iHeartMedia, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) March 31, 2023 December 31, 2022 (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 187,933 $ 336,236 Accounts receivable, net of allowance of $ 29,767 in 2023 and $ 29,171 in 2022 935,233 1,037,827 Prepaid expenses 112,010 79,098 Other current assets 36,152 19,618 Total Current Assets 1,271,328 1,472,779 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net 674,379 694,842 INTANGIBLE ASSETS AND GOODWILL Indefinite-lived intangibles - licenses and other 1,476,319 1,476,319 Other intangibles, net 1,357,884 1,419,670 Goodwill 2,313,436 2,313,403 OTHER ASSETS Operating lease right-of-use assets 770,829 788,280 Other assets 171,016 170,594 Total Assets $ 8,035,191 $ 8,335,887 CURRENT LIABILITIES Accounts payable $ 177,270 $ 240,454 Current operating lease liabilities 75,124 70,024 Accrued expenses 201,163 325,427 Accrued interest 57,943 64,165 Deferred revenue 144,671 131,084 Current portion of long-term debt 525 664 Total Current Liabilities 656,696 831,818 Long-term debt 5,394,932 5,413,503 Noncurrent operating lease liabilities 832,468 848,918 Deferred income taxes 556,431 483,810 Other long-term liabilities 122,760 73,332 Commitments and contingent liabilities (Note 6) STOCKHOLDERS’ EQUITY Noncontrolling interest 9,185 9,609 Preferred stock, par value $ .001 per share, 100,000,000 shares authorized, no shares issued and outstanding — — Class A Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued 122,385,200 and 122,370,425 shares in 2023 and 2022, respectively 123 123 Class B Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued 21,469,919 and 21,477,181 shares in 2023 and 2022, respectively 21 21 Special Warrants, 5,111,312 and 5,111,312 issued and outstanding in 2023 and 2022, respectively — — Additional paid-in capital 2,922,652 2,912,500 Accumulated deficit ( 2,449,742 ) ( 2,227,482 ) Accumulated other comprehensive loss ( 1,377 ) ( 1,331 ) Cost of shares ( 600,525 in 2023 and 597,482 in 2022) held in treasury ( 8,958 ) ( 8,934 ) Total Stockholders' Equity 471,904 684,506 Total Liabilities and Stockholders' Equity $ 8,035,191 $ 8,335,887 See Notes to Consolidated Financial Statements 1 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) (In thousands, except per share data) Three Months Ended March 31, 2023 2022 Revenue $ 811,239 $ 843,458 Operating expenses: Direct operating expenses (excludes depreciation and amortization) 344,620 330,524 Selling, general and administrative expenses (excludes depreciation and amortization) 402,801 384,344 Depreciation and amortization 108,512 114,051 Impairment charges 3,947 1,334 Other operating expense, net 221 870 Operating income (loss) ( 48,862 ) 12,335 Interest expense, net 95,457 79,219 Loss on investments, net ( 6,505 ) ( 1,765 ) Equity in earnings (loss) of nonconsolidated affiliates 40 ( 29 ) Gain on extinguishment of debt 4,625 — Other expense, net ( 99 ) ( 270 ) Loss before income taxes ( 146,258 ) ( 68,948 ) Income tax benefit (expense) ( 76,105 ) 20,209 Net loss ( 222,363 ) ( 48,739 ) Less amount attributable to noncontrolling interest ( 103 ) ( 157 ) Net loss attributable to the Company $ ( 222,260 ) $ ( 48,582 ) Other comprehensive loss, net of tax: Foreign currency translation adjustments ( 46 ) ( 247 ) Other comprehensive loss, net of tax ( 46 ) ( 247 ) Comprehensive loss ( 222,306 ) ( 48,829 ) Less amount attributable to noncontrolling interest — — Comprehensive loss attributable to the Company $ ( 222,306 ) $ ( 48,829 ) Net loss attributable to the Company per common share: Basic $ ( 1.50 ) $ ( 0.33 ) Weighted average common shares outstanding - Basic 148,365 147,513 Diluted $ ( 1.50 ) $ ( 0.33 ) Weighted average common shares outstanding - Diluted 148,365 147,513 See Notes to Consolidated Financial Statements 2 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at December 31, 2022 122,370,425 21,477,181 5,111,312 $ 9,609 $ 144 $ 2,912,500 $ ( 2,227,482 ) $ ( 1,331 ) $ ( 8,934 ) $ 684,506 Net loss ( 103 ) — — ( 222,260 ) — — ( 222,363 ) Vesting of restricted stock and other 7,513 — — — — — ( 24 ) ( 24 ) Share-based compensation — — 10,152 — — — 10,152 Conversion of Class B Shares to Class A Shares 7,262 ( 7,262 ) — — — — — — — Other ( 321 ) — — — — — ( 321 ) Other comprehensive loss — — — — ( 46 ) — ( 46 ) Balances at March 31, 2023 122,385,200 21,469,919 5,111,312 $ 9,185 $ 144 $ 2,922,652 $ ( 2,449,742 ) $ ( 1,377 ) $ ( 8,958 ) $ 471,904 (1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2023. See Notes to Consolidated Financial Statements 3 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at December 31, 2021 120,633,937 21,590,192 5,304,430 $ 8,410 $ 142 $ 2,876,571 $ ( 1,962,819 ) $ ( 257 ) $ ( 6,282 ) $ 915,765 Net loss ( 157 ) — — ( 48,582 ) — — ( 48,739 ) Vesting of restricted stock and other 597,400 — 1 409 — — ( 516 ) ( 106 ) Share-based compensation — — 5,535 — — — 5,535 Conversion of Special Warrants to Class A and Class B Shares 11,361 ( 11,361 ) — — — — — — — Conversion of Class B Shares to Class A Shares 159,692 ( 159,692 ) — — — — — — — Other ( 187 ) — — — — — ( 187 ) Other comprehensive loss — — — — ( 247 ) — ( 247 ) Balances at March 31, 2022 121,402,390 21,430,500 5,293,069 $ 8,066 $ 143 $ 2,882,515 $ ( 2,011,401 ) $ ( 504 ) $ ( 6,798 ) $ 872,021 (1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2022. See Notes to Consolidated Financial Statements 4 IHEARTMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Three Months Ended March 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 222,363 ) $ ( 48,739 ) Reconciling items: Impairment charges 3,947 1,334 Depreciation and amortization 108,512 114,051 Deferred taxes 72,620 ( 23,788 ) Provision for doubtful accounts 6,441 2,111 Amortization of deferred financing charges and note discounts, net 1,656 1,439 Share-based compensation 10,152 5,535 (Gain) Loss on disposal of operating and other assets ( 278 ) 584 Loss on investments 6,505 1,765 Equity in (earnings) loss of nonconsolidated affiliates ( 40 ) 29 Gain on extinguishment of debt ( 4,625 ) — Barter and trade income ( 8,007 ) ( 7,021 ) Other reconciling items, net 89 242 Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: Decrease in accounts receivable 94,759 121,339 Increase in prepaid expenses and other current assets ( 37,032 ) ( 39,983 ) Increase in other long-term assets ( 1,521 ) ( 2,610 ) Decrease in accounts payable ( 63,187 ) ( 49,129 ) Decrease in accrued expenses ( 73,306 ) ( 151,853 ) Increase (decrease) in accrued interest ( 6,222 ) 1,829 Increase in deferred income 16,829 19,602 Increase in other long-term liabilities 1,088 1,051 Cash used for operating activities ( 93,983 ) ( 52,212 ) Cash flows from investing activities: Purchases of property, plant and equipment ( 39,165 ) ( 22,557 ) Proceeds from disposal of assets 1,454 6,009 Change in other, net ( 710 ) ( 3,142 ) Cash used for investing activities ( 38,421 ) ( 19,690 ) Cash flows from financing activities: Payments on long-term debt and credit facilities ( 15,593 ) ( 168 ) Change in other, net ( 345 ) ( 293 ) Cash used for financing activities ( 15,938 ) ( 461 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 39 ( 83 ) Net decrease in cash, cash equivalents and restricted cash ( 148,303 ) ( 72,446 ) Cash, cash equivalents and restricted cash at beginning of period 336,661 352,554 Cash, cash equivalents and restricted cash at end of period $ 188,358 $ 280,108 SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 101,759 $ 76,104 Cash paid for income taxes 3,160 1,123 See Notes to Consolidated Financial Statements 5 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 – BASIS OF PRESENTATION Preparation of Interim Financial Statements All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to iHeartMedia, Inc. and its consolidated subsidiaries. The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The Company reports based on three reportable segments: ▪ the Multiplatform Group, which includes the Company's Broadcast radio, Networks and Sponsorships and Events businesses; ▪ the Digital Audio Group, which includes all of the Company's Digital businesses, including Podcasting; and ▪ the Audio & Media Services Group, which includes Katz Media Group (“Katz Media”), a full-service media representation business, and RCS Sound Software ("RCS"), a provider of scheduling and broadcast software and services. The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling interest or is the primary beneficiary. Investments in companies which the Company does not control, but exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process. Economic Conditions The Company's advertising revenue is correlated to changes in economic conditions. Increasing interest rates and high inflation contributed to a challenging macroeconomic environment beginning in the third quarter of 2022. This challenging environment has led to broader market uncertainty, which impacted the Company's revenue in the first quarter of 2023. The current market uncertainty and macroeconomic conditions, a recession, or a downturn in the U.S. economy could have a significant impact on the Company's ability to generate revenue. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES Act”) was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company was able to defer the payment of $ 29.3 million in certain employment taxes during 2020, half of which was due and paid on January 3, 2022 and the other half of which was due and paid on January 3, 2023. In addition, the Company claimed $ 12.4 million in refundable payroll tax credits related to the CARES Act provisions, of which $ 0.7 million was received in 2020, $ 3.8 million was received in 2021 and $ 7.9 million was received in January 2022. As of March 31, 2023, the Company had approximately $ 187.9 million in cash and cash equivalents, and the $ 450.0 million senior secured asset-based revolving credit facility entered into on May 17, 2022 (the "ABL Facility") had a borrowing base of $ 438.3 million, no outstanding borrowings and $ 25.0 million of outstanding letters of credit, resulting in $ 413.3 million of borrowing base availability. 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 was approximately $ 601 million. Based on current available liquidity, the Company expects to be able to meet its obligations as they become due over the coming year. 6 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Reclassifications Certain prior period amounts have been reclassified to conform to the 2023 presentation. Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the amounts reported in the Consolidated Statements of Cash Flows: (In thousands) March 31, 2023 December 31, 2022 Cash and cash equivalents $ 187,933 $ 336,236 Restricted cash included in: Other current assets 425 425 Total cash, cash equivalents and restricted cash in the Statement of Cash Flows $ 188,358 $ 336,661 Certain Relationships and Related Party Transactions From time to time, certain companies in which the Company holds minority equity interests, purchase advertising in the ordinary course. None of these ordinary course transactions have a material impact on the Company. New Accounting Pronouncements Recently Adopted In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification 606. The Company adopted this guidance during the first quarter of 2023. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows. 7 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2 – REVENUE Disaggregation of Revenue The following tables show revenue streams for the three months ended March 31, 2023 and 2022: (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Eliminations Consolidated Three Months Ended March 31, 2023 Revenue from contracts with customers: Broadcast Radio (1) $ 383,238 $ — $ — $ — $ 383,238 Networks (2) 107,954 — — — 107,954 Sponsorship and Events (3) 32,587 — — — 32,587 Digital, excluding Podcast (4) — 146,585 — ( 1,189 ) 145,396 Podcast (5) — 76,811 — — 76,811 Audio & Media Services (6) — — 61,351 ( 1,332 ) 60,019 Other (7) 4,924 — — — 4,924 Total 528,703 223,396 61,351 ( 2,521 ) 810,929 Revenue from leases (8) 310 — — — 310 Revenue, total $ 529,013 $ 223,396 $ 61,351 $ ( 2,521 ) $ 811,239 Three Months Ended March 31, 2022 Revenue from contracts with customers: Broadcast Radio (1) $ 415,242 $ — $ — $ — $ 415,242 Networks (2) 117,558 — — — 117,558 Sponsorship and Events (3) 33,601 — — — 33,601 Digital, excluding Podcast (4) — 145,675 — ( 1,269 ) 144,406 Podcast (5) — 68,544 — — 68,544 Audio & Media Services (6) — — 60,857 ( 1,341 ) 59,516 Other (7) 4,469 — — ( 168 ) 4,301 Total 570,870 214,219 60,857 ( 2,778 ) 843,168 Revenue from leases (8) 290 — — — 290 Revenue, total $ 571,160 $ 214,219 $ 60,857 $ ( 2,778 ) $ 843,458 (1) Broadcast Radio revenue is generated through the sale of advertising time on the Company’s domestic radio stations. (2) Networks revenue is generated through the sale of advertising on the Company’s Premiere and Total Traffic & Weather network programs and through the syndication of network programming to other media companies. (3) Sponsorship and events revenue is generated through local events and major nationally-recognized tent pole events and include sponsorship and other advertising revenue, ticket sales, and licensing, as well as endorsement and appearance fees generated by on-air talent. (4) Digital, excluding Podcast revenue is generated