Activities

Cash provided by operating activities of $103.6 million during the six months ended June 30, 2022 increased from $100.9 million during the six months ended June 30, 2021 primarily due to an increase in cash flows from operations as the Company's businesses continue to recover from the impact of COVID-19, mostly offset by an increase in the payment of bonuses and commissions in the first quarter of 2022.

Cash provided by operating activities of $206.7 million during the nine months ended September 30, 2022 increased from $196.6 million during the nine months ended September 30, 2021 primarily due to an increase in cash flows from operations as the Company's businesses continue to recover from the impact of COVID-19, mostly offset by an increase in the payment of bonuses and commissions in the first quarter of 2022.

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

Investing Activities

Cash used for investing activities of $49.7 million during the six months ended June 30, 2022 primarily reflects $72.2 million in cash used for capital expenditures.

Cash used for investing activities of $82.8 million during the nine months ended September 30, 2022 primarily reflects $112.6 million in cash used for capital expenditures.

We spent $80.3 million for capital expenditures in our Multiplatform Group segment primarily related to our real estate optimization initiatives, $15.9 million in our Digital Audio Group segment primarily related to IT infrastructure, $5.4 million in our Audio & Media Services Group segment, primarily related to software, and $11.0 million in Corporate primarily related to equipment and software purchases.

Cash used for investing activities was partially offset by proceeds from the sale of certain properties related to our real estate optimization initiatives.

Cash used for investing activities of $218.3 million during the six months ended June 30, 2021 primarily reflects the net cash payment made to acquire Triton Digital for $228.5 million.

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

In addition, $101.3 million in cash was used for capital expenditures.

We spent $31.5 million for capital expenditures in our Multiplatform Group segment and $11.7 million for capital expenditures in our Digital Audio Group segment primarily related to IT infrastructure, $2.2 million in our Audio & Media Services Group segment, primarily related to software and $5.7 million in Corporate primarily related to equipment and software purchases.

We spent $66.5 million for capital expenditures in our Multiplatform Group segment primarily related to our real estate optimization initiatives, $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 related to proceeds received of $50.8 million from the sale of our investment in the San Antonio Spurs.

Financing Activities

Cash used for financing activities totaled $110.7 million during the six months ended June 30, 2022 primarily due to the open market repurchases of $113.5 million aggregate principal amount of our 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash, reflecting a discounted purchase price from the face value of the notes.

Cash used for financing activities of $19.9 million during the six months ended June 30, 2021 primarily resulted from required quarterly principal payments made on the Term Loan Facility and repayment of a subsidiary note payable.

Cash used for financing activities totaled $179.7 million during the nine months ended September 30, 2022 primarily due to the open market repurchases of $188.5 million aggregate principal amount of our 8.375% Senior Unsecured Notes due 2027 for $173.4 million in cash, reflecting a discounted purchase price from the face value of the notes.

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 a repricing transaction, required quarterly principal payments made on the term loan credit facilities, and repayment of a subsidiary note payable.

Sources of Liquidity and Anticipated Cash Requirements

Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $294.8 million as of June 30, 2022, cash flow from operations and borrowing capacity under our $450.0 million senior secured asset-based revolving credit facility entered into on May 17, 2022 (the "New ABL Facility") which refinanced and replaced in its entirety the existing ABL Facility (the "Existing ABL Facility").

As of June 30, 2022, iHeartCommunications had no amounts outstanding under the ABL Facility, a facility size of $450.0 million and $29.4 million in outstanding letters of credit, resulting in $420.6 million of borrowing base availability.

Together with our cash balance of $294.8 million as of June 30, 2022 and our borrowing capacity under the New ABL Facility, our total available liquidity 1 was approximately $715 million.

We regularly evaluate economic conditions including the ongoing impact of COVID-19 on our business.

For the six months ended June 30, 2022, our revenues increased compared to the six months ended June 30, 2021 due to recovery from the macroeconomic effects of COVID-19, among other factors discussed in the Results of Operations section of the MD&A.

Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $295.4 million as of September 30, 2022, cash flow from operations and borrowing capacity under our $450.0 million senior secured asset-based revolving credit facility entered into on May 17, 2022 (the "New ABL Facility") which refinanced and replaced in its entirety the existing ABL Facility (the "Existing ABL Facility").

