iHeartMedia, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Format of Presentation Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related footnotes contained in Part I, Item 1 of this Quarterly Report on Form 10-Q of iHeartMedia, Inc. (the "Company," "iHeartMedia," "we," "our," or "us"). We report based on three reporting segments: ▪ the Multiplatform Group, which includes our Broadcast radio, Networks and Sponsorships and Events businesses; ▪ the Digital Audio Group, which includes our Digital businesses, including Podcasting; and ▪ the Audio & Media Services Group, which includes Katz Media Group (“Katz Media”), our full-service media representation business, and RCS Sound Software ("RCS"), a provider of scheduling and broadcast software and services. These reporting segments reflect how senior management operates the Company. This structure provides visibility into the underlying performance, results, and margin profiles of our distinct businesses and enables senior management to monitor trends at the operational level and address opportunities or issues as they arise via regular review of segment-level results and forecasts with operational leaders. Our segment profitability metric is Segment Adjusted EBITDA, which is reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as Revenue less operating expenses, excluding Restructuring expenses (as defined below) and share-based compensation expenses. We believe the presentation of our results by segment provides insight into our broadcast radio business and our digital business. We believe that our ability to generate cash flow from operations from our businesses and our current cash on hand will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next twelve months. Description of our Business Our strategy centers on delivering entertaining and informative content where our listeners want to find us across our various platforms. Multiplatform Group The primary source of revenue for our Multiplatform Group is from selling local and national advertising time on our radio stations, with contracts typically less than one year in duration. The programming formats of our radio stations are designed to reach audiences with targeted demographic characteristics. We work closely with our advertising and marketing partners to develop tools and leverage data to enable advertisers to effectively reach their desired audiences. Our Multiplatform Group also generates revenue from network syndication, nationally recognized events and other miscellaneous transactions. Management looks at our Multiplatform Group's operations’ overall revenue as well as the revenue from each revenue stream including Broadcast Radio, Networks, and Sponsorship and Events. We periodically review and refine our selling structures in all regions and markets in an effort to maximize the value of our offering to advertisers and, therefore, our revenue. Management also looks at Multiplatform Group's revenue by region and market size. Typically, larger markets can reach larger audiences with wider demographics than smaller markets. Additionally, management reviews our share of audio advertising revenues in markets where such information is available, as well as our share of target demographics listening in an average quarter hour. This metric gauges how well our formats are attracting and retaining listeners. Management also monitors revenue generated through our programmatic ad-buying platform, and our data analytics advertising product, to measure the success of our enhanced marketing optimization tools. We have made significant 16 investments so we can provide the same ad-buying experience that once was only available from digital-only companies and enable our clients to better understand how our assets can successfully reach their target audiences. Management monitors average advertising rates and cost per mille, the cost of every 1,000 advertisement impressions (“CPM”), which are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent ratings service. In addition, our advertising rates are influenced by the time of day the advertisement airs, with morning and evening drive-time hours typically priced the highest. Our price and yield information systems enable our station managers and sales teams to adjust commercial inventory and pricing based on local market demand, as well as to manage and monitor different commercial durations in order to provide more effective advertising for our customers at what we believe are optimal prices given market conditions. Yield is measured by management in a variety of ways, including revenue earned divided by minutes of advertising sold. A portion of our Multiplatform Group segment’s expenses vary in connection with changes in revenue. These variable expenses primarily relate to costs in our programming and sales departments, including profit sharing fees, and commissions. Digital Audio Group The primary source of revenue in the Digital Audio Group segment is the sale of advertising on our podcast network, iHeartRadio mobile application and website, and station websites. Revenues for digital advertising are recognized over time based on impressions delivered or time elapsed, depending upon the terms of the contract. Digital Audio