through the sale of streaming and display advertisements on digital platforms and through subscriptions to iHeartRadio streaming services. (5) Podcast revenue is generated through the sale of advertising on the Company's podcast network. (6) Audio & Media Services revenue is generated by services provided to broadcast industry participants through the Company’s Katz Media and RCS businesses. As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast software and media streaming, along with research services for radio stations, broadcast television stations, cable channels, record labels, ad agencies and Internet stations worldwide. (7) Other revenue represents fees earned for miscellaneous services, including on-site promotions, activations, and local marketing agreements. (8) Revenue from leases is primarily generated by the lease of towers to other media companies, which are all categorized as operating leases. 8 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Trade and Barter Trade and barter transactions represent the exchange of advertising spots for merchandise, services, advertising and promotion or other assets in the ordinary course of business. The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the advertising spots promised to the customer. The revenues and expenses may not be recognized in the same period depending on the timing of the services, advertising or promotion received in exchange for advertising spots. Trade and barter revenues and expenses, which are included in consolidated revenue and selling, general and administrative expenses, respectively, were as follows: Three Months Ended March 31, (In thousands) 2023 2022 Trade and barter revenues $ 45,029 $ 40,348 Trade and barter expenses 47,386 46,415 In addition to the trade and barter revenue in the table above, the Company recognized $ 8.0 million and $ 7.0 million during the three months ended March 31, 2023 and 2022, respectively, in connection with investments made in companies in exchange for advertising services. The following tables show the Company’s deferred revenue balance from contracts with customers: Three Months Ended March 31, (In thousands) 2023 2022 Deferred revenue from contracts with customers: Beginning balance (1) $ 157,910 $ 161,114 Revenue recognized, included in beginning balance ( 56,133 ) ( 60,389 ) Additions, net of revenue recognized during period, and other 68,904 83,331 Ending balance $ 170,681 $ 184,056 (1) Deferred revenue from contracts with customers, which excludes other sources of deferred revenue that are not related to contracts with customers, is included within deferred revenue and other long-term liabilities on the Consolidated Balance Sheets, depending upon when revenue is expected to be recognized. The Company’s contracts with customers generally have terms of one year or less; however, as of March 31, 2023, the Company expects to recognize $ 310.4 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration greater than one year, with substantially all of this amount to be recognized over the next five years . Commissions related to the Company’s media representation business have been excluded from this amount as they are contingent upon future sales. 9 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Revenue from Leases As of March 31, 2023, the future lease payments to be received by the Company are as follows: (In thousands) 2023 $ 714 2024 693 2025 509 2026 393 2027 339 Thereafter 1,251 Total $ 3,899 NOTE 3 – LEASES The Company enters into operating lease contracts for land, buildings, structures and other equipment. Arrangements are evaluated at inception to determine whether such arrangements contain a lease. Operating leases primarily include land and building lease contracts and leases of radio towers. Arrangements to lease building space consist primarily of the rental of office space, but may also include leases of other equipment, including automobiles and copiers. Operating leases are reflected on the Company's balance sheet within Operating lease right-of-use assets ("ROU assets") and the related short-term and long-term liabilities are included within Current and Noncurrent operating lease liabilities, respectively. The Company's finance leases are included within Property, plant and equipment with the related liabilities included within Long-term debt. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term. The Company tests for impairment of assets whenever events and circumstances indicate that such assets might be impaired. During the three months ended March 31, 2023, the Company recognized non-cash impairment charges of $ 3.9 million primarily in connection with changes in sublease assumptions for ROU assets related to certain operating leases for which management has made proactive decisions to abandon and sublease in connection with strategic actions to streamline the Company’s real estate footprint as part of the Company’s modernization initiatives. During the three months ended March 31, 2023, there were no non-cash impairment charges related to leasehold improvements. During the three months ended March 31, 2022, the Company recognized non-cash impairment charges of $ 1.3 million, including $ 1.2 million related to ROU assets, and $ 0.1 million related to leasehold improvements also as a result of the proactive decisions by management discussed above. The implicit rate within the Company's lease agreements is generally not determinable. As such, the Company uses the incremental borrowing rate ("IBR") to determine the present value of lease payments at the commencement of the lease. The IBR, as defined in ASC 842, is "the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment." 10 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table provides supplemental cash flow information related to leases for the periods presented: Three Months Ended March 31, (In thousands) 2023 2022 Cash paid for amounts included in measurement of operating lease liabilities $ 32,963 $ 43,265 Lease liabilities arising from obtaining right-of-use assets (1) 4,821 7,586 (1) Lease liabilities from obtaining right-of-use assets include new leases entered into during the three months ended March 31, 2023 and 2022, respectively. The Company reflects changes in the lease liability and changes in the ROU asset on a net basis in the Statements of Cash Flows. The operating lease expense was $ 18.1 million and $ 23.4 million for the three months ended March 31, 2023 and March 31, 2022, respectively. NOTE 4– PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL Property, Plant and Equipment The Company’s property, plant and equipment consisted of the following classes of assets as of March 31, 2023 and December 31, 2022, respectively: (In thousands) March 31, 2023 December 31, 2022 Land, buildings and improvements $ 349,459 $ 340,692 Towers, transmitters and studio equipment 221,588 215,655 Computer equipment and software 629,218 617,794 Furniture and other equipment 41,900 41,924 Construction in progress 28,373 29,091 1,270,538 1,245,156 Less: accumulated depreciation 596,159 550,314 Property, plant and equipment, net $ 674,379 $ 694,842 Indefinite-lived Intangible Assets The Company’s indefinite-lived intangible assets primarily consist of Federal Communications Commission ("FCC") broadcast licenses in its Multiplatform Group segment. Other Intangible Assets Other intangible assets consists of definite-lived intangible assets, which primarily include customer and advertiser relationships, talent and representation contracts, trademarks and tradenames and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time that the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at amortized cost. 11 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of March 31, 2023 and December 31, 2022, respectively: (In thousands) March 31, 2023 December 31, 2022 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer / advertiser relationships $ 1,652,455 $ ( 675,167 ) $ 1,652,455 $ ( 633,352 ) Talent and other contracts 338,900 ( 171,272 ) 338,900 ( 160,500 ) Trademarks and tradenames 335,862 ( 130,941 ) 335,862 ( 122,403 ) Other 18,443 ( 10,396 ) 18,443 ( 9,735 ) Total $ 2,345,660 $ ( 987,776 ) $ 2,345,660 $ ( 925,990 ) Total amortization expense related to definite-lived intangible assets for the Company for the three months ended March 31, 2023 and 2022 was $ 61.8 million and $ 63.1 million, respectively. As acquisitions and dispositions occur in the future, amortization expense may vary. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets: (In thousands) 2024 $ 244,707 2025 213,514 2026 201,512 2027 176,171 2028 160,395 Goodwill The following table presents the changes in the carrying amount of goodwill: (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Consolidated Balance as of December 31, 2022 $ 1,462,022 $ 747,350 $ 104,031 $ 2,313,403 Foreign currency — — 33 33 Balance as of March 31, 2023 $ 1,462,022 $ 747,350 $ 104,064 $ 2,313,436 12 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 5 – LONG-TERM DEBT Long-term debt outstanding for the Company as of March 31, 2023 and December 31, 2022 consisted of the following: (In thousands) March 31, 2023 December 31, 2022 Term Loan Facility due 2026 $ 1,864,032 $ 1,864,032 Incremental Term Loan Facility due 2026 401,220 401,220 Asset-based Revolving Credit Facility due 2027 (1) — — 6.375 % Senior Secured Notes due 2026 800,000 800,000 5.25 % Senior Secured Notes due 2027 750,000 750,000 4.75 % Senior Secured Notes due 2028 500,000 500,000 Other secured subsidiary debt (2) 4,296 4,462 Total consolidated secured debt 4,319,548 4,319,714 8.375 % Senior Unsecured Notes due 2027 (3) 1,100,366 1,120,366 Other unsecured subsidiary debt — 52 Original issue discount ( 9,828 ) ( 10,569 ) Long-term debt fees ( 14,629 ) ( 15,396 ) Total debt 5,395,457 5,414,167 Less: Current portion 525 664 Total long-term debt $ 5,394,932 $ 5,413,503 (1) As of March 31, 2023, the ABL Facility had a borrowing base of $ 438.3 million, no outstanding borrowings and $ 25.0 million of outstanding letters of credit, resulting in $ 413.3 million of borrowing base availability. (2) Other secured subsidiary debt consists of finance lease obligations maturing at various dates from 2024 through 2045. (3) During the three months ended March 31, 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. The Company’s weighted average interest rate was 7.1 % and 6.9 % as of March 31, 2023 and December 31, 2022, respectively. The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $ 4.5 billion and $ 4.8 billion as of March 31, 2023 and December 31, 2022, respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as either Level 1 or Level 2. Surety Bonds and Letters of Credit As of March 31, 2023, the Company and its subsidiaries had outstanding surety bonds and commercial standby letters of credit of $ 10.0 million and $ 25.4 million, respectively. These surety bonds and letters of credit relate to various operational matters including insurance, lease and performance bonds as well as other items. NOTE 6 – COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings. Additionally, due to the inherent uncertainty of 13 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations. Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial/contract disputes; defamation matters; employment and benefits related claims; intellectual property claims; real estate matters; governmental investigations; and tax disputes. Alien Ownership Restrictions and FCC Declaratory Ruling The Communications Act and FCC regulation prohibit foreign entities and individuals from having direct or indirect ownership or voting rights of more than 25 percent in a corporation controlling the licensee of a radio broadcast station unless the FCC finds greater foreign ownership to be in the public interest. On November 5, 2020, the FCC issued a declaratory ruling, which permits the Company to be up to 100 % foreign owned, subject to certain conditions (the "2020 Declaratory Ruling"). NOTE 7 – INCOME TAXES The Company’s income tax benefit (expense) for the three months ended March 31, 2023 and the three months ended March 31, 2022 consisted of the following components: (In thousands) Three Months Ended March 31, 2023 2022 Current tax expense $ ( 3,485 ) $ ( 3,579 ) Deferred tax benefit (expense) ( 72,620 ) 23,788 Income tax benefit (expense) $ ( 76,105 ) $ 20,209 The effective tax rates for the three months ended March 31, 2023 and March 31, 2022 were ( 52.0 )% and 29.3 %, respectively. The effective tax rates were primarily impacted by the forecasted increase in valuation allowance against certain deferred tax assets, related primarily to disallowed interest expense carryforwards, due to uncertainty regarding the Company’s ability to utilize those assets in future periods. NOTE 8 – STOCKHOLDERS' EQUITY Pursuant to the Company's 2019 Eq uity Incentive Plan (the "2019 Plan"), the Company historically granted restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals. On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the “2021 Plan”) was approved by stockholders and replaced the 2019 Plan. Pursuant to our 2021 Plan, we will continue to grant equity awards covering shares of the Company's Class A common stock to certain key individuals. Share-based Compensation Share-based compensation expenses are recorded