AUDACY, INC.

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AUDACY, INC. Management's Discussion And Analysis Of Financial Condition And Results Of Operations (form 10-Q)

05/09/2022 | 04:41pm EDT
In preparing the discussion and analysis contained in this Item 2, we presume
that readers have read or have access to the discussion and analysis contained
in our Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the "SEC") on March 1, 2022. In addition, you should read the
following discussion and analysis of our financial condition and results of
operations in conjunction with our condensed consolidated financial statements
and related notes included elsewhere in this report. The following results of
operations include a discussion of the three months ended March 31, 2022 as
compared to the comparable period in the prior year. Our results of operations
during the relevant periods represent the operations of the radio stations owned
or operated by us.

The following discussion and analysis contains forward-looking statements about
our business, operations and financial performance based on current expectations
that involve risks, uncertainties and assumptions. You should not place undue
reliance on any of these forward-looking statements. In addition, any
forward-looking statement speaks only as of the date on which it is made, and we
undertake no obligation to update any forward-looking statement or statements to
reflect events or circumstances after the date on which the statement is made,
to reflect the occurrence of unanticipated events or otherwise, except as
required by law. New factors emerge from time to time, and it is not possible
for us to predict which will arise or to assess with any precision the impact of
each factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.

Results of Operations for the Year-To-Date

The following significant factors affected our results of operations for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021:

COVID-19 Pandemic


In December 2019, a novel strain of coronavirus ("COVID-19") surfaced which
resulted in an outbreak of infections throughout the world, which has affected
operations and global supply chains. On March 11, 2020, the World Health
Organization declared COVID-19 a pandemic. While the full impact of this
pandemic is not yet known, we have taken proactive actions in an effort to
mitigate its effects and are continually assessing its effects on our business,
including how it has and will continue to impact advertisers, professional
sports and live events.

In March 2020, we began to experience adverse effects due to the pandemic. During the second quarter of 2020, we experienced significant declines in revenue performance. April revenues were most significantly impacted and we began to experience sequential month over month improvement in our revenue performance in May through December of 2020.


Due to the seasonality of the business, the month over month improvement in net
revenues did not continue into the first quarter of 2021. However, net revenues
in each month from March 2021 to December 2021 exceeded net revenues in each
month from March 2020 to December 2020. Again, due to the seasonality of the
business, the month over month improvement in net revenues did not continue into
the first quarter of 2022. However, net revenues in each month from January 2022
to March 2022 exceeded net revenues in each month from January 2021 to March
2021.

We are currently unable to predict the extent of the impact that the COVID-19
pandemic will have on our financial condition, results of operations and cash
flows in future periods due to numerous uncertainties, but to date, it has been
material and we believe the impact will continue to be material throughout 2022.
However, we believe we are well positioned to fully participate in the recovery
and the attractive growth opportunities in the audio space.

The extent to which the COVID-19 pandemic impacts our business, operations and
financial results is inherently uncertain and will depend on numerous evolving
factors that we may not be able to accurately predict. Therefore, the results
for the three months ended March 31, 2022, may not be indicative of the results
for the year ending December 31, 2022.

WideOrbit Streaming Acquisition


On October 20, 2021, we completed an acquisition of WideOrbit's digital audio
streaming technology and the related assets and operations of WideOrbit
Streaming for approximately $40.0 million (the "WideOrbit Streaming
Acquisition"). We will operate WideOrbit Streaming under the name AmperWave
("AmperWave"). We funded this acquisition through a draw on our revolving credit
facility (the "Revolver"). Based upon the timing of the WideOrbit Streaming
Acquisition, our condensed consolidated financial statements for the three
months ended March 31, 2022, reflect the results of AmperWave. Our condensed
consolidated financial statements for the three months ended March 31, 2021 do
not reflect the results of AmperWave.
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Urban One Exchange


In April 2021, we completed a transaction with Urban One, Inc. ("Urban One")
under which we exchanged our four station cluster in Charlotte, North Carolina
for one station in St. Louis, Missouri, one station in Washington, D.C., and one
station in Philadelphia, Pennsylvania (the "Urban One Exchange"). We began
programming the respective stations under local marketing agreements ("LMAs") on
November 23, 2020. Based on the timing of this transaction, our condensed
consolidated financial statements for the three months ended March 31, 2022: (i)
reflect the results of the acquired stations; and (ii) do not reflect the
results of the divested stations. Our condensed consolidated financial
statements for the three months ended March 31, 2021: (i) reflect the results of
the acquired stations for the portion of the period in which the LMAs were in
effect; and (ii) do not reflect the results of the divested stations.

