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Format of Presentation
−Removed: 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.
+Added: 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 Part I, Item 1 of this Quarterly Report on Form 10-Q of iHeartMedia, Inc.
(the "Company," "iHeartMedia," "we," "our," or "us").
−Removed: Our reportable segments are:
+Added: We report based on three reportable segments:
▪ the Multiplatform Group, which includes our Broadcast radio, Networks and Sponsorships and Events businesses;
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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.
−Removed: 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.
+Added: Our segment profitability metric is Segment Adjusted EBITDA, which is 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.
−Removed: We operate as a company with multiple platforms including radio, digital, podcasting, networks and events, as well as ad technology capabilities.
+Added: We have transitioned our business from a single platform radio broadcast operator to a company with multiple platforms including digital, podcasting, networks and events, as well as ad technology capabilities.
We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience.
−Removed: We believe the presentation of our results by segment provides additional insight into our broadcast radio business and our fast-growing digital business.
+Added: We believe the presentation of our results by segment provides insight into our broadcast radio business and our digital business.
We believe that our ability to generate cash flow from operations from our business initiatives and our current cash on hand will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next twelve months.
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Our Multiplatform Group also generates revenue from network syndication, nationally recognized events and other miscellaneous transactions.
−Removed: 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.
−Removed: Local advertising is sold by each radio station’s sales staff while national advertising is sold by our national sales team.
+Added: Management looks at our Multiplatform Group's operations’ overall revenue as well as the revenue from each revenue stream including Broadcast Spot, Networks, and Sponsorship and Events.
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.
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This metric gauges how well our formats are attracting and retaining listeners.
−Removed: Management also monitors revenue generated through our programmatic ad-buying platform, and our data analytics advertising product, SmartAudio, to measure the success of our enhanced marketing optimization tools.
+Added: Management also monitors revenue generated through our programmatic ad-buying platform, and our data analytics advertising product, 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.
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Digital Audio Group
−Removed: 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.
−Removed: Revenues for advertising spots are recognized over time based on impressions delivered or time elapsed, depending upon the terms of the contract.
+Added: The primary source of revenue in the Digital Audio Group segment is the sale of advertising on the Company’s podcast network, iHeartRadio mobile application and website, and station websites.
+Added: Revenues for digital advertising 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.
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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.
−Removed: 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.
−Removed: 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.
+Added: Our strategy has enabled us to extend our leadership in the growing podcasting sector, and iHeartMedia is the number one podcast publisher in America.
+Added: Our reach now extends across more than 250 platforms and thousands of 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.
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Economic Conditions
−Removed: Our advertising revenue is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP.
−Removed: 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.
−Removed: The rise in interest rates and historically high inflation have also contributed to a more challenging macroeconomic environment.
−Removed: This challenging environment has led to market uncertainty which impacted 2022 Multiplatform Group revenues, particularly during the third quarter.
−Removed: These current macroeconomic conditions, a recession, or downturn in the U.S.
−Removed: economy could have a significant impact on the Company’s ability to generate revenue.
+Added: Our advertising revenue is correlated to changes in economic conditions.
+Added: Increasing interest rates and high inflation contributed to a challenging macroeconomic environment beginning in the third quarter of 2022.
+Added: This challenging environment has led to broader market uncertainty which impacted our revenue in the first quarter of 2023.
+Added: The current market uncertainty and macroeconomic conditions, a recession, or a downturn in the U.S.
+Added: economy could have a significant impact on our ability to generate revenue.
Cost Savings Initiatives
−Removed: 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, and we continue to explore opportunities for further efficiencies.
+Added: We have implemented key modernization initiatives and operating-expense-saving initiatives over recent years 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.
+Added: We continue to explore opportunities for further efficiencies.
Impairment Charges
−Removed: We perform our annual impairment test on our goodwill and indefinite-lived Federal Communication Commission ("FCC") licenses as of July 1 of each year.
−Removed: 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.
−Removed: 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.
−Removed: This has resulted in a significant decrease in the fair values of certain of our FCC licenses and reporting units.
−Removed: 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.
−Removed: This data is populated using industry normalized information representing an average asset within a market.
−Removed: 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.
−Removed: Considerations in developing these assumptions included the extent of the economic downturn, ranges of expected timing of recovery, discount rates and other factors.
−Removed: Based on our testing, the estimated fair value of the FCC licenses was below their carrying values.
−Removed: As a result, we recognized a non-cash impairment charge of $302.1 million on our FCC licenses.
−Removed: 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.
−Removed: As discussed above, our annual impairment testing resulted in a significant decrease in the fair values of our reporting units.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Terminal values were also estimated and discounted to their present value.
