Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data) June 30,
2023 December 31,
2022
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 165,325 $ 336,236
Accounts receivable, net of allowance of $ 36,022 in 2023 and $ 29,171 in 2022
1,004,807 1,037,827
Prepaid expenses 127,380 79,098
Other current assets 38,880 19,618
Total Current Assets 1,336,392 1,472,779
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net 649,687 694,842
INTANGIBLE ASSETS AND GOODWILL
Indefinite-lived intangibles - licenses and other 1,112,751 1,476,319
Other intangibles, net 1,296,099 1,419,670
Goodwill 1,721,410 2,313,403
OTHER ASSETS
Operating lease right-of-use assets 700,720 788,280
Other assets 166,751 170,594
Total Assets $ 6,983,810 $ 8,335,887
CURRENT LIABILITIES
Accounts payable $ 199,947 $ 240,454
Current operating lease liabilities 75,749 70,024
Accrued expenses 232,234 325,427
Accrued interest 62,349 64,165
Deferred revenue 160,099 131,084
Current portion of long-term debt 440 664
Total Current Liabilities 730,818 831,818
Long-term debt 5,315,955 5,413,503
Noncurrent operating lease liabilities 762,787 848,918
Deferred income taxes 425,454 483,810
Other long-term liabilities 152,254 73,332
Commitments and contingent liabilities (Note 6)
STOCKHOLDERS’ EQUITY (DEFICIT)
Noncontrolling interest 10,351 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 124,046,612 and 122,370,425 shares in 2023 and 2022, respectively
124 123
Class B Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued 21,347,363 and 21,477,181 shares in 2023 and 2022, respectively
21 21
Special Warrants, 5,111,055 and 5,111,312 issued and outstanding in 2023 and 2022, respectively
— —
Additional paid-in capital 2,931,598 2,912,500
Accumulated deficit ( 3,334,212 ) ( 2,227,482 )
Accumulated other comprehensive loss ( 1,454 ) ( 1,331 )
Cost of shares ( 916,632 in 2023 and 597,482 in 2022) held in treasury
( 9,886 ) ( 8,934 )
Total Stockholders' Equity (Deficit) ( 403,458 ) 684,506
Total Liabilities and Stockholders' Equity (Deficit) $ 6,983,810 $ 8,335,887
See Notes to Consolidated Financial Statements
1
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Revenue $ 920,014 $ 954,005 $ 1,731,253 $ 1,797,463
Operating expenses:
Direct operating expenses (excludes depreciation and amortization) 355,061 365,382 699,681 695,906
Selling, general and administrative expenses (excludes depreciation and amortization) 393,773 379,057 796,574 763,401
Depreciation and amortization 108,065 110,788 216,577 224,839
Impairment charges 960,570 245 964,517 1,579
Other operating (income) expense, net ( 261 ) 15,664 ( 40 ) 16,534
Operating income (loss) ( 897,194 ) 82,869 ( 946,056 ) 95,204
Interest expense, net 98,693 81,494 194,150 160,713
Gain (loss) on investments, net ( 6,038 ) 9,590 ( 12,543 ) 7,825
Equity in loss of nonconsolidated affiliates ( 44 ) ( 29 ) ( 4 ) ( 58 )
Gain on extinguishment of debt 22,902 8,203 27,527 8,203
Other expense, net ( 272 ) ( 2,175 ) ( 371 ) ( 2,445 )
Earnings (Loss) before income taxes ( 979,339 ) 16,964 ( 1,125,597 ) ( 51,984 )
Income tax benefit (expense) 96,357 ( 1,782 ) 20,252 18,427
Net income (loss) ( 882,982 ) 15,182 ( 1,105,345 ) ( 33,557 )
Less amount attributable to noncontrolling interest 1,488 781 1,385 624
Net income (loss) attributable to the Company $ ( 884,470 ) $ 14,401 $ ( 1,106,730 ) $ ( 34,181 )
Other comprehensive loss, net of tax:
Foreign currency translation adjustments ( 77 ) ( 650 ) ( 123 ) ( 897 )
Other comprehensive loss, net of tax ( 77 ) ( 650 ) ( 123 ) ( 897 )