in Selling, general and administrative expenses and were $ 10.2 million and $ 5.5 million for the Company for the three months ended March 31, 2023 and March 31, 2022, respectively. On March 28, 2022, the Company issued performance-based restricted stock units ("Q1 2022 Performance RSUs") to certain key employees. Such Q1 2022 Performance RSUs vest upon the achievement of total stockholder return goals and continued service, which are being measured over an approximately 50-month period from the date of issuance. In the three months ended March 31, 2023, the Company recognized $ 0.7 million in relation to these Q1 2022 Performance RSUs. On May 9, 2022, the Company issued performance-based restricted stock units ("Q2 2022 Performance RSUs") and restricted stock units ("2022 RSUs") to certain key employees. Such 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. Such 2022 RSUs vest upon continued service. These awards are being recognized ratably over a 3-year period from the date of 14 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) issuance. In the three months ended March 31, 2023, the Company recognized $ 1.2 million in relation to these Q2 2022 Performance RSUs. 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. In addition, as of March 31, 2023, there were unrecognized compensation costs of $ 9.5 million for the Q1 2022 Performance RSUs and $ 10.6 million for the Q2 2022 Performance RSUs related to unvested share-based compensation arrangements that will vest based on certain 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 the 3-year period from the date of issuance for the Q2 2022 Performance RSUs. Common Stock and Special Warrants The Company is authorized to issue 2,100,000,000 shares, consisting of (a) 1,000,000,000 shares of Class A Common Stock, par value $ 0.001 per share (the “Class A Common Stock”), (b) 1,000,000,000 shares of Class B Common Stock, par value $ 0.001 per share (the “Class B Common Stock”), and (c) 100,000,000 shares of preferred stock, par value $ 0.001 per share (the “Preferred Stock”). The following table presents the Company's Class A Common Stock, Class B Common Stock and Special Warrants issued as of March 31, 2023: March 31, 2023 Class A Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized 122,385,200 Class B Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized 21,469,919 Special Warrants 5,111,312 Total Class A Common Stock, Class B Common Stock and Special Warrants issued 148,966,431 During the three months ended March 31, 2023, stockholders converted 7,262 shares of the Class B common stock into Class A common stock. During the three months ended March 31, 2022, stockholders converted 159,692 shares of the Class B common stock into Class A common stock. Special Warrants Each Special Warrant issued under the special warrant agreement entered into in connection with the Company's emergence from bankruptcy in 2019 may be exercised by its holder to purchase one share of Class A common stock or Class B common stock at an exercise price of $ 0.001 per share, unless the Company in its sole discretion believes such exercise would, alone or in combination with any other existing or proposed ownership of common stock, result in, subject to certain exceptions, (a) such exercising holder owning more than 4.99 percent of the Company's outstanding Class A common stock, (b) more than 22.5 percent of the Company's capital stock or voting interests being owned directly or indirectly by foreign individuals or entities, (c) the Company exceeding any other applicable foreign ownership threshold or (d) violation of any provision of the Communications Act or restrictions on ownership or transfer imposed by the Company's certificate of incorporation or the decisions, rules and policies of the FCC. Any holder exercising Special Warrants must complete and timely deliver to the warrant agent the required exercise forms and certifications required under the special warrant agreement. The Communications Act and FCC regulations prohibit foreign entities or individuals from indirectly (i.e., through a parent company) owning or voting more than 25 percent of a licensee’s equity, unless the FCC determines that greater indirect foreign ownership is in the public interest. As mentioned in Note 6 above, on November 5, 2020, the FCC issued the 2020 Declaratory Ruling, which permits the Company to be up to 100 % foreign owned. During the three months ended March 31, 2023, there were no Special Warrants exercised for shares of Class A or Class B common stock. During the three months ended March 31, 2022, stockholders exercised 11,361 Special Warrants for an equivalent number of shares of Class A common stock. During the three months ended March 31, 2022, there were no Special Warrant exercised for shares of Class B common stock. 