−Removed: 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.
−Removed: There are inherent uncertainties related to these factors and in management’s judgment in applying these factors.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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
−Removed: 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.
+Added: Revenues for the first quarter of 2023 decreased for our Multiplatform Group segment due to lower spending on radio advertising in connection with the uncertain market conditions, and increased for our Digital Audio Group segment.
The key developments that impacted our business during the quarter are summarized below:
−Removed: • 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.
−Removed: • 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.
−Removed: • 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.
−Removed: • 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.
−Removed: • 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.
−Removed: • 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.
−Removed: • Cash flows provided by operating activities of $103.1 million increased from $95.7 million in the prior year's third quarter.
−Removed: • Adjusted EBITDA (1) of $252.2 million, was up $22.0 million from $230.2 million in prior year's third quarter.
−Removed: • Free cash flow (2) of $62.8 million increased from $45.5 million in the prior year's third quarter.
+Added: • Consolidated Revenue of $811.2 million decreased $32.2 million, or 3.8% during the quarter ended March 31, 2023 compared to Consolidated Revenue of $843.5 million in the prior year's first quarter.
+Added: • Revenue and Segment Adjusted EBITDA from our Multiplatform Group decreased $42.1 million and $46.9 million compared to the prior year's first quarter, respectively.
+Added: • Revenue and Segment Adjusted EBITDA from our Digital Audio Group increased $9.2 million and $1.6 million compared to the prior year's first quarter, respectively.
+Added: • Revenue and Segment Adjusted EBITDA from our Audio & Media Services Group increased $0.5 million and decreased $1.0 million compared to the prior year's first quarter, respectively.
+Added: • Operating loss of $48.9 million, decreased $(61.2) million from Operating income of $12.3 million in the prior year’s first quarter.
+Added: • Net loss of $222.4 million, increased $173.6 million from Net Loss of $48.7 million in the prior year's first quarter.
+Added: • Cash flows used for operating activities of $(94.0) million increased from $(52.2) million used for operating activities in the prior year's first quarter.
+Added: • Adjusted EBITDA (1) of $93.4 million, was down $(51.8) million from $145.2 million in prior year's first quarter.
+Added: • Free cash flow (2) of $(133.1) million decreased from $(74.8) 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
−Removed: September 30,
Revenue $ 811,239 $ 843,458
Operating income (loss) (48,862) 12,335
−Removed: Net income (loss) (309,776) 3,673
−Removed: Cash provided by operating activities 103,110 95,736
+Added: Net loss (222,363) (48,739)
+Added: Cash used for operating activities (93,983) (52,212)
Adjusted EBITDA (1)
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(133,148) (74,769)
−Removed: (1) For a definition of Adjusted EBITDA and a reconciliation to Operating income, the most closely comparable GAAP measure, and to Net income (loss), please see "Reconciliation of Operating Income (Loss) to Adjusted EBITDA" and "Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA" in this MD&A.
−Removed: (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.
+Added: (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.
+Added: (2) For a definition of Free cash flow and a reconciliation to Cash used for operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash used for operating activities to Free cash flow” in this MD&A.
Results of Operations
−Removed: 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:
+Added: The tables below present the comparison of our historical results of operations for the three months ended March 31, 2023 to the three months ended March 31, 2022:
(In thousands) Three Months Ended
−Removed: September 30, Nine Months Ended
−Removed: September 30,
−Removed: 2022 2021 2022 2021
Revenue $ 811,239 $ 843,458
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Interest expense, net 95,457 79,219
−Removed: Gain (loss) on investments, net (3,466) (10,367) 4,359 39,468
−Removed: Equity in loss of nonconsolidated affiliates (132) (1,056) (190) (1,115)
−Removed: Gain (loss) on extinguishment of debt 6,892 (7,896) 15,095 (7,896)
+Added: Loss on investments, net (6,505) (1,765)
+Added: Equity in earnings (loss) of nonconsolidated affiliates 40 (29)
+Added: Gain on extinguishment of debt 4,625 —
Other expense, net (99) (270)
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Income tax benefit (expense) (76,105) 20,209
−Removed: Net income (loss) (309,776) 3,673 (343,333) (270,343)
+Added: Net loss (222,363) (48,739)
Less amount attributable to noncontrolling interest
−Removed: 587 493 1,211 486
−Removed: Net income (loss) attributable to the Company $ (310,363) $ 3,180 $ (344,544) $ (270,829)
−Removed: 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:
+Added: Net loss attributable to the Company $ (222,260) $ (48,582)
+Added: The table below presents the comparison of our revenue streams for the three months ended March 31, 2023 to the three months ended March 31, 2022:
(In thousands) Three Months Ended
−Removed: September 30, % Nine Months Ended
−Removed: September 30, %
−Removed: 2022 2021 Change 2022 2021 Change
+Added: 2023 2022 Change
Broadcast Radio $ 383,238 $ 415,242 (7.7) %
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Revenue, total $ 811,239 $ 843,458 (3.8) %
−Removed: 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:
−Removed: Consolidated revenue increased $60.9 million during the three months ended September 30, 2022 compared to the same period of 2021.