Comprehensive income (loss) ( 884,547 ) 13,751 ( 1,106,853 ) ( 35,078 )
Less amount attributable to noncontrolling interest — — — —
Comprehensive income (loss) attributable to the Company $ ( 884,547 ) $ 13,751 $ ( 1,106,853 ) $ ( 35,078 )
Net income (loss) attributable to the Company per common share:
Basic $ ( 5.93 ) $ 0.10 $ ( 7.44 ) $ ( 0.23 )
Weighted average common shares outstanding - Basic 149,179 148,050 148,774 147,783
Diluted $ ( 5.93 ) $ 0.10 $ ( 7.44 ) $ ( 0.23 )
Weighted average common shares outstanding - Diluted 149,179 149,131 148,774 147,783
See Notes to Consolidated Financial Statements
2
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(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
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
Net income (loss) 1,488 — — ( 884,470 ) — — ( 882,982 )
Vesting of restricted stock and other
1,538,599 — 1 ( 1 ) — — ( 928 ) ( 928 )
Share-based compensation — — 8,947 — — — 8,947
Conversion of Special Warrants to Class A or Class B Shares 198 59 ( 257 ) — — — — — — —
Conversion of Class B Shares to Class A Shares
122,615 ( 122,615 ) — — — — — — —
Other
( 322 ) — — — — — ( 322 )
Other comprehensive loss — — — — ( 77 ) — ( 77 )
Balances at
June 30, 2023
124,046,612 21,347,363 5,111,055 $ 10,351 $ 145 $ 2,931,598 $ ( 3,334,212 ) $ ( 1,454 ) $ ( 9,886 ) $ ( 403,458 )
(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
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
Net income 781 — — 14,401 — — 15,182
Vesting of restricted stock and other 627,289 — — 4 — — ( 1,558 ) ( 1,554 )
Share-based compensation
— — 8,610 — — — 8,610
Conversion of Special Warrants to Class A and Class B Shares
14 ( 14 ) — — — — — — —
Conversion of Class B Shares to Class A Shares 38,528 ( 38,528 ) — — — — — — —
Other ( 188 ) — — — — — ( 188 )
Other comprehensive loss — — — — ( 650 ) — ( 650 )
Balances at
June 30, 2022
122,068,221 21,391,972 5,293,055 $ 8,659 $ 143 $ 2,891,129 $ ( 1,997,000 ) $ ( 1,154 ) $ ( 8,356 ) $ 893,421
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2023 or 2022.
See Notes to Consolidated Financial Statements
3
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(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 income (loss) 1,385 — — ( 1,106,730 ) — — ( 1,105,345 )
Vesting of restricted stock and other 1,546,112 — 1 ( 1 ) — — ( 952 ) ( 952 )
Share-based compensation
— — 19,099 — — — 19,099
Conversion of Special Warrants to Class A and Class B Shares
198 59 ( 257 ) — — — — — — —
Conversion of Class B Shares to Class A Shares 129,877 ( 129,877 ) — — — — — — —
Other ( 643 ) — — — — — ( 643 )
Other comprehensive loss — — — — ( 123 ) — ( 123 )
Balances at
June 30, 2023
124,046,612 21,347,363 5,111,055 $ 10,351 $ 145 $ 2,931,598 $ ( 3,334,212 ) $ ( 1,454 ) $ ( 9,886 ) $ ( 403,458 )
(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 income (loss) 624 — — ( 34,181 ) — — ( 33,557 )
Vesting of restricted stock and other 1,224,689 — 1 413 — — ( 2,074 ) ( 1,660 )
Share-based compensation
— — 14,145 — — — 14,145
Conversion of Special Warrants to Class A and Class B Shares
11,375 ( 11,375 ) — — — — — — —
Conversion of Class B Shares to Class A Shares 198,220 ( 198,220 ) — — — — — — —
Other ( 375 ) — — — — — ( 375 )
Other comprehensive loss — — — — ( 897 ) — ( 897 )
Balances at
June 30, 2022
122,068,221 21,391,972 5,293,055 $ 8,659 $ 143 $ 2,891,129 $ ( 1,997,000 ) $ ( 1,154 ) $ ( 8,356 ) $ 893,421
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2023, 2022 or 2021.