15 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Computation of Loss per Share (In thousands, except per share data) Three Months Ended March 31, 2023 2022 NUMERATOR: Net loss attributable to the Company – common shares $ ( 222,260 ) $ ( 48,582 ) DENOMINATOR (1) : Weighted average common shares outstanding - basic 148,365 147,513 Stock options and restricted stock (2) : — — Weighted average common shares outstanding - diluted 148,365 147,513 Net loss attributable to the Company per common share: Basic $ ( 1.50 ) $ ( 0.33 ) Diluted $ ( 1.50 ) $ ( 0.33 ) (1) All of the outstanding Special Warrants are included in both the basic and diluted weighted average common shares outstanding of the Company for the three months ended March 31, 2023 and 2022. (2) Outstanding equity service awards representing 11.7 million and 10.0 million shares of Class A common stock of the Company for the three months ended March 31, 2023 and 2022, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive. NOTE 9 – SEGMENT DATA The Company’s primary businesses are included in its Multiplatform Group and Digital Audio Group segments. Revenue and expenses earned and charged between Multiplatform Group, Digital Audio Group, Audio & Media Services Group, and Corporate are eliminated in consolidation. The Multiplatform Group provides media and entertainment services via broadcast delivery and also includes the Company’s events and national syndication businesses. The Digital Audio Group provides media and entertainment services via digital delivery. The Audio & Media Services Group provides other audio and media services, including the Company’s media representation business (Katz Media) and its provider of scheduling and broadcast software (RCS). Corporate includes infrastructure and support, including executive, information technology, human resources, legal, finance and administrative functions for the Company’s businesses. Share-based payments are recorded in Selling, general and administrative expense. 16 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following tables present the Company's segment results for the Company for the three months ended March 31, 2023 and 2022: Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Three Months Ended March 31, 2023 Revenue $ 529,013 $ 223,396 $ 61,351 $ — $ ( 2,521 ) $ 811,239 Operating expenses (1) 441,961 169,277 46,007 63,091 ( 2,521 ) 717,815 Segment Adjusted EBITDA (2) $ 87,052 $ 54,119 $ 15,344 $ ( 63,091 ) $ — $ 93,424 Depreciation and amortization ( 108,512 ) Impairment charges ( 3,947 ) Other operating expense, net ( 221 ) Restructuring expenses ( 19,454 ) Share-based compensation expense ( 10,152 ) Operating loss $ ( 48,862 ) Intersegment revenues $ — $ 1,189 $ 1,332 $ — $ — $ 2,521 Capital expenditures 26,424 5,777 3,887 3,077 — 39,165 Share-based compensation expense — — — 10,152 — 10,152 Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Three Months Ended March 31, 2022 Revenue $ 571,160 $ 214,219 $ 60,857 $ — $ ( 2,778 ) $ 843,458 Operating expenses (1) 437,253 161,711 44,470 57,584 ( 2,778 ) 698,240 Segment Adjusted EBITDA (2) $ 133,907 $ 52,508 $ 16,387 $ ( 57,584 ) $ — $ 145,218 Depreciation and amortization ( 114,051 ) Impairment charges ( 1,334 ) Other operating expense, net ( 870 ) Restructuring expenses ( 11,093 ) Share-based compensation expense ( 5,535 ) Operating income $ 12,335 Intersegment revenues $ 168 $ 1,269 $ 1,341 $ — $ — $ 2,778 Capital expenditures 12,338 5,156 1,699 3,364 — 22,557 Share-based compensation expense — — — 5,535 — 5,535 (1) Consolidated operating expenses consist of Direct operating expenses and Selling, general and administrative expenses and exclude Restructuring expenses, share-based compensation expenses and depreciation and amortization. (2) For a definition of Adjusted EBITDA for the consolidated company and a reconciliation to Operating income (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 Item 2 of this Quarterly Report on Form 10-Q. Beginning on January 1, 2021, Segment Adjusted EBITDA became the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. 17