Podcorn Acquisition


In March 2021, we completed an acquisition of podcast influencers marketplace,
Podcorn Media, Inc. ("Podcorn") for $14.6 million in cash and a
performance-based earn out which is based upon the achievement of certain annual
performance benchmarks over a two year period (the "Podcorn Acquisition"). Based
on the timing of this transaction, our condensed consolidated financial
statements for the three months ended March 31, 2022, reflect the results of
Podcorn. Our condensed consolidated financial statements for the three months
ended March 31, 2021, reflect the results of Podcorn for the portion of the
period after the completion of the Podcorn Acquisition.

Restructuring Charges


In connection with the CBS Radio business acquisition in November 2017 (the
"Merger") and the COVID-19 pandemic, we incurred restructuring charges,
including workforce reductions and other restructuring costs of $0.9 million and
$0.2 million during the three months ended March 31, 2022 and March 31, 2021,
respectively. Amounts were expensed as incurred and are included in
Restructuring charges.

Note Issuance - The 2029 Notes


During the first quarter of 2021, we issued $540.0 million in aggregate
principal amount of senior secured second-lien notes due March 31, 2029 (the
"2029 Notes"). Interest on the 2029 Notes accrues at the rate of 6.750% per
annum and is payable semi-annually in arrears on March 31 and September 30 of
each year.

We used net proceeds of the offering, along with cash on hand, to: (i) repay
$77.0 million of existing indebtedness under our term B-2 loan (the "Term B-2
Loan"); (ii) repay $40.0 million of drawings under our revolving credit facility
(the "Revolver"); and (iii) fully redeem all of our $400.0 million aggregate
principal amount of 7.250% senior notes due 2024 (the "Senior Notes") and to pay
fees and expenses in connection with the redemption.

In connection with this activity, during the first quarter of 2021, we: (i)
recorded $6.6 million of new debt issuance costs attributable to the 2029 Notes;
and (ii) $0.4 million of debt issuance costs attributable to the Revolver. We
also incurred $0.5 million of costs which were classified within refinancing
expenses.

In connection with the redemption of the Senior Notes during the first quarter
of 2021, we wrote off the following amounts to gain/loss on extinguishment of
debt: (i) $14.5 million in prepayment premiums for the early retirement of the
Senior Notes; (ii) $8.7 million of unamortized premium attributable to the
Senior Notes; (iii) $1.0 million of unamortized debt issuance costs attributable
to the Senior Notes; and (iv) $1.3 million of unamortized debt issuance costs
attributable to the Term B-2 Loan.

Note Issuance - The 2027 Notes


During 2019, we, issued $425.0 million in aggregate principal amount of senior
secured second-lien notes due May 1, 2027 (the "Initial 2027 Notes"). Interest
on the Initial 2027 Notes accrues at the rate of 6.500% per annum and is payable
semi-annually in arrears on May 1 and November 1 of each year. The Initial 2027
Notes are governed by an indenture dated as of April 30, 2019 (the "Base
Indenture"), as supplemented by a first supplemental indenture dated December
13, 2019 (the "First Supplemental Indenture"), (collectively, the "Indenture").

During the fourth quarter of 2021, we issued $45.0 million of additional 6.500%
senior secured second-lien notes due 2027 (the "Additional 2027 Notes"). The
Additional 2027 Notes are treated as a single series with the Initial 2027
Notes. We used net proceeds of the Additional 2027 Notes offering to repay $44.6
million of existing indebtedness under the Term B-2 Loan. Increases in our
interest expense occurred due to the issuance of the Additional 2027 Notes which
have a higher interest rate
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than the Term B-2 Loan. In connection with this note issuance: (i) we incurred
third party costs of approximately $1.1 million, of which approximately $0.8
million was capitalized and approximately $0.4 million was captured as
refinancing expenses.

Impairment Loss


The impairment loss incurred during the three months ended March 31, 2022
includes $1.1 million related to an early termination of a lease and a $0.4
million write down of property and equipment. The impairment loss incurred
during the three months ended March 31, 2021 includes a $0.3 million write down
of property and equipment and $0.3 million related to an early termination of
certain leases.