−Removed: 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.
−Removed: 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.
−Removed: Audio & Media Services revenue increased $11.7 million due to the increase in political advertising revenue.
−Removed: Consolidated revenue increased $290.1 million during the nine months ended September 30, 2022 compared to the same period of 2021.
−Removed: 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.
−Removed: 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.
−Removed: Digital Audio Group revenue increased $159.5 million, driven primarily by continuing increases in demand for digital advertising, including continued growth in podcasting.
−Removed: 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.
+Added: Consolidated results for the three months ended March 31, 2023 compared to the consolidated results for the three months ended March 31, 2022 were as follows:
+Added: Consolidated revenue decreased $32.2 million during the three months ended March 31, 2023 compared to the same period of 2022.
+Added: Multiplatform Group revenue decreased $42.1 million, or 7.4%, primarily resulting from a decrease in broadcast advertising due to a more challenging macroeconomic environment as discussed above, as well as a decline in political advertising.
+Added: Digital Audio Group revenue increased $9.2 million, or 4.3%, driven primarily by continuing increases in demand for digital advertising.
+Added: Audio & Media Services revenue increased $0.5 million primarily due to continued growth in digital revenues, partially offset by a decrease in political revenue.
Direct Operating Expenses
−Removed: Consolidated direct operating expenses increased $46.0 million during the three months ended September 30, 2022 compared to the same period of 2021.
−Removed: 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.
−Removed: Consolidated direct operating expenses increased $128.5 million during the nine months ended September 30, 2022 compared to the same period of 2021.
−Removed: 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.
+Added: Consolidated direct operating expenses increased $14.1 million during the three months ended March 31, 2023 compared to the same period of 2022.
+Added: The increase in direct operating expenses was primarily driven by higher variable content costs resulting from an increase in digital revenue, including profit sharing expenses, third-party digital costs, and production costs, as well as costs incurred in connection with executing on our cost saving initiatives.
Selling, General and Administrative (“SG&A”) Expenses
−Removed: Consolidated SG&A expenses increased $9.8 million during the three months ended September 30, 2022 compared to the same period of 2021.
−Removed: 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.
−Removed: These increases were partially offset by lower variable bonus expense.
−Removed: Consolidated SG&A expenses increased $58.2 million during the nine months ended September 30, 2022 compared to the same period of 2021.
−Removed: 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.
−Removed: These increases were partially offset by lower variable bonus expense.
+Added: Consolidated SG&A expenses increased $18.5 million during the three months ended March 31, 2023 compared to the same period of 2022.
+Added: The increase in Consolidated SG&A expenses was driven primarily by higher share-based compensation and employee compensation, higher bad debt expense, as well as costs incurred in connection with executing on our cost reduction initiatives.
+Added: These increases were partially offset by lower sales commissions.
Depreciation and Amortization
−Removed: 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.
−Removed: 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.
+Added: Depreciation and amortization decreased $5.5 million during the three months ended March 31, 2023 compared to the same period of 2022, primarily as a result of a lower fixed asset base due to properties sold in 2022 in connection with our real estate optimization initiatives, and lower amortization expense due to certain intangible assets being fully amortized.
Impairment Charges
−Removed: We perform our annual impairment test on our goodwill and FCC licenses as of July 1 of each year.
−Removed: 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.
−Removed: See Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill ,
−Removed: for further discussion of the impairment charges.
−Removed: No impairment charges were recorded for our goodwill for the three and nine months ended September 30, 2022.
−Removed: The annual impairment test performed on our goodwill and FCC licenses as of July 1, 2021 did not result in impairment.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Other Operating Expense, Net
−Removed: 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.
+Added: 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.
+Added: During the three months ended March 31, 2023, we recognized non-cash impairment charges of $3.9 million primarily related to changes in sublease assumptions for certain operating leases previously determined to be subleased as part of strategic actions to streamline our real estate footprint.
+Added: We recorded non-cash impairment charges of $1.3 million during the three months ended March 31, 2022.