Group’s contracts with advertisers are typically a year or less in duration and are generally billed monthly upon satisfaction of the performance obligations. Through our Digital Audio Group, we continue to expand the choices for listeners. We derive revenue in this segment by developing and delivering our content and selling advertising across multiple digital distribution channels, including via our iHeartRadio mobile application, our station websites and other digital platforms that reach national, regional and local audiences. Our strategy has enabled us to extend our leadership in the growing podcasting sector, and iHeartMedia is the number one podcast publisher in America. Our reach now extends across more than 500 platforms and thousands of different connected devices, and our digital business is comprised of podcasting, streaming, subscription, display advertisements, and other content that is disseminated over digital platforms. A portion of our Digital Audio Group segment’s expenses vary in connection with changes in revenue. These variable expenses primarily relate to our content costs including profit sharing fees and third-party content costs, as well as sales commissions. Certain of our content costs, including digital music performance royalties, vary with the volume of listening hours on our digital platforms. Audio & Media Services Group Audio & Media Services Group revenue is generated by services provided to broadcast industry participants through our Katz Media and RCS businesses. As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast software and media streaming, along with research services for radio stations, broadcast television stations, cable channels, record labels, ad agencies and Internet stations worldwide. Economic Conditions Our advertising revenue, cash flows, and cost of capital are impacted by changes in economic conditions. Higher interest rates and inflation have contributed to a challenging macroeconomic environment since 2022. This challenging environment has led to broader market uncertainty which has impacted our 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 our ability to generate revenue and cash flows. 17 Cost Savings Initiatives We have implemented key modernization initiatives and operating-expense-saving initiatives to take advantage of the significant investments we have made in new technologies to deliver incremental cost efficiencies. We continue to explore opportunities for further efficiencies. Impairment Charges As part of our operating-expense-savings initiatives, we have taken proactive steps to streamline our real estate footprint and reduce related lease and operating expenses incurred by the Company. These strategic actions resulted in impairment charges due to the write-down of the affected right-of-use assets when changes to sublease assumptions occur. 18 Executive Summary Consolidated revenues for the first quarter of 2024 decreased due to continued lower spending on radio advertising in connection with continued uncertain market conditions, partially offset by continued increases in demand for digital advertising and by increased political revenues as 2024 is a presidential election year. The key developments that impacted our business during the quarter are summarized below: • Consolidated Revenue of $799.0 million decreased $12.2 million, or 1.5%, during the quarter ended March 31, 2024 compared to Consolidated Revenue of $811.2 million in the prior year's first quarter. • Multiplatform Group Revenue decreased $35.6 million, or 6.7%, and Segment Adjusted EBITDA decreased $9.9 million, or 11.3%, compared to the prior year's first quarter, respectively. • Digital Audio Group Revenue increased $15.6 million, or 7.0%, and Segment Adjusted EBITDA increased $14.0 million, or 25.9%, compared to the prior year's first quarter, respectively. • Audio & Media Services Group Revenue increased $7.8 million, or 12.7%, and Segment Adjusted EBITDA increased $8.4 million, or 54.4%, compared to the prior year's first quarter, respectively. • Operating loss of $34.7 million improved $14.2 million from $48.9 million in the prior year’s first quarter driven primarily by a decrease in operating expenses, including trade and other variable expenses. • Net loss of $18.1 million decreased $204.3 million from $222.4 million in the prior year's first quarter mainly due to the $101.4 million gain recognized on the sale of our investment in Broadcast Music, Inc. ("BMI") in the first quarter of 2024 and the income tax benefit recognized during the period compared to income tax expense recognized in the prior year's first quarter. • Cash flows used for operating activities of $59.3 million decreased from $94.0 million in the prior year's first quarter. • Adjusted EBITDA (1) of $104.6 million, was up $11.2 million from $93.4 million in prior year's first quarter. • Free cash flow (2) of $(80.9) million improved from $(133.1) million in the prior year's first quarter. The table below presents a summary of our historical results of operations for the periods presented: (In thousands) Three Months Ended March 31, 2024 2023 Revenue $ 799,038 $ 811,239 Operating loss (34,708) (48,862) Net loss (18,108) (222,363) Cash used for operating activities (59,277) (93,983) Adjusted EBITDA (1) $ 104,617 $ 93,424 Free cash flow (2) (80,859) (133,148) (1) For a definition of Adjusted EBITDA and a reconciliation to Operating loss, the most closely comparable GAAP measure, and to Net loss, please see "Reconciliation of Operating loss to Adjusted EBITDA" and "Reconciliation of Net loss to EBITDA and Adjusted EBITDA" in this MD&A. (2) For a definition of Free cash flow and a reconciliation to Cash used for operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash used for operating activities to Free cash flow” in this MD&A. 19 Results of Operations The tables below present the comparison of our historical results of operations for the three months ended March 31, 2024 to the three months ended March 31, 2023: (In thousands) Three Months Ended March 31, 2024 2023 Revenue $ 799,038 $ 811,239 Operating expenses: Direct operating expenses (excludes depreciation and amortization) 341,360 344,620 Selling, general and administrative expenses (excludes depreciation and amortization) 385,144 402,801 Depreciation and amortization 105,162 108,512 Impairment charges 1,508 3,947 Other operating expense, net 572 221 Operating loss (34,708) (48,862) Interest expense, net 95,515 95,457 Gain (loss) on investments, net 91,994 (6,505) Equity in earnings (loss) of nonconsolidated affiliates (45) 40 Gain on extinguishment of debt — 4,625 Other expense, net (496) (99) Loss before income taxes (38,770) (146,258) Income tax benefit (expense) 20,662 (76,105) Net loss (18,108) (222,363) Less amount attributable to noncontrolling interest 400 (103) Net loss attributable to the Company $ (18,508) $ (222,260) The table below presents the comparison of our revenue streams for the three months ended March 31, 2024 to the three months ended March 31, 2023: (In thousands) Three Months Ended March 31, % 2024 2023 Change Broadcast Radio $ 359,338 $ 383,238 (6.2) % Networks 102,051 107,954 (5.5) % Sponsorship and Events 27,829 32,587 (14.6) % Other 4,245 5,234 (18.9) % Multiplatform Group 493,463 529,013 (6.7) % Digital, excluding Podcast 148,344 146,585 1.2 % Podcast 90,624 76,811 18.0 % Digital Audio Group 238,968 223,396 7.0 % Audio & Media Services Group 69,168 61,351 12.7 % Eliminations (2,561) (2,521) Revenue, total $ 799,038 $ 811,239 (1.5) % 20 Consolidated results for the three months ended March 31, 2024 compared to the consolidated results for the three months ended March 31, 2023 were as follows: Revenue Consolidated revenue decreased $12.2 million during the three months ended March 31, 2024 compared to the same period of 2023. Multiplatform Group revenue decreased $35.6 million, or 6.7%, primarily resulting from a decrease in broadcast advertising in connection with continued uncertain market conditions and a decrease in non cash trade revenues related to the 2024 iHeartRadio Music Awards, partially offset by an increase in political revenues as 2024 is a presidential election year. Digital Audio Group revenue increased $15.6 million, or 7.0%, driven primarily by continuing increases in demand for podcast advertising. Audio & Media Services revenue increased $7.8 million primarily as a result of contract termination fees earned by Katz Media and due to higher political revenue. Direct Operating Expenses Consolidated direct operating expenses decreased $3.2 million during the three months ended March 31, 2024 compared to the same period of 2023. The decrease was primarily driven by certain lower variable content costs including broadcast profit sharing expense, third-party digital costs in connection with COVID-19 related advertisers, and event costs related to the timing of the 2024 iHeartRadio Music Awards, partially offset by certain higher variable content costs, including higher third-party digital costs and sales commissions related to the increase in digital revenues and an increase in broadcast music license fees. Selling, General and Administrative (“SG&A”) Expenses Consolidated SG&A expenses decreased $17.7 million during the three months ended March 31, 2024 compared to the same period of 2023. The decrease was driven primarily by lower non-cash trade expense due to the timing of the 2024 iHeartRadio Music Awards and lower bonus expense based on results, partially offset by an increase in certain costs incurred in connection with executing on our cost savings initiatives. Depreciation and Amortization Depreciation and amortization decreased $3.4 million during the three months ended March 31, 2024 compared to the same period of 2023, primarily as a result of a lower fixed asset base due to properties sold in 2022 and 2023 in connection with our real estate optimization initiatives. Impairment Charges During the three months ended March 31, 2024 and 2023, we recognized non-cash impairment charges of $1.5 million and $3.9 million, respectively, primarily related to changes in sublease assumptions for certain operating leases previously determined to be subleased as part of strategic actions to streamline our real estate footprint. Interest Expense Interest expense increased $0.1 million during the three months ended March 31, 2024 compared to the same period of 2023, primarily as a result of the increase in floating borrowing rates, largely offset by the