Net (Gain) Loss on Sale or Disposal


During 2022, we entered into an agreement with a third party Qualified
Intermediary ("QI"), under which we entered into an exchange of real property
held for productive use or investment. This agreement relates to the sale of
real property and identification and acquisition of replacement property. Total
proceeds from the sale resulted in a gain of approximately $2.5 million.


Three Months Ended March 31, 2022 As Compared To The Three Months Ended March 31, 2021


                                                                       THREE MONTHS ENDED MARCH 31,
                                                             2022                  2021                % Change
                                                              (dollars in millions)
NET REVENUES                                           $        275.3          $   240.8                       14  %

OPERATING EXPENSE:
Station operating expenses                                      227.1              212.5                        7  %
Depreciation and amortization expense                            13.5               11.6                       16  %
Corporate general and administrative expenses                    25.9               23.6                       10  %

Restructuring charges                                             0.9                0.2                      350  %
Impairment loss                                                   1.5                0.6                      150  %
Net (gain) loss on sale or disposal                              (2.5)                 -                        -  %
Refinancing expenses                                                -                0.5                     (100) %
Other expenses                                                    0.4                  -                      100  %
Total operating expense                                         266.8              249.0                        7  %
OPERATING INCOME (LOSS)                                           8.5               (8.2)                    (204) %

INTEREST EXPENSE                                                 23.5               21.2                       11  %
Net (gain) loss on extinguishment of debt                           -                8.2                     (100) %

OTHER INCOME (EXPENSE)                                              -                8.2                        -100

(LOSS) BEFORE INCOME TAXES (BENEFIT)                            (15.0)             (37.6)                     (60) %

INCOME TAXES (BENEFIT)                                           (3.9)             (15.9)                     (75) %

NET INCOME (LOSS)                                      $        (11.1)         $   (21.7)                     (49) %





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Net Revenues


Revenues increased compared to prior year primarily due to economic recovery and
improvements across all segments of our business from the depressed levels of
the prior year. Prior year revenues were negatively impacted from the economic
slowdown triggered by the COVID-19 pandemic.

Net revenues were also positively impacted by: (i) growth in our spot revenues;
(ii) growth in our digital revenues; and (iii) the operations of AmperWave for
the full period;

Net revenues increased the most for our stations located in the Chicago and Philadelphia markets. Net revenues decreased the most for our stations located in the Los Angeles and Sacramento markets.

Station Operating Expenses


Station operating expenses increased compared to prior year primarily due to:
(i) an increase in payroll and related expenses in the current year; (ii) an
increase in digital expenses related to user acquisition, content licenses and
podcast host and talent fees; and (iii) an increase in 2022 revenues which
resulted in a corresponding increase in variable sales-related expenses.

Station operating expenses include non-cash compensation expense of $1.2 million
and $1.1 million for the three months ended March 31, 2022 and March 31, 2021,
respectively.

Depreciation and Amortization Expense


Depreciation and amortization expense increased primarily due to an increase in
amortization of intangible assets in 2022 relative to 2021. The increase in
amortization is due to the addition of amortizable intangible assets in the
WideOrbit Streaming Acquisition and the Podcorn Acquisition. Additionally,
depreciation and amortization expense increased due to an increase in capital
expenditures in 2022 relative to 2021.

Corporate General and Administrative Expenses


Corporate general and administrative expenses increased primarily as a result
of: (i) an increase in payroll and related expenses in the current year. This
increase was partially offset by a decrease in corporate rebranding costs in
connection with our corporate name change in 2021, which is nonrecurring in
nature.

Corporate general and administrative expenses include non-cash compensation expense of $1.8 million and $1.7 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

Restructuring Charges

We incurred restructuring charges in 2022 and 2021 primarily in response to the COVID-19 pandemic. These costs primarily included workforce reduction charges.

Impairment Loss


The impairment loss incurred during the three months ended March 31, 2022
includes a $0.4 million write down of property and equipment and $1.2 million
related to an early termination of certain leases. The impairment loss incurred
during the three months ended March 31, 2021 includes a $0.3 million write down
of property and equipment and $0.3 million related to an early termination of
certain leases.