Interest Expense
−Removed: 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.
−Removed: 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.
−Removed: Gain (Loss) on Investments, Net
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Gain (Loss) on Extinguishment of Debt
−Removed: 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.
−Removed: 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.
+Added: Interest expense increased $16.2 million during the three months ended March 31, 2023 compared to the same period of 2022, primarily as a result of the increase in LIBOR borrowing rates, partially offset by the 2022 repurchases of $329.6 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $299.4 million in cash.
+Added: Loss on Investments, Net
+Added: During the three months ended March 31, 2023 and March 31, 2022, we recogn ized a loss on in vestments, net of $6.5 million and $1.8 million, respectively, related to declines in the value of our investments.
+Added: Gain on Extinguishment of Debt
+Added: During the three months ended March 31, 2023, we recognized a gain on extinguishment of debt of $4.6 million in connection with the open market repurchases of $20.0 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $15.4 million in cash.
Income Tax Benefit (Expense)
−Removed: The effective tax rate for the Company for the three and nine months ended September 30, 2022 was (4.5)% and 1.4%, respectively.
+Added: The effective tax rate for the Company for the three months ended March 31, 2023 and March 31, 2022 was (52.0)% and 29.3%, 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.
−Removed: Net Income (Loss) Attributable to the Company
−Removed: 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.
−Removed: 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.
+Added: Net Loss Attributable to the Company
+Added: Net loss attributable to the Company of $222.3 million during the three months ended March 31, 2023 increased $173.7 million compared to Net loss attributable to the Company of $48.6 million during the three months ended March 31, 2022, primarily as a result of lower consolidated revenues, higher content costs, and costs incurred in connection with the execution of cost reduction initiatives.
Multiplatform Group Results
(In thousands) Three Months Ended
−Removed: September 30, % Nine Months Ended
−Removed: September 30, %
−Removed: 2022 2021 Change 2022 2021 Change
+Added: 2023 2022 Change
Revenue $ 529,013 $ 571,160 (7.4) %
4 unchanged sentences
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
−Removed: 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.
−Removed: 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.
+Added: Revenue from our Multiplatform Group decreased $(42.1) million compared to the prior year as a result of the challenging macroeconomic environment, and a decline in political advertising.
+Added: Broadcast revenue declined $(32.0) million, or 7.7%, year-over-year, driven by lower spot revenue.
+Added: Networks declined $(9.6) million, or 8.2%, year-over-year.
Revenue from Sponsorship and Events decreased by $(1.0) million, or 3.0%, year-over-year.
−Removed: 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.
−Removed: 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.
−Removed: Broadcast revenue increased $72.2 million, or 5.6%, year-over-year, while Networks grew $5.7 million, or 1.6%, year-over-year.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Operating expenses increased $4.7 million, driven primarily by higher content and production costs, partially offset by decreased sales commissions.
Digital Audio Group Results
(In thousands) Three Months Ended
−Removed: September 30, % Nine Months Ended
−Removed: September 30, %
−Removed: 2022 2021 Change 2022 2021 Change
+Added: 2023 2022 Change
Revenue $ 223,396 $ 214,219 4.3 %
4 unchanged sentences
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
−Removed: Revenue from our Digital Audio Group increased $48.2 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew $21.1 million, or 14.9%, year-over-year, driven by increased demand for digital advertising as well as Podcast revenue which increased by $27.1 million, or 42.1%, year-over-year, driven by higher revenues from the development of new podcasts as well as growth from existing podcasts.
−Removed: Digital Audio Group revenue increased as a result of general increased demand for digital advertising and the growing popularity of podcasting.
−Removed: 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.
−Removed: In addition, operating expenses increased due to investments in increased headcount and key infrastructure to support our growing digital operations.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In addition, operating expenses increased due to investments in increased headcount and key infrastructure to support our growing digital operations.
+Added: Revenue from our Digital Audio Group increased $9.2 million compared to the prior year, led by Podcast revenue which increased by $8.3 million, or 12.1%, year-over-year, driven primarily by increased demand for podcast, and growth from Digital, excluding Podcast revenue, which grew $0.9 million, or 0.6%, year-over-year, driven by increased demand for digital advertising.
+Added: Operating expenses increased $7.6 million due to higher variable content and production costs primarily resulting from the development of new podcasts, higher third-party digital costs, and profit share expenses primarily resulting from higher revenue.
Audio & Media Services Group Results
(In thousands) Three Months Ended
−Removed: September 30, % Nine Months Ended
−Removed: September 30, %
−Removed: 2022 2021 Change 2022 2021 Change
+Added: 2023 2022 Change
Revenue $ 61,351 $ 60,857 0.8 %
4 unchanged sentences
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
−Removed: 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.