See Notes to Consolidated Financial Statements
4
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) Six Months Ended June 30,
2023 2022
Cash flows from operating activities:
Net loss $ ( 1,105,345 ) $ ( 33,557 )
Reconciling items:
Impairment charges 964,517 1,579
Depreciation and amortization 216,577 224,839
Deferred taxes ( 58,898 ) ( 60,587 )
Provision for doubtful accounts 18,565 8,815
Amortization of deferred financing charges and note discounts, net 3,331 2,942
Share-based compensation 19,099 14,145
(Gain) Loss on disposal of operating and other assets ( 1,216 ) 15,583
(Gain) Loss on investments 12,543 ( 7,825 )
Equity in loss of nonconsolidated affiliates 4 58
Gain on extinguishment of debt ( 27,527 ) ( 8,203 )
Barter and trade income ( 11,728 ) ( 12,250 )
Other reconciling items, net 199 680
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in accounts receivable 14,061 54,240
Increase in prepaid expenses and other current assets ( 54,641 ) ( 24,996 )
Increase in other long-term assets ( 2,447 ) ( 5,371 )
Decrease in accounts payable ( 40,518 ) ( 6,963 )
Decrease in accrued expenses ( 48,809 ) ( 75,154 )
Decrease in accrued interest ( 1,816 ) ( 1,706 )
Increase in deferred income 35,742 15,261
Increase in other long-term liabilities 31,096 2,059
Cash provided by (used for) operating activities ( 37,211 ) 103,589
Cash flows from investing activities:
Purchases of property, plant and equipment ( 61,938 ) ( 72,210 )
Proceeds from disposal of assets 6,875 26,754
Change in other, net ( 4,197 ) ( 4,201 )
Cash used for investing activities ( 59,260 ) ( 49,657 )
Cash flows from financing activities:
Payments on long-term debt and credit facilities ( 73,280 ) ( 105,749 )
Change in other, net ( 1,595 ) ( 4,962 )
Cash used for financing activities ( 74,875 ) ( 110,711 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 10 ( 519 )
Net decrease in cash, cash equivalents and restricted cash ( 171,336 ) ( 57,298 )
Cash, cash equivalents and restricted cash at beginning of period 336,661 352,554
Cash, cash equivalents and restricted cash at end of period $ 165,325 $ 295,256
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 195,482 $ 160,003
Cash paid for income taxes 11,000 6,835
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 have contributed to a challenging macroeconomic environment since 2022. This challenging environment has led to broader market uncertainty, and has delayed the Company's expected recovery and has had an adverse impact on the Company's revenues and cash flows. 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 June 30, 2023, the Company had approximately $ 165.3 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 $ 444.5 million, no outstanding borrowings and $ 24.9 million of outstanding letters of credit, resulting in $ 419.6 million of borrowing base availability. Together with the Company's cash balance of $ 165.3 million as of June 30, 2023 and its borrowing capacity under the ABL Facility, the Company's total available liquidity was approximately $ 585 million. Based on current available liquidity, the Company expects to be able to meet its obligations as they become due over the coming year.
Economic uncertainty due to inflation and higher interest rates since 2022 has resulted in, among other things, lower advertising spending by businesses. This economic uncertainty has had an adverse impact on the Company's revenues and cash flows. In
6
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
addition, the economic uncertainty has had a significant impact on the trading values of the Company's debt and equity securities for a sustained period, indicating a need for the Company to perform an impairment test as of June 30, 2023 on the goodwill recorded in its reporting units. In connection with testing goodwill for impairment, the Company also tested its indefinite-lived Federal Communication Commission ("FCC") licenses.
The estimated fair values of the Company’s FCC licenses, which have indefinite lives, are based on broadcast industry information, including industry-wide projections. The factors discussed above negatively impacted certain assumptions in the discounted cash flow models used to value the Company's FCC licenses. The Company's June 30, 2023 testing indicated that the fair values of its FCC licenses were below their carrying values, which resulted in a non-cash impairment charge of $ 363.6 million .
Based on the valuation analysis that the Company performed in connection with the interim goodwill impairment testing as of June 30, 2023, the Company determined that the estimated fair values of three of its reporting units were below their carrying values, including goodwill, which required the Company to recognize a non-cash impairment charge of $ 595.5 million to reduce the Company's goodwill balance.
The Company believes it has made reasonable estimates and utilized reasonable assumptions to calculate the fair values of its 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 the magnitude of the impact of current market conditions, as well as the timing of any recovery. If the Company's actual results are not consistent with its estimates, the Company could be exposed to future impairment losses that could be material to its results of operations.