As of September 30, 2022, iHeartCommunications had no amounts outstanding under the New ABL Facility, a facility size of $450.0 million and $27.0 million in outstanding letters of credit, resulting in $423.0 million of borrowing base availability.

Together with our cash balance of $295.4 million as of September 30, 2022 and our borrowing capacity under the New ABL Facility, our total available liquidity 1 was approximately $718 million.

We regularly evaluate economic conditions including macroeconomic conditions on our business.

A challenging macroeconomic environment has led to market uncertainty which impacted 2022 Multiplatform Group revenues, particularly in the third quarter.

For the nine months ended September 30, 2022, our revenues increased compared to the nine months ended September 30, 2021 due to recovery from the macroeconomic effects of COVID-19 partially offset by market uncertainty from the challenging macroeconomic environment, among other factors discussed in the Results of Operations section of the MD&A.

Although we cannot predict future economic conditions or the impact of any potential contraction of economic growth on our business, we believe that we have sufficient liquidity to continue to fund our operations for at least the next twelve months.

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

Certain contractual obligations are reflected on the Consolidated Balance Sheet as of June 30, 2022, while others are considered future commitments.

Certain contractual obligations are reflected on the Consolidated Balance Sheet as of September 30, 2022, while others are considered future commitments.

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

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

Assuming the current level of borrowings and interest rates in effect at June 30, 2022, we anticipate that we will have approximately $168 million of cash interest payments in the remainder of 2022.

Assuming the current level of borrowings and interest rates in effect at September 30, 2022, we anticipate that we will have approximately $88.7 million of cash interest payments in the remainder of 2022.

With the increase in interest rates, including LIBOR, we anticipate cash interest payments to be higher in the fourth quarter of 2022 and into 2023.

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

We acknowledge the challenges posed by the COVID-19 pandemic and any potential slow down in economic activity, rising inflation and interest rates, and other macroeconomic trends, however, we remain confident in our business, our employees and our strategy.

We acknowledge the challenges posed by the market uncertainty as a result of global economic weakness, the recent slowdown in economic activity, rising interest rates, historically high inflation and other macroeconomic trends, however, we remain confident in our business, our employees and our strategy.

Further, we believe our available liquidity will allow us to fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next twelve months.

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We frequently evaluate strategic opportunities.

During the three months ended June 30, 2022, we conducted open market repurchases of $113.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash, reflecting a discounted purchase price from the face value of the notes.

During the nine months ended September 30, 2022, we conducted open market repurchases of $188.5 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $173.4 million in cash, reflecting a discounted purchase price from the face value of the notes.

We expect from time to time to pursue other strategic opportunities such as acquisitions or disposals of certain businesses, which may or may not be material.

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Summary Debt Capital Structure

As of June 30, 2022 and December 31, 2021, we had the following debt outstanding, net of cash and cash equivalents:

(In thousands) June 30, 2022 December 31, 2021

As of September 30, 2022 and December 31, 2021, we had the following debt outstanding, net of cash and cash equivalents:

(In thousands) September 30, 2022 December 31, 2021

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

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For more information about the New ABL Facility, refer to Note 5, Long-Term Debt .

2 During the three months ended June 30, 2022, we repurchased $113.5 million aggregate principal amount of iHeartCommunications, Inc.’s 8.375% Senior Unsecured Notes due 2027 for $105.3 million in cash, excluding accrued interest, via open market transactions.

2 During the second and third quarter of 2022, we repurchased $188.5 million aggregate principal amount of iHeartCommunications, Inc.’s 8.375% Senior Unsecured Notes due 2027 for $173.4 million in cash, excluding accrued interest, via open market transactions.

The repurchased notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $15.1 million.

Our New ABL Facility contains a springing fixed charge coverage ratio that is effective if certain triggering events related to borrowing capacity under the New ABL Facility occur.

As of June 30, 2022, no triggering event had occurred and, as a result, we were not required to comply with any fixed charge coverage ratio as of or for the periods ended June 30, 2022.

As of September 30, 2022, no triggering event had occurred and, as a result, we were not required to comply with any fixed charge coverage ratio as of or for the period ended September 30, 2022.

Other than our New ABL Facility, none of our long-term debt includes maintenance covenants that could trigger early repayment.

As of June 30, 2022, we were in compliance with all covenants related to our debt agreements in all material respects.

As of September 30, 2022, we were in compliance with all covenants related to our debt agreements in all material respects.