−Removed: 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.
−Removed: Revenue from our Audio & Media Services Group increased $27.3 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.
−Removed: Operating expenses increased $17.4 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.
+Added: Revenue from our Audio & Media Services Group increased $0.5 million compared to the comparative period in the prior year driven by continued growth in digital revenues, partially offset by a decrease in political revenue.
+Added: Operating expenses increased $1.5 million primarily as a result of higher software costs.
Reconciliation of Operating income (loss) to Adjusted EBITDA
(In thousands) Three Months Ended
−Removed: September 30, Nine Months Ended
−Removed: September 30,
−Removed: 2022 2021 2022 2021
Operating income (loss) $ (48,862) $ 12,335
6 unchanged sentences
$ 93,424 $ 145,218
−Removed: Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
+Added: Reconciliation of Net loss to EBITDA and Adjusted EBITDA
(In thousands) Three Months Ended
−Removed: September 30, Nine Months Ended
−Removed: September 30,
−Removed: 2022 2021 2022 2021
−Removed: Net income (loss) $ (309,776) $ 3,673 $ (343,333) $ (270,343)
+Added: Net loss $ (222,363) $ (48,739)
Income tax benefit (expense) 76,105 (20,209)
2 unchanged sentences
EBITDA $ 57,711 $ 124,322
−Removed: (Gain) loss on investments, net 3,466 10,367 (4,359) (39,468)
−Removed: (Gain) loss on extinguishment of debt (6,892) 7,896 (15,095) 7,896
+Added: Loss on investments, net 6,505 1,765
+Added: Gain on extinguishment of debt (4,625) —
Other expense, net 99 270
−Removed: Equity in loss of nonconsolidated affiliates 132 1,056 190 1,115
+Added: Equity in earnings (loss) of nonconsolidated affiliates (40) 29
Impairment charges 3,947 1,334
6 unchanged sentences
Depreciation and amortization, Impairment charges and Other operating expense, net.
−Removed: 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.
+Added: Alternatively, Adjusted EBITDA is calculated as Net loss, adjusted to exclude Income tax (benefit) expense, Interest expense, net, Depreciation and amortization, Loss on investments, net, Gain on extinguishment of debt, Other expense, net, Equity in earnings (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.
9 unchanged sentences
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.
−Removed: Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
+Added: Reconciliation of Cash used for operating activities to Free Cash Flow
(In thousands) Three Months Ended
−Removed: September 30, Nine Months Ended
−Removed: September 30,
−Removed: 2022 2021 2022 2021
−Removed: Cash provided by operating activities $ 103,110 $ 95,736 $ 206,699 $ 196,593
+Added: Cash used for operating activities $ (93,983) $ (52,212)
Purchases of property, plant and equipment (39,165) (22,557)
1 unchanged sentence
$ (133,148) $ (74,769)
−Removed: (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.
+Added: (1) We define Free cash flow ("Free Cash Flow") as Cash 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.
5 unchanged sentences
On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the "2021 Plan") was approved by stockholders and replaced the prior plan.
−Removed: 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.
−Removed: 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.
−Removed: On March 28, 2022, we issued performance-based restricted stock units ("Q1 2022 Performance RSUs") to certain key employees.
−Removed: The Q1 2022 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.
−Removed: On May 9, 2022, we issued performance-based restricted stock units ("Q2 2022 Performance RSUs") and restricted stock units ("2022 RSUs") to certain key employees.
−Removed: The Q2 2022 Performance RSUs vest upon the achievement of certain total stockholder return goals, Adjusted EBITDA goals, Diversity, Equity and Inclusion goals, and continued service.
−Removed: The Q2 2022 Performance RSUs are measured over a 3-year period from the date of issuance.
−Removed: The 2022 RSUs vest upon continued service.
−Removed: The 2022 RSUs are being recognized ratably over a 3-year period from the date of issuance.
−Removed: 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.
+Added: At our 2023 Annual Meeting of Stockholders, we are seeking to approve an increase to the shares authorized for issuance under the 2021 Plan.
+Added: Pursuant to our 2021 Plan, we may grant restricted stock units covering and options to purchase shares of the Company's Class A common stock to certain key individuals.
+Added: Share-based compensation expenses are recorded in SG&A expenses and were $10.2 million and $5.5 million for the three months ended March 31, 2023 and 2022, respectively.
+Added: As of March 31, 2023, there was $37.7 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 3.0 years.