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) June 30,
2023 December 31,
2022
Cash and cash equivalents $ 165,325 $ 336,236
Restricted cash included in:
Other current assets — 425
Total cash, cash equivalents and restricted cash in the Statement of Cash Flows $ 165,325 $ 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 had 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 and six months ended June 30, 2023 and 2022:
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Eliminations Consolidated
Three Months Ended June 30, 2023
Revenue from contracts with customers:
Broadcast Radio (1)
$ 429,152 $ — $ — $ — $ 429,152
Networks (2)
122,168 — — — 122,168
Sponsorship and Events (3)
38,210 — — — 38,210
Digital, excluding Podcast (4)
— 164,147 — ( 1,216 ) 162,931
Podcast (5)
— 96,707 — — 96,707
Audio & Media Services (6)
— — 65,804 ( 1,372 ) 64,432
Other (7)
5,585 — — — 5,585
Total 595,115 260,854 65,804 ( 2,588 ) 919,185
Revenue from leases (8)
829 — — — 829
Revenue, total $ 595,944 $ 260,854 $ 65,804 $ ( 2,588 ) $ 920,014
Three Months Ended June 30, 2022
Revenue from contracts with customers:
Broadcast Radio (1)
$ 462,547 $ — $ — $ — $ 462,547
Networks (2)
127,532 — — — 127,532
Sponsorship and Events (3)
38,064 — — — 38,064
Digital, excluding Podcast (4)
— 166,880 — ( 1,376 ) 165,504
Podcast (5)
— 85,681 — — 85,681
Audio & Media Services (6)
— — 71,065 ( 1,378 ) 69,687
Other (7)
4,792 — — ( 167 ) 4,625
Total 632,935 252,561 71,065 ( 2,921 ) 953,640
Revenue from leases (8)
365 365
Revenue, total $ 633,300 $ 252,561 $ 71,065 $ ( 2,921 ) $ 954,005
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IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Eliminations Consolidated
Six Months Ended June 30, 2023
Revenue from contracts with customers:
Broadcast Radio (1)
$ 812,390 $ — $ — $ — $ 812,390
Networks (2)
230,122 — — — 230,122
Sponsorship and Events (3)
70,797 — — — 70,797
Digital, excluding Podcast (4)
— 310,732 — ( 2,405 ) 308,327
Podcast (5)
— 173,518 — — 173,518
Audio & Media Services (6)
— — 127,155 ( 2,704 ) 124,451
Other (7)
10,509 — — — 10,509
Total 1,123,818 484,250 127,155 ( 5,109 ) 1,730,114
Revenue from leases (8)
1,139 — — — 1,139
Revenue, total $ 1,124,957 $ 484,250 $ 127,155 $ ( 5,109 ) $ 1,731,253
Six Months Ended June 30, 2022
Revenue from contracts with customers:
Broadcast Radio (1)
$ 877,789 $ — $ — $ — $ 877,789
Networks (2)
245,090 — — — 245,090
Sponsorship and Events (3)
71,665 — — — 71,665
Digital, excluding Podcast (4)
— 312,555 — ( 2,645 ) 309,910
Podcast (5)
— 154,225 — — 154,225
Audio & Media Services (6)
— — 131,922 ( 2,719 ) 129,203
Other (7)
9,261 — — ( 335 ) 8,926
Total 1,203,805 466,780 131,922 ( 5,699 ) 1,796,808
Revenue from leases (8)
655 — — — 655
Revenue, total $ 1,204,460 $ 466,780 $ 131,922 $ ( 5,699 ) $ 1,797,463
(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.
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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
June 30, Six Months Ended
June 30,
(In thousands) 2023 2022 2023 2022
Trade and barter revenues $ 53,235 $ 32,993 $ 98,264 $ 73,341
Trade and barter expenses 31,521 29,336 78,907 75,751
In addition to the trade and barter revenue in the table above, the Company recognized $ 3.7 million and $ 5.2 million during the three months ended June 30, 2023 and 2022, respectively, and $ 11.7 million and $ 12.3 million during the six months ended June 30, 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
June 30, Six Months Ended
June 30,
(In thousands) 2023 2022 2023 2022
Deferred revenue from contracts with customers:
Beginning balance (1)
$ 170,681 $ 184,056 $ 157,910 $ 161,114
Revenue recognized, included in beginning balance ( 57,532 ) ( 61,973 ) ( 83,307 ) ( 90,406 )
Additions, net of revenue recognized during period, and other 71,678 67,596 110,224 118,971
Ending balance $ 184,827 $ 189,679 $ 184,827 $ 189,679
(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 June 30, 2023, the Company expects to recognize $ 317.8 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.