lower outstanding aggregate principal of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 due to the repurchases of $204.0 million of the notes for $147.3 million in cash made during 2023. Gain (Loss) on Investments, Net During the three months ended March 31, 2024, we recogn ized a gain on investments, net of $92.0 million due to the $101.4 million gain recognized on the sale of our investment in BMI in the first quarter of 2024, partially offset by declines in the value of certain investments. During the three months ended March 31, 2023, we recogn ized a loss on in vestments, net of $6.5 million, related to declines in the value of our investments. Gain on Extinguishment of Debt During the three months ended March 31, 2023, we recognized a gain on extinguishment of debt of $4.6 million in connection with the open market repurchases of $20.0 million aggregate principal amount of iHeartCommunications, Inc.'s 8.375% Senior Unsecured Notes due 2027 for $15.4 million in cash. There were no repurchases during the three months ended March 31, 2024. 21 Income Tax Benefit (Expense) The effective tax rates for the Company for the three months ended March 31, 2024 and 2023 were 53.3% and (52.0)%, respectively. The effective tax rates were primarily impacted by the forecasted increase in valuation allowance against certain deferred tax assets, related primarily to disallowed interest expense carryforwards due to uncertainty regarding the Company’s ability to utilize those assets in future periods. Net Loss Attributable to the Company Net loss attributable to the Company of $18.5 million during the three months ended March 31, 2024 reflected a decrease of $203.8 million compared to Net loss attributable to the Company of $222.3 million during the three months ended March 31, 2023, primarily due to the $101.4 million gain recognized on the sale of our investment in BMI in the first quarter of 2024 and the income tax benefit recognized during the period compared to income tax expense recognized in the prior year's first quarter. Multiplatform Group Results (In thousands) Three Months Ended March 31, % 2024 2023 Change Revenue $ 493,463 $ 529,013 (6.7) % Operating expenses (1) 416,281 441,961 (5.8) % Segment Adjusted EBITDA $ 77,182 $ 87,052 (11.3) % Segment Adjusted EBITDA margin 15.6 % 16.5 % (1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses. Revenue from our Multiplatform Group decreased $35.6 million compared to the prior year primarily due to a decrease in broadcast advertising in connection with continued uncertain market conditions and a decrease in non cash trade and barter revenues related to the 2024 iHeartRadio Music Awards, partially offset by an increase in political revenues. Broadcast revenue declined $23.9 million, or 6.2%, year-over-year, driven by lower spot revenue, partially offset by an increase political advertising. Networks declined $5.9 million, or 5.5%, year-over-year. Revenue from Sponsorship and Events decreased $4.8 million, or 14.6%, year-over-year. Operating expenses decreased $25.7 million, driven primarily by lower non cash trade expense and live event costs due to the timing of the 2024 iHeartRadio Music Awards, as well as lower bonus expense based on results, partially offset by higher broadcast music license fees. Digital Audio Group Results (In thousands) Three Months Ended March 31, % 2024 2023 Change Revenue $ 238,968 $ 223,396 7.0 % Operating expenses (1) 170,841 169,277 0.9 % Segment Adjusted EBITDA $ 68,127 $ 54,119 25.9 % Segment Adjusted EBITDA margin 28.5 % 24.2 % (1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses. Revenue from our Digital Audio Group increased $15.6 million compared to the prior year, driven by Podcast revenue which increased by $13.8 million, or 18.0% year-over-year, driven primarily by continued increase in demand for podcasting from advertisers, and Digital, excluding Podcast revenue, which grew $1.8 million, or 1.2% year-over-year, driven by an increase in demand for digital advertising, partially offset by a decrease in COVID-19 related advertisers. 22 Operating expenses increased $1.6 million primarily driven by higher variable content costs, including higher third-party digital costs and sales commissions related to the increase in revenues, as well as higher merchandising and event costs, partially offset by lower third-party digital costs in connection with COVID-19 related advertisers and lower compensation expense. Audio & Media Services Group Results (In thousands) Three Months Ended March 31, % 2024 2023 Change Revenue $ 69,168 $ 61,351 12.7 % Operating expenses (1) 45,473 46,007 (1.2) % Segment Adjusted EBITDA $ 23,695 $ 15,344 54.4 % Segment Adjusted EBITDA margin 34.2 % 24.9 % (1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses. Revenue from our Audio & Media Services Group increased $7.8 million compared to the prior year period primarily due to contract termination fees earned by Katz Media and due to higher political revenue as 2024 is a presidential election year. Operating expenses decreased $0.5 million primarily as a result of a favorable shift in the sales mix toward services. Reconciliation of Operating loss to Adjusted EBITDA (In thousands) Three Months Ended March 31, 2024 2023 Operating