−Removed: 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.
+Added: In addition, as of March 31, 2023, there were unrecognized compensation costs of $9.5 million of Q1 2022 Performance RSUs and $10.6 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.
1 unchanged sentence
The following discussion highlights cash flow activities during the periods presented:
−Removed: (In thousands) Nine Months Ended
−Removed: September 30,
−Removed: Cash provided by (used for):
+Added: (In thousands) Three Months Ended
+Added: Cash used for:
Operating activities $ (93,983) $ (52,212)
3 unchanged sentences
(133,148) (74,769)
−Removed: (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.
+Added: (1) For a definition of Free Cash Flow and a reconciliation to Cash used for operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash used for operating activities to Free Cash Flow” in this MD&A.
Operating Activities
−Removed: 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.
−Removed: The Company did not pay bonuses to the vast majority of employees in the first quarter of 2021.
+Added: Cash used for operating activities of $94.0 million during the three months ended March 31, 2023 increased from $52.2 million during the three months ended March 31, 2022 primarily due to a decrease in broadcast radio revenue due to a more challenging macroeconomic environment, an increase in LIBOR borrowing rates, and timing of payments.
+Added: These decreases were partially offset by a decrease in bonus payments in 2023 compared to 2022.
Investing Activities
−Removed: 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.
+Added: Cash used for investing activities of $38.4 million during the three months ended March 31, 2023 primarily reflects $39.2 million in cash used for capital expenditures.
We spent $26.4 million for capital expenditures in our Multiplatform Group segment primarily related to our real estate optimization initiatives, $5.8 million in our Digital Audio Group segment primarily related to IT infrastructure, $3.9 million in our Audio & Media Services Group segment, primarily related to software, and $3.1 million in Corporate primarily related to equipment and software purchases.
−Removed: Cash used for investing activities was partially offset by proceeds from the sale of certain properties related to our real estate optimization initiatives.
−Removed: 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.
−Removed: In addition, $101.3 million in cash was used for capital expenditures.
+Added: Cash used for investing activities in the three months ended March 31, 2023 includes $12.7 million of cash paid in the current period related to assets acquired in the fourth quarter of 2022.
+Added: 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.
−Removed: 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
−Removed: 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.
−Removed: 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.
+Added: Cash used for financing activities totaled $15.9 million during the three months ended March 31, 2023 primarily due to the repurchases of $20.0 million aggregate principal amount of our 8.375% Senior Unsecured Notes due 2027 for $15.4 million in cash, reflecting a discounted purchase price from the face value of the notes.
+Added: Cash used for financing activities totaled $0.5 million during the three months ended March 31, 2022.
+Added: 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.
Sources of Liquidity and Anticipated Cash Requirements
−Removed: 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").
−Removed: 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.
−Removed: 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.
−Removed: We regularly evaluate economic conditions including macroeconomic conditions on our business.
−Removed: A challenging macroeconomic environment has led to market uncertainty which impacted 2022 Multiplatform Group revenues, particularly in the third quarter.
−Removed: 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.
+Added: Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $187.9 million as of March 31, 2023, cash flows from operations and borrowing capacity under our $450.0 million senior secured asset-based revolving credit facility entered into on May 17, 2022 (the "ABL Facility").
+Added: As of March 31, 2023, iHeartCommunications had no amounts outstanding under the ABL Facility, a borrowing base of $438.3 million and $25.0 million in outstanding letters of credit, resulting in $413.3 million of borrowing base availability.
+Added: Together with our cash balance of $187.9 million as of March 31, 2023 and our borrowing capacity under the ABL Facility, our total available liquidity 1 was approximately $601 million.
+Added: We regularly evaluate the impact of economic conditions on our business.
+Added: A challenging macroeconomic environment has led to market uncertainty which impacted Q1 2023 revenues.
+Added: For the three months ended March 31, 2023, our revenues decreased compared to the three months ended March 31, 2022 primarily due to the decrease in broadcast radio revenue driven 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.
1 unchanged sentence
These obligations impact our short-term and long-term liquidity and capital resource needs.
−Removed: Certain contractual obligations are reflected on the Consolidated Balance Sheet as of September 30, 2022, while others are considered future commitments.
+Added: Certain contractual obligations are reflected on the Consolidated Balance Sheet as of March 31, 2023, 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 2023 will be to fund our working capital, make interest and tax payments, fund capital expenditures, pursue certain strategic opportunities, and maintain operations.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Assuming the current level of borrowings and interest rates in effect at March 31, 2023, we anticipate that we will have approximately $287.5 million of cash interest payments in the remainder of 2023 compared to $266.3 million of cash interest payments during the same period in 2022, primarily related to the increase in interest rates, including LIBOR.