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IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue from Leases
As of June 30, 2023, the future lease payments to be received by the Company are as follows:
(In thousands)
2023 $ 410
2024 474
2025 264
2026 140
2027 81
Thereafter 96
Total $ 1,465
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 and six months ended June 30, 2023, the Company recognized non-cash impairment charges of $ 1.5 million and $ 5.5 million, respectively, due to 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. During the three and six months ended June 30, 2023, there were no non-cash impairment charges related to leasehold improvements.
During the three months ended June 30, 2022, the Company recognized non-cash impairment charges of $ 0.3 million, including $ 0.2 million related to ROU assets and $ 0.1 million related to leasehold improvements. During the six months ended June 30, 2022, the Company recognized non-cash impairment charges of $ 1.6 million, including $ 1.4 million related to ROU assets, and $ 0.2 million related to leasehold improvements. These charges were primarily to streamline the Company's real estate footprint.
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."
11
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:
Six Months Ended June 30,
(In thousands) 2023 2022
Cash paid for amounts included in measurement of operating lease liabilities $ 67,329 $ 76,153
Lease liabilities arising from obtaining right-of-use assets (1)
7,280 135,128
(1) Lease liabilities from obtaining right-of-use assets include new leases entered into during the six months ended June 30, 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 $ 34.5 million and $ 43.3 million for the six months ended June 30, 2023 and 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 June 30, 2023 and December 31, 2022, respectively:
(In thousands) June 30,
2023 December 31,
2022
Land, buildings and improvements $ 352,112 $ 340,692
Towers, transmitters and studio equipment 226,491 215,655
Computer equipment and software 641,133 617,794
Furniture and other equipment 42,350 41,924
Construction in progress 27,277 29,091
1,289,363 1,245,156
Less: accumulated depreciation 639,676 550,314
Property, plant and equipment, net $ 649,687 $ 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.
The Company performs its annual impairment test on goodwill and indefinite-lived intangible assets, including FCC licenses, as of July 1 of each year. In addition, the Company tests for impairment of other intangible assets whenever events and circumstances indicate that such assets might be impaired.
As discussed in Note 1, Basis of Presentation , economic uncertainty due to inflation and higher interest rates since 2022 has resulted in, among other things, lower advertising spending by businesses. This economic uncertainty has had an adverse impact on the Company's revenues and cash flows. In addition, the economic uncertainty has had a significant impact on the trading values of the Company's debt and equity securities for a sustained period. As a result, the Company performed an impairment test as of June 30, 2023 on its goodwill balances. In connection with its goodwill impairment testing, the Company also performed an interim impairment test on its indefinite-lived FCC licenses.
The uncertainty surrounding the demand for advertising impacted the key industry assumptions used in the models that are utilized to value the Company's FCC licenses. As a result, the fair values of certain of the Company's FCC licenses have decreased.
12
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company's 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, estimated start-up costs, and capital expenditures. This data is populated using industry normalized information representing an average asset within a market. The Company obtained the most recent broadcast radio industry revenue projections for use in the valuation model, as well as various other sources to analyze media and broadcast industry market forecasts and other data in developing the assumptions used for purposes of performing impairment testing on the Company's FCC licenses as of June 30, 2023.
Considerations in developing these assumptions included the expected impact on advertising revenues given the current market uncertainty, ranges of expected timing of recovery, discount rates and other factors. Based on the Company's interim testing, the estimated fair values of its FCC licenses were below their carrying values. As a result, the Company recognized a non-cash impairment charge of $ 363.6 million on its FCC licenses.
Other Intangible Assets
Other intangible assets consists of definite-lived intangible assets, which primarily include customer and advertiser relationships, talent and representation contracts, trademarks and tradenames and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time that the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at amortized cost.
The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they might be impaired. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
In connection with its impairment testing, the Company also assessed its other intangible assets. Based on the Company’s assessment, no impairment indicators were identified related to the definite-lived intangible assets.
The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of June 30, 2023 and December 31, 2022, respectively:
(In thousands) June 30, 2023 December 31, 2022
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Customer / advertiser relationships $ 1,652,455 $ ( 716,983 ) $ 1,652,455 $ ( 633,352 )
Talent and other contracts 338,900 ( 182,043 ) 338,900 ( 160,500 )
Trademarks and tradenames 335,862 ( 139,479 ) 335,862 ( 122,403 )
Other 18,443 ( 11,056 ) 18,443 ( 9,735 )
Total $ 2,345,660 $ ( 1,049,561 ) $ 2,345,660 $ ( 925,990 )
Total amortization expense related to definite-lived intangible assets for the Company for the three months ended June 30, 2023 and 2022 was $ 61.8 million and $ 63.4 million, respectively. Total amortization expense related to definite-lived intangible assets for the Company for the six months ended June 30, 2023 and 2022 was $ 123.6 million and $ 126.5 million, respectively.