Net (Gain) Loss on Sale or Disposal

During the three months ended March 31, 2022, we recognized a gain of approximately $2.5 million on the sale of a land easement in San Francisco, California.

Refinancing Expenses

We incurred $0.5 million of costs in connection with the issuance of the 2029 Notes during 2021.



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Interest Expense

During the three months ended March 31, 2022, we incurred an additional $2.3 million in interest expense as compared to the three months ended March 31, 2021.


This increase in interest expense was primarily attributable to an increase in
the outstanding indebtedness upon which interest is computed. This increase was
partially offset by a reduction in outstanding variable-rate indebtedness upon
which interest is computed.

Income Taxes (Benefit)

Tax Rate for the three Months Ended March 31, 2022


We recognized an income tax benefit at an effective income tax rate of 26.0% for
the three months ended March 31, 2022. The effective income tax rate was
determined using a forecasted tax rate based upon projected taxable income for
the year. The effective income tax rate for the period was impacted by permanent
items, state tax expense and discrete income tax expense related to stock based
compensation.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and
Economic Security Act (the "CARES Act"). The CARES Act is an emergency economic
stimulus package that includes spending and tax breaks to strengthen the United
States economy and fund a nationwide effort to curtail the effects of the
COVID-19 pandemic. The CARES Act includes significant business tax provisions
that, among other things, includes the removal of certain limitations on
utilization of NOLs, increases the loss carry back period for certain losses to
five years, and increases the ability to deduct interest expense, as well as
amending certain provisions of the previously enacted Tax Cuts and Jobs Act. We
were able to carryback our 2020 federal income tax loss to prior tax years and
file a refund claim with the Internal Revenue Service ("IRS") for $15.2 million.

On December 27, 2020, the United States enacted the Consolidated Appropriations
Act, 2021 (the "Appropriations Act"), an additional stimulus package providing
financial relief for individuals and small businesses. The Appropriations Act
contains a variety of tax provisions, including full expensing of business meals
in 2021 and 2022, and expansion of the employee retention tax credit. We do not
currently expect the Appropriations Act to have a material tax impact.

Tax Rate for the three Months Ended March 31, 2021


The estimated annual effective income tax rate was 42.3% for the three months
ended March 31, 2021, which was determined using a forecasted rate based upon
projected taxable income for the year.
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Liquidity and Capital Resources

Liquidity


Although we have been, and expect to continue to be, negatively impacted by the
COVID-19 pandemic, we anticipate that our business will continue to generate
sufficient cash flow from operating activities and we believe that these cash
flows, together with our existing cash and cash equivalents and our ability to
draw on current credit facilities, will be sufficient for us to meet our current
and long-term liquidity and capital requirements. However, our ability to
maintain adequate liquidity is dependent upon a number of factors, including our
revenue, macroeconomic conditions, the length and severity of business
disruptions caused by the COVID-19 pandemic, our ability to contain costs and to
collect accounts receivable, and various other factors, many of which are beyond
our control. Moreover, if the COVID-19 pandemic continues to create significant
disruptions in the credit or financial markets, or impacts our credit ratings,
it could adversely affect our ability to access capital on attractive terms, if
at all. We also expect the timing of certain priorities to be impacted, such as
the pace of our debt reduction efforts and the delay of certain capital
projects.

The Credit Facility, as amended, is comprised of the $250.0 million Revolver and
the Term B-2 Loan. As of March 31, 2022, we had $632.4 million outstanding under
the Term B-2 Loan and $75.0 million outstanding under the Revolver. In addition,
we had $6.1 million in outstanding letters of credit. During the three months
ended March 31, 2022, we repaid $22.7 million outstanding under our Revolver.

As of March 31, 2022, total liquidity was $204.7 million, which was comprised of
$169.1 million available under the Revolver and $35.6 million in cash and cash
equivalents. For the three months ended March 31, 2022, we decreased our
outstanding debt by $22.3 million due to the previously discussed revolver
paydown activity.

As of March 31, 2022, our Consolidated Net First Lien Leverage Ratio was 3.4
times as calculated in accordance with the terms of our Credit Facility, which
place restrictions on the amount of cash, cash equivalents and restricted cash
that can be subtracted in determining consolidated first lien net debt.