+Added: Future increases in interest rates could have a significant impact on our cash interest payments.
+Added: 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.
+Added: 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, high inflation and other macroeconomic trends, however, we remain confident in our business, our employees and our strategy.
+Added: 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;
1 unchanged sentence
We frequently evaluate strategic opportunities.
−Removed: 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.
+Added: During the three months ended March 31, 2023, we repurchased $20.0 million in aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $15.4 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.
−Removed: 1 Total available liquidity is defined as cash and cash equivalents plus available borrowings under the New ABL Facility.
+Added: Tax Matters Agreement
+Added: In connection with the separation (the "Separation") of Clear Channel Outdoor Holdings, Inc.
+Added: as part of our plan of reorganization, we entered into the Tax Matters Agreement by and among iHeartMedia, iHeartCommunications, iHeart Operations, Inc., Clear Channel Holdings, Inc., and Clear Channel Outdoor Holding, Inc.
+Added: (the "Outdoor Group"), to allocate the responsibility of iHeartMedia and its subsidiaries, on the one hand, and the Outdoor Group and its subsidiaries, on the other, for the payment of taxes arising prior and subsequent to, and in connection with, the Separation.
+Added: The Tax Matters Agreement requires that iHeartMedia and iHeartCommunications indemnify the Outdoor Group and its subsidiaries, 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.
+Added: In addition, the Tax Matters Agreement requires that the Outdoor Group indemnify iHeartMedia for certain income taxes paid by iHeartMedia on behalf of the Outdoor Group and its subsidiaries.
+Added: 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
−Removed: As of September 30, 2022 and December 31, 2021, we had the following debt outstanding, net of cash and cash equivalents:
−Removed: (In thousands) September 30, 2022 December 31, 2021
+Added: As of March 31, 2023 and December 31, 2022, we had the following debt outstanding, net of cash and cash equivalents:
+Added: (In thousands) March 31, 2023 December 31, 2022
Term Loan Facility due 2026 $ 1,864,032 $ 1,864,032
1 unchanged sentence
Asset-based Revolving Credit Facility due 2027 — —
−Removed: Asset-based Revolving Credit Facility due 2027 1
6.375% Senior Secured Notes due 2026 800,000 800,000
11 unchanged sentences
$ 5,207,524 $ 5,077,931
−Removed: 1 On May 17, 2022, we entered into a $450.0 million New ABL Facility, maturing in 2027, which refinanced and replaced in its entirety the Existing ABL Facility.
−Removed: For more information about the New ABL Facility, refer to Note 5, Long-Term Debt .
−Removed: 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.
+Added: 1 During the first quarter of 2023, we repurchased $20.0 million aggregate principal amount of iHeartCommunications, Inc.’s 8.375% Senior Unsecured Notes due 2027 for $15.4 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 $4.6 million.
−Removed: 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.
−Removed: 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.
−Removed: Other than our New ABL Facility, none of our long-term debt includes maintenance covenants that could trigger early repayment.
−Removed: As of September 30, 2022, we were in compliance with all covenants related to our debt agreements in all material respects.
+Added: 2 Net Debt is a non-GAAP financial metric that is used by management and investors to assess our ability to meet financial obligations.
+Added: Our ABL Facility contains a springing fixed charge coverage ratio that is effective if certain triggering events related to borrowing capacity under the ABL Facility occur.
+Added: As of March 31, 2023, 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 March 31, 2023.
+Added: Other than our ABL Facility, none of our long-term debt includes maintenance covenants that could trigger early repayment.
+Added: As of March 31, 2023, 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 .
7 unchanged sentences
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.
−Removed: 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.
−Removed: Further, as of September 30, 2022, we were in compliance with all covenants related to our debt agreements in all material respects.
+Added: 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, 2023, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same period.
+Added: Further, as of March 31, 2023, we were in compliance with all covenants related to our debt agreements.
Commitments, Contingencies and Guarantees
3 unchanged sentences
Please refer to “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q.
+Added: Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies generally over a one to five-year period.
+Added: The aggregate of these contingent payments, if performance targets are met, would not significantly impact our financial position or results of operations.
We have future cash obligations under various types of contracts.
9 unchanged sentences
This may affect the comparability of results between years.
−Removed: We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates and inflation.
+Added: We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates, foreign currency exchange rates and inflation.
Interest Rate Risk
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Accordingly, our earnings will be affected by changes in interest rates.