13
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 January 1, 2023 (1)
$ 1,462,022 $ 747,350 $ 104,031 $ 2,313,403
Impairment $ ( 121,563 ) $ ( 439,383 ) $ ( 34,515 ) ( 595,461 )
Acquisitions — 3,375 — 3,375
Foreign currency — 43 50 93
Balance as of June 30, 2023
$ 1,340,459 $ 311,385 $ 69,566 $ 1,721,410
(1) Beginning goodwill balance is presented net of prior accumulated impairment losses of $ 1.2 billion related to the Multiplatform Group segment. Refer to the table above for impairments recorded in 2023.
Goodwill Impairment
At least annually, the Company performs its impairment test for each reporting unit’s goodwill. The Company also tests goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired.
As discussed above, economic uncertainty has had a significant impact on the Company's revenue and cash flows, as well as the trading values of the Company's debt and equity securities for a sustained period. As a result, the Company performed an impairment test as of June 30, 2023 on its goodwill. The uncertainty surrounding the demand for advertising impacted the key assumptions used in the models which are utilized to value the Company's goodwill.
The goodwill impairment test requires measurement of the fair value of the Company's reporting units, which is compared to the carrying value of the reporting units, including goodwill. Each of the Company's reporting units is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires the Company to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on the Company's budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and in management’s judgment in applying these factors. The economic environment resulting from inflation, higher interest rates, and the related uncertainty in the markets impacted the trading values of the Company's debt and equity securities and certain assumptions used to estimate the fair values of the Company's reporting units for purposes of performing the interim goodwill impairment test. Based on the Company's valuation analysis, it determined that the estimated fair values of three of its reporting units were below their carrying value, including goodwill, which required the Company to recognize a non-cash impairment charge of $ 595.5 million to reduce its goodwill balance.
While the Company believes it has made reasonable estimates and utilized reasonable assumptions to calculate the fair values of its other intangible 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 the magnitude of the impact of current market
14
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
conditions, as well as the timing of any recovery. If the Company's actual results are not consistent with its estimates, the Company could be exposed to future impairment losses that could be material to its results of operations.
NOTE 5 – LONG-TERM DEBT
Long-term debt outstanding for the Company as of June 30, 2023 and December 31, 2022 consisted of the following:
(In thousands) June 30, 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)
3,618 4,462
Total consolidated secured debt 4,318,870 4,319,714
8.375 % Senior Unsecured Notes due 2027 (3)
1,020,457 1,120,366
Other unsecured subsidiary debt — 52
Original issue discount ( 9,080 ) ( 10,569 )
Long-term debt fees ( 13,852 ) ( 15,396 )
Total debt 5,316,395 5,414,167
Less: Current portion 440 664
Total long-term debt $ 5,315,955 $ 5,413,503
(1) As of June 30, 2023, the ABL Facility had a borrowing base of $ 444.5 million, no outstanding borrowings and $ 24.9 million of outstanding letters of credit, resulting in $ 419.6 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 June 30, 2023, the Company repurchased $ 79.9 million aggregate principal amount of iHeartCommunications Inc.'s 8.375 % Senior Unsecured Notes due 2027 for $ 57.0 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 $ 22.9 million. During the six months ended June 30, 2023, the Company repurchased $ 99.9 million aggregate principal amount of iHeartCommunications Inc.'s 8.375 % Senior Unsecured Notes due 2027 for $ 72.4 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 $ 27.5 million. During the three and six months ended, June 30, 2022, the Company repurchased $ 113.5 million aggregate principal amount of iHeartCommunications Inc.'s 8.375 % Senior Unsecured Notes due 2027 for $ 105.3 million in cash, excluding accrued interest, via open market transactions. The repurchased notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $ 8.2 million.
The Company’s weighted average interest rate was 7.2 % and 6.9 % as of June 30, 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 $ 4.2 billion and $ 4.8 billion as of June 30, 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.