Amendment and Repricing - CBS Radio (Now Audacy Capital Corp.) Indebtedness

In connection with the Merger, we assumed CBS Radio's (now Audacy Capital Corp.'s) indebtedness outstanding under: (i) a credit agreement (the "Credit Facility") among CBS Radio (now Audacy Capital Corp.), the guarantors named therein, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent; and (ii) the Senior Notes (described below).

The 2027 Notes


During 2019, we and our finance subsidiary, Audacy Capital Corp. (formerly
Entercom Media Corp.) ("Audacy Capital Corp."), issued $425.0 million in
aggregate principal amount of senior secured second-lien notes due May 1, 2027
(the "Initial 2027 Notes"). Interest on the Initial 2027 Notes accrues at the
rate of 6.500% per annum and is payable semi-annually in arrears on May 1 and
November 1 of each year. The Initial 2027 Notes are governed by an indenture
dated as of April 30, 2019 (the "Base Indenture"), as supplemented by a first
supplemental indenture dated December 13, 2019 (the "First Supplemental
Indenture), (collectively, the "Indenture").

A portion of the Initial 2027 Notes was issued at a premium. As of any reporting
period, the unamortized premium on the Initial 2027 Notes is reflected on the
balance sheet as an addition to the Initial 2027 Notes.

We used net proceeds of the offering, along with cash on hand and amounts
borrowed under our Revolver, to repay $521.7 million of existing indebtedness
under our term loan component previously outstanding (the "Term B-1 Loan").
Contemporaneous with this partial pay-down of the Term B-1 Loan, we replaced the
remaining amount outstanding under the Term B-1 Loan with the Term B-2 Loan.

During the fourth quarter of 2021, Audacy Capital Corp. issued $45.0 million of
additional 6.500% senior secured second-line notes due 2027 (the "Additional
2027 Notes"). The Additional 2027 Notes were issued as additional notes under
the Indenture. The Additional 2027 Notes are treated as a single series with the
Initial 2027 Notes (collectively, the "2027 Notes") and have substantially the
same terms as the Initial 2027 Notes. The Additional 2027 Notes were issued at a
price of 100.750% of their principal amount. As of any reporting period, the
unamortized premium on the 2027 Notes is reflected on the balance sheet as an
addition to the $470.0 million 2027 Notes.
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The 2027 Notes are fully and unconditionally guaranteed on a senior secured second-lien basis by most of the direct and indirect subsidiaries of Audacy Capital Corp. The 2027 Notes and the related guarantees are secured on a second-lien priority basis by liens on substantially all of the assets of Audacy Capital Corp. and the guarantors.


A default under the 2027 Notes could cause a default under the Credit Facility
and/or the 2029 Notes. Any event of default, therefore, could have a material
adverse effect on our business and financial condition.

The 2027 Notes are not a registered security and there are no plans to register
the 2027 Notes as a security in the future. As a result, Rule 3-10 of Regulation
S-X promulgated by the SEC is not applicable and no separate financial
statements are required for the guarantor subsidiaries.

The Credit Facility


The Term B-2 Loan requires mandatory prepayments equal to a percentage of Excess
Cash Flow, subject to incremental step-downs, depending on the Consolidated Net
Secured Leverage Ratio. The Excess Cash Flow payment is based on the Excess Cash
Flow and the Consolidated Net Secured Leverage Ratio for the prior year. We made
our first Excess Cash Flow payment in the first quarter of 2020.

As of March 31, 2022, we were in compliance with the financial covenant then
applicable and all other terms of the Credit Facility in all material respects.
Our ability to maintain compliance with our financial covenant under the Credit
Facility is highly dependent on our results of operations. Currently, given the
impact of COVID-19, the outlook is highly uncertain.

Failure to comply with our financial covenant or other terms of our Credit
Facility and any subsequent failure to negotiate and obtain any required relief
from our lenders could result in a default under the Credit Facility. We will
continue to monitor our liquidity position and covenant obligations and assess
the impact of the COVID-19 pandemic on our ability to comply with the covenants
under the Credit Facility.

Any event of default could have a material adverse effect on our business and
financial condition. We may seek from time to time to amend our Credit Facility
or obtain other funding or additional funding, which may result in higher
interest rates on our debt. However, we may not be able to do so on terms that
are acceptable or to the extent necessary to avoid a default, depending upon
conditions in the credit markets, the length and depth of the market reaction to
the COVID-19 pandemic and our ability to compete in this environment.