loss $ (34,708) $ (48,862) Depreciation and amortization 105,162 108,512 Impairment charges 1,508 3,947 Other operating expense, net 572 221 Restructuring expenses 23,603 19,454 Share-based compensation expense 8,480 10,152 Adjusted EBITDA (1) $ 104,617 $ 93,424 23 Reconciliation of Net loss to EBITDA and Adjusted EBITDA (In thousands) Three Months Ended March 31, 2024 2023 Net loss $ (18,108) $ (222,363) Income tax (benefit) expense (20,662) 76,105 Interest expense, net 95,515 95,457 Depreciation and amortization 105,162 108,512 EBITDA $ 161,907 $ 57,711 (Gain) loss on investments, net (91,994) 6,505 Gain on extinguishment of debt — (4,625) Other expense, net 496 99 Equity in (earnings) loss of nonconsolidated affiliates 45 (40) Impairment charges 1,508 3,947 Other operating expense, net 572 221 Restructuring expenses 23,603 19,454 Share-based compensation expense 8,480 10,152 Adjusted EBITDA (1) $ 104,617 $ 93,424 (1) We define Adjusted EBITDA as consolidated Operating loss adjusted to exclude restructuring expenses included within Direct operating expenses and SG&A expenses, and share-based compensation expenses included within SG&A expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization, Impairment charges and Other operating expense, net. Alternatively, Adjusted EBITDA is calculated as Net loss, adjusted to exclude Income tax (benefit) expense, Interest expense, net, Depreciation and amortization, (Gain) loss on investments, net, Gain on extinguishment of debt, Other expense, net, Equity in (earnings) loss of nonconsolidated affiliates, Impairment charges, Other operating expense, net, Share-based compensation expense, and restructuring expenses. Restructuring expenses primarily include expenses incurred in connection with cost-saving initiatives, as well as certain expenses, which, in the view of management, are outside the ordinary course of business or otherwise not representative of the Company's operations during a normal business cycle. We use Adjusted EBITDA, among other measures, to evaluate the Company’s operating performance. This measure is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management. We believe this measure is an important indicator of our operational strength and performance of our business because it provides a link between operational performance and operating income. It is also a primary measure used by management in evaluating companies as potential acquisition targets. We believe the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management. We believe it helps improve investors’ ability to understand our operating performance and makes it easier to compare our results with other companies that have different capital structures or tax rates. In addition, we believe this measure is also among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing our operating performance to other companies in our industry. Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income or net income (loss) as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs. Because it excludes certain financial information compared with operating income and compared with consolidated net income (loss), the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded. 24 Reconciliation of Cash used for operating activities to Free Cash Flow (In thousands) Three Months Ended March 31, 2024 2023 Cash used for operating activities $ (59,277) $ (93,983) Purchases of property, plant and equipment (21,582) (39,165) Free cash flow (1) $ (80,859) $ (133,148) (1) We define Free cash flow ("Free Cash Flow") as Cash used for operating activities less capital expenditures, which is disclosed as Purchases of property, plant and equipment in the Company's Consolidated Statements of Cash Flows. We use Free Cash Flow, among other measures, to evaluate the Company’s liquidity and its ability to generate cash flow. We believe that Free Cash Flow is meaningful to investors because we review cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations. In addition, we believe that Free Cash Flow helps improve investors' ability to compare our liquidity with other companies. Since Free Cash Flow is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, Cash provided by (used for) operating activities and may not be comparable to similarly titled measures employed by other companies. Free Cash Flow is not necessarily a measure of our ability to fund our cash needs. Share-Based Compensation Expense On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the "2021 Plan") was approved by stockholders and replaced the prior plan. On February 23, 2023, our Board adopted an amendment to the 2021 Plan, which provided for an increase to the shares authorized for issuance under the 2021 Plan. At our 2023 Annual Meeting of Stockholders, the amendment was approved. Pursuant to our 2021 Plan, we may grant restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals. Share-based compensation expenses are recorded in SG&A expenses and were $8.5 million and $10.2 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, there was $51.3 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 1.9 years. See Note 8, Stockholders' Deficit , for more information. 