On June 15, 2023, iHeartCommunications, Inc. ("iHeartCommunications") entered into an amendment to the credit agreement governing its term loan credit facilities (the "Term Loan Facility"). The amendment replaces the prior Eurocurrency interest rate, based upon LIBOR, with the Secured Overnight Financing Rate (“SOFR”) successor rate plus a SOFR adjustment as specified in the credit agreement. The Term Loan Facility margins remain the same with the Term Loan Facility due 2026 containing margins of 3.00 % for Term SOFR Loans (as defined in the credit agreement) and 2.00 % for Base Rate Loans (as defined in the credit agreement), and the incremental Term Loan Facility due 2026 containing margins of 3.25 % for Term SOFR Loans with a floor of 0.50 % and 2.25 % for Base Rate Loans with a floor of 1.50 %.
15
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Surety Bonds and Letters of Credit
As of June 30, 2023, the Company and its subsidiaries had outstanding surety bonds and commercial standby letters of credit of $ 8.7 million and $ 24.9 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 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 and six months ended June 30, 2023 and the three and six months ended June 30, 2022 consisted of the following components:
(In thousands) Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
Current tax expense $ ( 35,161 ) $ ( 38,581 ) $ ( 38,646 ) $ ( 42,160 )
Deferred tax benefit (expense) 131,518 36,799 58,898 60,587
Income tax benefit (expense) $ 96,357 $ ( 1,782 ) $ 20,252 $ 18,427
The effective tax rates for the three and six months ended June 30, 2023 were 9.8 % and 1.8 %, 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, as well as to impairment charges to non-deductible goodwill as discussed in Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill . The deferred tax benefit primarily consists of $ 92.9 million related to the FCC license impairment charges recorded during the period.
The effective tax rates for the three and six months ended June 30, 2022 were 10.5 % and 35.4 %, 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 and net operating loss carryforwards, due to uncertainty regarding the Company’s ability to utilize those assets in future periods.
16
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 – STOCKHOLDERS' EQUITY (DEFICIT)
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, the 2021 Long-Term Incentive Award Plan (the “2021 Plan”) was approved by stockholders and replaced the 2019 Plan. Pursuant to the 2021 Plan, the Company 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 $ 9.2 million and $ 8.6 million for the three months ended June 30, 2023 and 2022, respectively. Share-based compensation expenses were $ 19.4 million and $ 14.1 million for the Company for the six months ended June 30, 2023 and 2022, respectively.
The Company periodically issues restricted stock units ("RSUs") and performance-based RSUs ("Performance RSUs") to certain key employees. The RSUs vest solely due to continued service over time. The Performance RSUs generally vest upon the achievement of certain total stockholder return goals, Adjusted EBITDA goals, Diversity, Equity and Inclusion goals, and continued service. The majority of these awards are being measured over an approximately 3-year period from the date of issuance, while certain Performance RSUs are measured over a 50-month period from the date of issuance. On May 18, 2023, the Company issued additional RSUs and Performance RSUs to certain key employees.
The following tables present the Company's total share based compensation expense by award type for the three and six months ended June 30, 2023 and 2022:
(In thousands) Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
RSUs $ 5,536 $ 4,902 $ 11,638 $ 8,252
Performance RSUs 2,300 1,500 4,232 1,500
Options 1,376 2,208 3,494 4,393
Total Share Based Compensation Expense $ 9,212 $ 8,610 $ 19,364 $ 14,145
As of June 30, 2023, there was $ 42.3 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based solely on service conditions. This cost is expected to be recognized over a weighted average period of approximately 2.8 years. In addition, as of June 30, 2023, there were unrecognized compensation costs of $ 24.6 million for the 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 3-year or 50-month period from the date of issuance.
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.
17
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During the three and six months ended June 30, 2023, there were 198 Special Warrants exercised for shares of Class A common stock. During the three and six months ended June 30, 2023, there were 59 Special Warrants exercised for shares of Class B common stock. During the three and six months ended June 30, 2022, stockholders exercised 14 and 11,375 Special Warrants, respectively, for an equivalent number of shares of Class A common stock. During the six months ended June 30, 2022, there were no Special Warrants exercised for shares of Class B common stock.