The Credit Facility - Amendment No. 5


On July 20, 2020, Audacy Capital Corp. entered into an amendment ("Amendment No.
5") to the Credit Agreement, dated October 17, 2016 (as previously amended, the
"Existing Credit Agreement" and, as amended by Amendment No. 5, the "Credit
Agreement"), with the guarantors party thereto, the lenders party thereto and
JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.
Amendment No. 5, among other things:

(a) amended our financial covenants under the Credit Agreement by: (i)
suspending the testing of the Consolidated Net First Lien Leverage Ratio (as
defined in the Credit Agreement) through the Test Period (as defined in the
Credit Agreement) ending December 31, 2020; (ii) adding a new minimum liquidity
covenant of $75.0 million until December 31, 2021, or such earlier date as we
may elect (the "Covenant Relief Period"); and (iii) imposing certain
restrictions during the Covenant Relief Period, including among other things,
certain limitations on incurring additional indebtedness and liens, making
restricted payments or investments, redeeming notes and entering into certain
sale and lease-back transactions;

(b) increased the interest rate and/or fees under the Credit Agreement during
the Covenant Relief Period applicable to: (i) 2024 Revolving Credit Loans (as
defined in the Credit Agreement) to (x) in the case of Eurodollar Rate Loans (as
defined in the Credit Agreement), a customary Eurodollar rate formula plus a
margin of 2.50% per annum, and (y) in the case of Base Rate Loans (as defined in
the Credit Agreement), a customary base rate formula plus a margin of 1.50% per
annum, and (ii) Letter of Credit (as defined in the Credit Agreement) fees to
2.50% times the daily maximum amount available to be drawn under any such Letter
of Credit; and

(c) modified the definition of Consolidated EBITDA by setting fixed amounts for
the fiscal quarters ending June 30, 2020, September 30, 2020, and December 31,
2020, for purposes of testing compliance with the Consolidated Net First Lien
Leverage Ratio financial covenant during the Covenant Relief Period, which fixed
amounts correspond to the Borrower's Consolidated EBITDA as reported under the
Existing Credit Agreement for the Test Period ended March 31, 2020, for the
fiscal quarters ending June 30, 2019, September 30, 2019, and December 31, 2019,
respectively.
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The Credit Facility - Amendment No. 6


On March 5, 2021, Audacy Capital Corp. entered into an amendment ("Amendment No.
6") to the Credit Agreement, dated October 17, 2016 (as previously amended, the
"Existing Credit Agreement" and, as amended by Amendment No. 6, the "Credit
Agreement"), with the guarantors party thereto, the lenders party thereto and
JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.

Under the Existing Credit Agreement, during the Covenant Relief Period the
Company is subject to a $75.0 million limitation on investments in joint
ventures, Affiliates, Unrestricted Subsidiaries and Non-Guarantor Subsidiaries
(each as defined in the Existing Credit Agreement) (the "Covenant Relief Period
Investment Limitation"). Amendment No. 6, among other things, excludes from the
Covenant Relief Period Investment Limitation any investments made in connection
with a permitted receivables financing facility.

Accounts Receivable Facility

On July 15, 2021, we and certain of our subsidiaries entered into a $75.0 million accounts receivable securitization facility (the "Receivables Facility") to provide additional liquidity, to reduce our cost of funds and to repay outstanding indebtedness under the Credit Facility.


The documentation for the Receivables Facility includes (i) a Receivables
Purchase Agreement (the "Receivables Purchase Agreement") entered into by and
among Audacy Operations, Inc., a Delaware corporation and our wholly-owned
subsidiary ("Audacy Operations"), Audacy Receivables, LLC, a Delaware limited
liability company and our wholly-owned subsidiary, as seller ("Audacy
Receivables"), the investors party thereto (the "Investors"), and DZ BANK AG
Deutsche Zentral-Genossenschaftsbank, Frankfurt AM Main, as agent ("DZ BANK");
(ii) a Sale and Contribution Agreement (the "Sale and Contribution Agreement"),
by and among Audacy Operations, Audacy New York, LLC, a Delaware limited
liability company and our wholly-owned subsidiary ("Audacy NY"), and Audacy
Receivables; and (iii) a Purchase and Sale Agreement (the "Purchase and Sale
Agreement," and together with the Receivables Purchase Agreement and the Sale
and Contribution Agreement, the "Agreements") by and among certain of our
wholly-owned subsidiaries (together with Audacy NY, the "Originators"), Audacy
Operations and Audacy NY.