25 LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following discussion highlights cash flow activities during the periods presented: (In thousands) Three Months Ended March 31, 2024 2023 Cash provided by (used for): Operating activities $ (59,277) $ (93,983) Investing activities 78,015 (38,421) Financing activities (3,548) (15,938) Free Cash Flow (1) (80,859) (133,148) (1) For a definition of Free Cash Flow and a reconciliation to Cash used for operating activities, the most closely comparable GAAP measure, please see “Reconciliation of Cash used for operating activities to Free Cash Flow” in this MD&A. Operating Activities Cash used for operating activities was $59.3 million during the three months ended March 31, 2024 compared to $94.0 million during the three months ended March 31, 2023. The change was primarily due to improvement in the timing of receivable collections and timing of payable payments, partially offset by the decrease in broadcast radio revenue and an increase in cash bonus payments in 2024 compared to 2023. Investing Activities Cash provided by investing activities of $78.0 million during the three months ended March 31, 2024 primarily reflects $101.4 million of proceeds received from the sale of our investment in BMI, partially offset by $21.6 million in cash used for capital expenditures. For capital expenditures, we spent $11.7 million in our Multiplatform Group segment primarily related to our IT infrastructure and real estate optimization initiatives, $5.4 million in our Digital Audio Group segment primarily related to IT infrastructure, $2.3 million in our Audio & Media Services Group segment, primarily related to software, and $2.2 million in Corporate primarily related to equipment and software purchases. Cash used for investing activities of $38.4 million during the three months ended March 31, 2023 primarily reflects $39.2 million in cash used for capital expenditures. We spent $26.4 million for capital expenditures in our Multiplatform Group segment primarily related to our real estate optimization initiatives, $5.8 million in our Digital Audio Group segment primarily related to IT infrastructure, $3.9 million in our Audio & Media Services Group segment, primarily related to software, and $3.1 million in Corporate primarily related to equipment and software purchases. Financing Activities Cash used for financing activities totaled $3.5 million during the three months ended March 31, 2024 primarily due to distributions to noncontrolling interest holders . Cash used for financing activities totaled $15.9 million during the three months ended March 31, 2023 primarily due to the repurchases of $20.0 million aggregate principal amount of our 8.375% Senior Unsecured Notes due 2027 for $15.4 million in cash, reflecting a discounted purchase price from the face value of the notes. 26 Sources of Liquidity and Anticipated Cash Requirements Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $361.4 million as of March 31, 2024, cash flows from operations and borrowing capacity under our $450.0 million senior secured asset-based revolving credit facility entered into on May 17, 2022 (the "ABL Facility"). As of March 31, 2024, iHeartCommunications had no amounts outstanding under the ABL Facility, a facility size of $450.0 million and $23.2 million in outstanding letters of credit, resulting in $426.8 million of borrowing base availability. Our total available liquidity 1 as of March 31, 2024 was $788.2 million. We regularly evaluate the impact of economic conditions on our business. A challenging macroeconomic environment has led to market uncertainty which has continued to negatively impact 2024 revenues and cash flows. For the three months ended March 31, 2024, our revenues decreased compared to the three months ended March 31, 2023 primarily due to the decrease in broadcast radio revenue, among other factors discussed in the Results of Operations section of the MD&A. Although we cannot predict future economic conditions or the impact of any potential contraction of economic growth on our business, we believe that we have sufficient liquidity to continue to fund our operations for at least the next twelve months. We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of March 31, 2024, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, commitments under non-cancelable operating lease agreements, and employment and talent contracts. In addition to our contractual obligations, we expect that our primary anticipated uses of liquidity in 2024 will be to fund our working capital and maintain operations, make interest and tax payments, fund capital expenditures, make voluntary debt repayments and pursue other strategic opportunities. Assuming the current level of borrowings and interest rates in effect at March 31, 2024, we anticipate that we will have approximately $284.2 million of cash interest payments in the remainder of 2024 compared to $291.0 million of cash interest payments during the same period in 2023, primarily due to the lower outstanding debt balance as a result of the note repurchases in 2023, partially offset by an increase in floating interest rates. Future increases in interest rates could have a significant impact on our cash interest payments. We acknowledge the challenges posed by the market uncertainty as a result of global economic and geo-political conditions, current levels of interest rates, the continuing impact of inflation on consumer spending and in turn, advertising spend, and other macroeconomic trends. However, we remain confident in our business, our employees and our strategy. Further, we believe our available liquidity will allow us to fund capital expenditures and other obligations and make interest payments on our long-term debt. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms or at all in the future. We frequently evaluate strategic opportunities. We expect from time to time to pursue other strategic opportunities such as acquisitions or disposals of certain businesses, which may or may not be material. 1 Total available liquidity is defined as cash and cash equivalents plus available borrowings under the ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations. 27 Summary Debt Capital Structure As of March 31, 2024 and December 31, 2023, we had the following debt outstanding, net of cash and cash equivalents: (In thousands) March 31, 2024 December 31, 2023 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 — — 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 3,429 3,367 Total Secured Debt $ 4,318,681 $ 4,318,619 8.375% Senior Unsecured Notes due 2027 916,357 916,357 Original issue discount (6,785) (7,558) Long-term debt fees (11,461) (12,268) Total Debt $ 5,216,792 $ 5,215,150 Less: Cash and cash equivalents 361,403 346,382 Net Debt 1 $ 4,855,389 $ 4,868,768 1 Net Debt is a non-GAAP financial metric that is used by management and investors to assess our ability to meet financial obligations, including our ability to service our long-term debt obligations. We define Net Debt as Total Debt less Cash and cash equivalents. Our ABL Facility contains a springing fixed charge coverage ratio that is effective if certain triggering events related to borrowing capacity under the ABL Facility occur. As of March 31, 2024, no triggering event had occurred and, as a result, we were not required to comply with any fixed charge coverage ratio as of or for the period ended March 31, 2024. Other than our ABL Facility, none of our long-term debt includes maintenance covenants that could trigger early repayment. As of March 31, 2024, we were in compliance with all covenants related to our debt agreements. For additional information regarding our debt, refer to Note 5, Long-Term Debt . Our subsidiaries have from time to time repurchased certain debt obligations of iHeartCommunications, and may in the future, as part of various financing and investment strategies, purchase additional outstanding indebtedness of iHeartCommunications or its subsidiaries or our outstanding equity securities, in tender offers, open market purchases, privately negotiated transactions or otherwise. We or our subsidiaries may also sell certain assets, securities, or properties. These purchases or sales, if any, could have a material positive or negative impact on our liquidity available to repay outstanding debt obligations or on our consolidated results of operations. These transactions could also require or result in amendments to the agreements governing outstanding debt obligations or changes in our leverage or other financial ratios, which could have a material positive or negative impact on our ability to comply with the covenants contained in iHeartCommunications’ debt agreements. These transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Supplemental Financial Information under Debt Agreements Pursuant to iHeartCommunications' material debt agreements, iHeartMedia Capital I, LLC ("Capital I"), the parent guarantor and a subsidiary of iHeartMedia, is permitted to satisfy its reporting obligations under such agreements by furnishing iHeartMedia’s consolidated financial information and an explanation of the material differences between iHeartMedia’s consolidated financial information, on the one hand, and the financial information of Capital I and its consolidated restricted subsidiaries, on the other hand. Because neither iHeartMedia nor iHeartMedia Capital II, LLC, a wholly-owned direct subsidiary of iHeartMedia and the parent of Capital I, have any operations or material assets or liabilities, there are no material differences between iHeartMedia’s consolidated financial information for the three months ended March 31, 2024, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same period. Further, as of March 31, 2024, we were in compliance with all covenants related to our debt agreements. 28 Commitments, Contingencies and Guarantees We are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued our estimate of the probable costs for 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 our assumptions or the effectiveness of our strategies related to these proceedings. Please refer to “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q. Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies generally over a one to five-year period. The aggregate of these contingent payments, if performance targets are met, would not significantly impact our financial position or results of operations. We have future cash obligations under various types of contracts. We lease office space, certain broadcast facilities and equipment. Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance. We also have non-cancellable contracts in our radio broadcasting operations related to program rights and music license fees. In the normal course of business, our broadcasting operations have minimum future payments associated with employee and talent contracts. These contracts typically contain cancellation provisions that allow us to cancel the contract with good cause. SEASONALITY Typically, our businesses experience their lowest financial performance in the first quarter of the calendar year. We expect this trend to continue in the future. Due to this seasonality and certain other factors, the results for the interim periods may not be indicative of results for the full year. In addition, we are impacted by political cycles and generally experience higher revenues in congressional election years, and particularly in presidential election years. This may affect the comparability of results between years. MARKET RISK We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates, foreign currency exchange rates and inflation. Interest Rate Risk A significant amount of our long-term debt bears interest at variable rates. Additionally, certain assumptions used within management's estimates are impacted by changes in interest rates. Accordingly, our earnings will be affected by changes in interest rates. As of March 31, 2024, approximately 43% of our aggregate principal amount of long-term debt bore interest at floating rates. Assuming the current level of borrowings and assuming a 100 bps change in floating interest rates, it is estimated that our interest expense for the three months ended March 31, 2024 would have changed by $5.7 million. In the event of an adverse change in interest rates, management may take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. Inflation Inflation is a factor in our business and we continue to seek ways to mitigate its effect. Inflation has affected our performance in terms of higher costs for employee compensation, equipment and third party services. Although we are unable to determine the exact impact of inflation, we believe the impact will continue to be immaterial considering the actions we may take in response to these higher costs that may arise as a result of inflation. Critical Accounting Estimates There have been no significant changes to our critical accounting policies and estimates disclosed in “Critical Accounting Estimates” of Item 7, Management’s Discussion and Analysis of our Annual Report on Form 10-K for the year ended December 31, 2023. 29 CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, financial position and results of operations, macroeconomic trends including inflation, interest rates and potential recessionary indicators, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, debt repurchases, our business plans, strategies and initiatives, benefits of acquisitions and dispositions, our expectations about certain markets and businesses, expected cash interest payments, future impairment charges and our anticipated financial performance and liquidity. Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables which could impact our future performance. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance. There can be no assurance, however, that management’s expectations will necessarily come to pass. Actual future events and performance may differ materially from the expectations reflected in our forward-looking statements. We do not intend, nor do we undertake any duty, to update any forward-looking statements. A wide range of factors could materially affect future developments and performance, including but not limited to: • risks associated with weak or uncertain global economic and geopolitical conditions and their impact on the level of expenditures for advertising; • risks related to the COVID-19 pandemic or other future pandemics, or public health crises and any related reduction in demand for advertising; • intense competition including increased competition from alternative media platforms and technologies; • dependence upon the performance of on-air talent, program hosts and management as well as maintaining or enhancing our master brand; • fluctuations in operating costs and other factors within or beyond our control; • technological changes and innovations; • shifts in population and other demographics; • the impact of our substantial indebtedness; • the impact of acquisitions, dispositions and other strategic transactions; • legislative or regulatory requirements; • the impact of legislation, ongoing litigation or royalty audits on music licensing and royalties; • regulations and consumer concerns regarding privacy and data protection, and breaches of information security measures; • risks related to our Class A common stock; • regulations impacting our business and the ownership of our securities; and • certain other factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as updated by other filings with the Securities and Exchange Commission (“SEC”). This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Required information is presented under “Market Risk” within Item 2 of this Part I. 30