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

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Supplemental Financial Information under Debt Agreements

Pursuant to iHeartCommunications' material debt agreements, Capital I, the parent guarantor and a subsidiary of iHeartMedia, is permitted to satisfy its reporting obligations under such agreements by furnishing iHeartMedia’s consolidated financial information and an explanation of the material differences between iHeartMedia’s consolidated financial information, on the one hand, and the financial information of Capital I and its consolidated restricted subsidiaries, on the other hand.

Because neither iHeartMedia nor iHeartMedia Capital II, LLC, a wholly-owned direct subsidiary of iHeartMedia and the parent of Capital I, have any operations or material assets or liabilities, there are no material differences between iHeartMedia’s consolidated financial information for the three and six months ended June 30, 2022, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same period.

Further, as of June 30, 2022, we were in compliance with all covenants related to our debt agreements in all material respects.

Pursuant to iHeartCommunications' material debt agreements, iHeartMedia Capital I, LLC ("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, 2022, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same period.

Further, as of September 30, 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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Accordingly, our earnings will be affected by changes in interest rates.

As of June 30, 2022, approximately 40% of our aggregate principal amount of long-term debt bore interest at floating rates.

Assuming the current level of borrowings and assuming a 50% change in LIBOR, it is estimated that our interest expense for the six months ended June 30, 2022 would have changed by $2.5 million.

As of September 30, 2022, approximately 41% 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, 2022 would have changed by $9.0 million.

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

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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.

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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.

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

These factors have negatively impacted the key assumptions used in the discounted cash flow models that are utilized to value our FCC licenses and goodwill, particularly the discount rates used in estimating fair values.

This has resulted in a significant decrease in the fair values of certain of our FCC licenses and reporting units.

Indefinite-lived Intangible Assets

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, profit margin, and the risk-adjusted discount rate as well as other assumptions including market share, duration and profile of the build-up period, and estimated start-up capital costs.

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

On July 1, 2022, we performed our annual impairment test in accordance with ASC 350-30-35 and we concluded that a $302.1 million 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 five-year period;

• 2.5% revenue growth was assumed beyond the initial five-year period and 2.0% revenue growth was assumed in the terminal 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 19.1%, depending on market size;

• Assumed discount rates of 10.0% for the 15 largest markets and 10.5% 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:

Impact on the Fair Value of our FCC Licenses due to 100 bps Change in:

Revenue Growth Rate Profit Margin Discount Rate

(in thousands)

$ 228,765 $ 161,722 $ 264,227

The carrying value of our FCC licenses at September 30, 2022 after the impairment of $302.1 million was $1.48 billion, while the fair value was $1.50 billion.

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

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 impairment testing performed as of July 1, 2022 has resulted in a significant decrease in the fair values of our reporting units.

The fair values of our Multiplatform, Digital, and RCS reporting units exceed their carrying values by less than 15%.

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, 2022, 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 2022 through 2026.

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.

• Revenues beyond 2026 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 (beyond 2030), and 2.0% for our Katz Media reporting unit (beyond 2030).

• In order to risk adjust the cash flow projections in determining fair value, we utilized discounts rates between 13% and 16% for each of our reporting units.

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) Impact on the Fair Value of our Goodwill due to 100 bps Change in:

Reporting Unit Revenue Growth Rate Profit Margin Discount Rate

Multiplatform $ 350,000 $ 150,000 $ 340,000

Digital 150,000 90,000 140,000

Katz Media 30,000 10,000 20,000

Other 20,000 10,000 20,000

An increase in discount rates or a decrease in revenue growth rates or profit margins could result in impairment

charges being required to be recorded for one or more of our reporting units.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf.

This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, the anticipated impacts of and recovery from the COVID-19 pandemic on our business, financial position and results of operations, economic trends including inflation and potential recessionary indicators, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, debt repurchases, our business plans, strategies and initiatives, benefits of acquisitions, our expectations about certain markets and businesses, expected cash interest payments and our anticipated financial performance and liquidity.

This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, the anticipated impacts of the COVID-19 pandemic on our business, financial position and results of operations, macroeconomic trends including inflation and potential recessionary indicators, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, debt repurchases, our business plans, strategies and initiatives, benefits of acquisitions, our expectations about certain markets and businesses, expected cash interest payments and our anticipated financial performance and liquidity.

Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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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