Audacy Receivables is considered a special purpose vehicle ("SPV") as it is an
entity that has a special, limited purpose and it was created to sell accounts
receivable, together with customary related security and interest in the
proceeds thereof, to the Investors in exchange for cash investments.

Yield is payable to Investors under the Receivables Purchase Agreement at a
variable rate based on either one-month LIBOR or commercial paper rates plus a
margin. Collections on the accounts receivable: (x) will be used to: (i) satisfy
the obligations of Audacy Receivables under the Receivables Facility; or (ii)
purchase additional accounts receivable from the Originators; or (y) may be
distributed to Audacy NY, the sole member of Audacy Receivables. Audacy
Operations acts as the servicer under the Agreements.

The Agreements contain representations, warranties and covenants that are
customary for bankruptcy-remote securitization transactions, including covenants
requiring Audacy Receivables to be treated at all times as an entity separate
from the Originators, Audacy Operations, the Company or any of its other
affiliates and that transactions entered into between Audacy Receivables and any
of its affiliates shall be on arm's-length terms. The Receivables Purchase
Agreement also contains customary default and termination provisions which
provide for acceleration of amounts owed under the Receivables Purchase
Agreement upon the occurrence of certain specified events with respect to Audacy
Receivables, Audacy Operations, the Originators, or the Company, including, but
not limited to: (i) Audacy Receivables' failure to pay yield and other amounts
due; (ii) certain insolvency events; (iii) certain judgments entered against the
parties; (iv) certain liens filed with respect to assets; and (v) breach of
certain financial covenants and ratios.

We have agreed to guarantee the performance obligations of Audacy Operations and
the Originators under the Receivables Facility documents. We have not agreed to
guarantee any obligations of Audacy Receivables or the collection of any of the
receivables and will not be responsible for any obligations to the extent the
failure to perform such obligations by Audacy Operations or any Originator
results from receivables being uncollectible on account of the insolvency,
bankruptcy or lack of creditworthiness or other financial inability to pay of
the related obligor.

In general, the proceeds from the sale of the accounts receivable are used by
the SPV to pay the purchase price for accounts receivables it acquires from
Audacy NY and may be used to fund capital expenditures, repay borrowings on the
Credit Facility, satisfy maturing debt obligations, as well as fund working
capital needs and other approved uses.
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Although the SPV is a wholly owned consolidated subsidiary of Audacy NY, the SPV
is legally separate from Audacy NY. The assets of the SPV (including the
accounts receivables) are not available to creditors of Audacy NY, Audacy
Operations or the Company, and the accounts receivables are not legally assets
of Audacy NY, Audacy Operations or the Company. The Receivables Facility is
accounted for as a secured financing. The pledged receivables and the
corresponding debt are included in Accounts receivable and Long-term debt,
respectively, on the Consolidated Balance Sheets.

The Receivables Facility will expire on July 15, 2024, unless earlier terminated
or subsequently extended pursuant to the terms of the Receivables Purchase
Agreement. The pledged receivables and the corresponding debt are included in
Accounts receivable, net and Long-term debt, net of current portion,
respectively, on the Condensed Consolidated Balance Sheet. At March 31, 2022, we
had outstanding borrowings of $75.0 million under the Receivables Facility.

The 2029 Notes


During the first quarter of 2021, we and our finance subsidiary, Audacy Capital
Corp., issued $540.0 million in aggregate principal amount of senior secured
second-lien notes due March 31, 2029 (the "2029 Notes"). Interest on the 2029
Notes accrues at the rate of 6.750% per annum and is payable semi-annually in
arrears on March 31 and September 30 of each year.

We used net proceeds of the offering, along with cash on hand, to: (i) repay
$77.0 million of existing indebtedness under the Term B-2 Loan; (ii) repay $40.0
million of drawings under the Revolver; and (iii) fully redeem all of our $400.0
million aggregate principal amount of 7.250% senior notes due 2024 (the "Senior
Notes") and to pay fees and expenses in connection with the redemption.