−Removed: As of September 30, 2022, approximately 41% of our aggregate principal amount of long-term debt bore interest at floating rates.
−Removed: 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.
+Added: As of March 31, 2023, approximately 42% of our aggregate principal amount of long-term debt bore interest at floating rates.
+Added: Assuming the current level of borrowings and assuming a 100 bps change in LIBOR, it is estimated that our interest expense for the three months ended March 31, 2023 would have changed by $5.7 million.
In the event of an adverse change in interest rates, management may take actions to mitigate our exposure.
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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, 2022.
−Removed: We perform our annual impairment test on goodwill and indefinite-lived intangible assets as of July 1 of each year.
−Removed: 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.
−Removed: 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.
−Removed: This has resulted in a significant decrease in the fair values of certain of our FCC licenses and reporting units.
−Removed: Indefinite-lived Intangible Assets
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value.
−Removed: 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.
−Removed: 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.
−Removed: This data is populated using industry normalized information representing an average asset within a market.
−Removed: 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.
−Removed: In determining the fair value of our FCC licenses, the following key assumptions were used:
−Removed: • Revenue forecasts published by BIA Financial Network, Inc.
−Removed: (“BIA”), varying by market, and revenue growth projections made by industry analysts were used for the initial five-year period;
−Removed: • 2.5% revenue growth was assumed beyond the initial five-year period and 2.0% revenue growth was assumed in the terminal period;
−Removed: • Revenue was grown proportionally over a build-up period, reaching market revenue forecast by year 3;
−Removed: • 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;
−Removed: • Assumed discount rates of 10.0% for the 15 largest markets and 10.5% for all other markets.
−Removed: 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.
−Removed: If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future.
−Removed: 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:
−Removed: Impact on the Fair Value of our FCC Licenses due to 100 bps Change in:
−Removed: Revenue Growth Rate Profit Margin Discount Rate
−Removed: (in thousands)
−Removed: $ 228,765 $ 161,722 $ 264,227
−Removed: 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.
−Removed: 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.
−Removed: We test goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired.
−Removed: The fair value of our reporting units is used to apply value to the net assets of each reporting unit.
−Removed: To the extent that the carrying amount of net assets would exceed the fair value, an impairment charge may be required to be recorded.
−Removed: The impairment testing performed as of July 1, 2022 has resulted in a significant decrease in the fair values of our reporting units.
−Removed: The fair values of our Multiplatform, Digital, and RCS reporting units exceed their carrying values by less than 15%.
−Removed: 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.
−Removed: Terminal values are also estimated and discounted to their present value.
−Removed: On July 1, 2022, we performed our annual impairment test in accordance with ASC 350-30-35, resulting in no impairment of goodwill.
−Removed: In determining the fair value of our reporting units, we used the following assumptions:
−Removed: • Expected cash flows underlying our business plans for the periods 2022 through 2026.
−Removed: 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.
−Removed: • 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).
−Removed: • 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.
−Removed: 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.
−Removed: If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future.
−Removed: 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:
−Removed: (In thousands) Impact on the Fair Value of our Goodwill due to 100 bps Change in:
−Removed: Reporting Unit Revenue Growth Rate Profit Margin Discount Rate
−Removed: Multiplatform $ 350,000 $ 150,000 $ 340,000
−Removed: Digital 150,000 90,000 140,000
−Removed: Katz Media 30,000 10,000 20,000
−Removed: Other 20,000 10,000 20,000
−Removed: An increase in discount rates or a decrease in revenue growth rates or profit margins could result in impairment
−Removed: 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.
−Removed: 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.
+Added: 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, 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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• risks associated with weak or uncertain global economic conditions and their impact on the level of expenditures for advertising;
−Removed: • the impact of the COVID-19 pandemic on our business, financial position and results of operations;
+Added: • risks related to the COVID-19 pandemic or other future pandemics;
• intense competition including increased competition from alternative media platforms and technologies;
• dependence upon the performance of on-air talent, program hosts and management as well as maintaining or enhancing our master brand;
−Removed: • fluctuations in operating costs;
+Added: • fluctuations in operating costs and other factors within or beyond our control;
• technological changes and innovations;
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• legislative or regulatory requirements;
−Removed: • the impact of legislation or ongoing litigation on music licensing and royalties;
+Added: • the impact of legislation, ongoing litigation or royalty audits on music licensing and royalties;
• regulations and consumer concerns regarding privacy and data protection, and breaches of information security measures;
−Removed: • risks related to our Class A common stock, including our significant number of outstanding warrants;
+Added: • risks related to our Class A common stock;
• regulations impacting our business and the ownership of our securities;
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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.