Computation of Income (Loss) per Share
(In thousands, except per share data) Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
NUMERATOR:
Net income (loss) attributable to the Company – common shares $ ( 884,470 ) $ 14,401 $ ( 1,106,730 ) $ ( 34,181 )
DENOMINATOR (1) :
Weighted average common shares outstanding - basic 149,179 148,050 148,774 147,783
Stock options and restricted stock (2) :
— 1,081 — —
Weighted average common shares outstanding - diluted 149,179 149,131 148,774 147,783
Net income (loss) attributable to the Company per common share:
Basic $ ( 5.93 ) $ 0.10 $ ( 7.44 ) $ ( 0.23 )
Diluted $ ( 5.93 ) $ 0.10 $ ( 7.44 ) $ ( 0.23 )
(1) All of the outstanding Special Warrants are included in both the basic and diluted weighted average common shares outstanding of the Company for the three and six months ended June 30, 2023 and 2022.
(2) Outstanding equity service awards representing 13.8 million and 6.2 million shares of Class A common stock of the Company for the three months ended June 30, 2023 and 2022, respectively, and $ 12.7 million and $ 10.4 million for the six months ended June 30, 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.
18
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present the Company's segment results for the Company for the three and six months ended June 30, 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 June 30, 2023
Revenue $ 595,944 $ 260,854 $ 65,804 $ — $ ( 2,588 ) $ 920,014
Operating expenses (1)
433,542 176,272 47,305 74,302 ( 2,588 ) 728,833
Segment Adjusted EBITDA (2)
$ 162,402 $ 84,582 $ 18,499 $ ( 74,302 ) $ — $ 191,181
Depreciation and amortization ( 108,065 )
Impairment charges ( 960,570 )
Other operating income, net 261
Restructuring expenses ( 10,789 )
Share-based compensation expense ( 9,212 )
Operating loss $ ( 897,194 )
Intersegment revenues $ — $ 1,216 $ 1,372 $ — $ — $ 2,588
Capital expenditures 14,870 5,502 904 1,497 — 22,773
Share-based compensation expense — — — 9,212 — 9,212
Segments
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated
Three Months Ended June 30, 2022
Revenue $ 633,300 $ 252,561 $ 71,065 $ — $ ( 2,921 ) $ 954,005
Operating expenses (1)
438,804 173,678 48,995 58,264 ( 2,921 ) 716,820
Segment Adjusted EBITDA (2)
$ 194,496 $ 78,883 $ 22,070 $ ( 58,264 ) $ — $ 237,185
Depreciation and amortization ( 110,788 )
Impairment charges ( 245 )
Other operating expense, net ( 15,664 )
Restructuring expenses ( 19,009 )
Share-based compensation expense ( 8,610 )
Operating income $ 82,869
Intersegment revenues $ 167 $ 1,376 $ 1,378 $ — $ — $ 2,921
Capital expenditures 36,378 5,912 2,423 4,940 — 49,653
Share-based compensation expense — — — 8,610 — 8,610
19
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Segments
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated
Six Months Ended June 30, 2023
Revenue $ 1,124,957 $ 484,250 $ 127,155 $ — $ ( 5,109 ) $ 1,731,253
Operating expenses (1)
875,503 345,549 93,312 137,393 ( 5,109 ) 1,446,648
Segment Adjusted EBITDA (2)
$ 249,454 $ 138,701 $ 33,843 $ ( 137,393 ) $ — $ 284,605
Depreciation and amortization ( 216,577 )
Impairment charges ( 964,517 )
Other operating income, net 40
Restructuring expenses ( 30,243 )
Share-based compensation expense ( 19,364 )
Operating loss $ ( 946,056 )
Intersegment revenues $ — $ 2,405 $ 2,704 $ — $ — $ 5,109
Capital expenditures 41,294 11,279 4,791 4,574 — 61,938
Share-based compensation expense — — — 19,364 — 19,364
Segments
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated
Six Months Ended June 30, 2022
Revenue $ 1,204,460 $ 466,780 $ 131,922 $ ( 5,699 ) $ 1,797,463
Operating expenses (1)
876,057 335,389 93,465 115,848 ( 5,699 ) 1,415,060
Segment Adjusted EBITDA (2)
$ 328,403 $ 131,391 $ 38,457 $ ( 115,848 ) $ — $ 382,403
Depreciation and amortization ( 224,839 )
Impairment charges ( 1,579 )
Other operating expense, net ( 16,534 )
Restructuring expenses ( 30,102 )
Share-based compensation expense ( 14,145 )
Operating income $ 95,204
Intersegment revenues $ 335 $ 2,645 $ 2,719 $ — $ 5,699
Capital expenditures 48,716 11,068 4,122 8,304 72,210
Share-based compensation expense — — — 14,145 14,145
(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.
20