In connection with this activity, during the first quarter of 2021, we: (i)
recorded $6.6 million of new debt issuance costs attributable to the 2029 Notes;
and (ii) $0.4 million of debt issuance costs attributable to the Revolver which
will be amortized over the remaining term of the Revolver on a straight line
basis. We also incurred $0.5 million of costs which were classified within
refinancing expenses.

The 2029 Notes are fully and unconditionally guaranteed on a senior secured second priority basis by each of the direct and indirect subsidiaries of Audacy Capital Corp.

A default under the 2029 Notes could cause a default under our Credit Facility or the 2027 Notes. Any event of default, therefore, could have a material adverse effect on our business and financial condition.


The 2029 Notes are not a registered security and there are no plans to register
the 2029 Notes as a security in the future. As a result, Rule 3-10 of Regulation
S-X promulgated by the SEC is not applicable and no separate financial
statements are required for the guarantor subsidiaries.

The Senior Notes


Simultaneously with entering into the Merger and assuming the Credit Facility on
November 17, 2017, we also assumed the Senior Notes that were set to mature on
November 1, 2024 in the amount of $400.0 million (the "Senior Notes"). The
Senior Notes, which were originally issued by CBS Radio (now Audacy Capital
Corp.) on October 17, 2016, were valued at a premium as part of the fair value
measurement on the date of the Merger. The premium on the Senior Notes was
amortized over the term under the effective interest rate method. As of any
reporting period, the unamortized premium on the Senior Notes was reflected on
the balance sheet as an addition to the $400.0 million liability.

As discussed above, during the three months ended March 31, 2021, we issued a
call notice to redeem our Senior Notes with an effective date of April 10, 2021.
We incurred interest on the Senior Notes until the redemption date. In
connection with the redemption, we deposited the following funds to satisfy our
obligations under the Senior Notes and discharge the Indenture governing the
Senior Notes: (i) $400.0 million to redeem the Senior Notes in full; (ii) $14.5
million for a call premium for the early retirement of the Senior Notes; and
(iii) $12.8 million for accrued and unpaid interest through April 10, 2021. As a
result of the refinancing, we recorded an $8.2 million loss on extinguishment of
debt that included the call premium, the write off of unamortized debt issuance
costs, and the write off of unamortized premium on the Senior Notes.

Operating Activities

Net cash flows provided by operating activities were $15.2 million and $43.9 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

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The cash flows from operating activities decreased primarily due to an increase
in net investment in working capital of $25.8 million. This decrease was
partially offset by a decrease in net loss, as adjusted for certain non-cash
charges and income tax benefits of $7.9 million.

The increase in investment in working capital is primarily due to the timing of:
(i) collections of accounts receivable; (ii) settlements of accounts payable and
accrued liabilities; (iii) settlements of accrued interest expense; (iv)
settlements of prepaid expenses; and (v) settlements of other long-term
liabilities.

The decrease in net loss, as adjusted for certain non-cash charges and income
tax benefits is primarily attributable to: (i) a reduction in net loss of $10.6
million; (ii) an increase in deferred tax benefits of $3.5 million; and (iii) an
increase in impairment loss of $0.9 million.

Investing Activities

Net cash flows used in investing activities were $12.1 million and $22.6 million for the three months ended March 31, 2022 and March 31, 2021, respectively.


During 2021, net cash flows used in investing activities decreased primarily due
to a decrease in purchases of business and audio assets of $15.3 million. This
reduction was partially offset by: (i) an increase in additions to tangible and
intangible assets of $7.2 million; and (ii) an increase in proceeds from sales
or disposals of assets of $2.5 million.

Financing Activities

Net cash flows used in financing activities were $24.6 million and $0.7 million for the three months ended March 31, 2022 and March 31, 2021, respectively.


During 2021, net cash flows used in by financing activities increased primarily
due to: (i) a decrease in proceeds from issuance of long term debt of $540.0
million; and (ii) a decrease in borrowing under the Revolver of $12.0 million.
This decrease was partially offset by: (i) a decrease in cash outflows related
to the redemption of the Senior Notes of $400.0 million; (ii) a decrease of
payments of long-term debt of $77.0 million; (iii) a decrease of payments
against the Revolver of $29.3 million; (iv) a decrease in payments of call
premiums and other fees of $14.5 million; and (v) a decrease in payments for
debt issuance costs of $6.9 million.

Dividends

We presently do not pay a dividend. Any future dividends will be at the discretion of the Board based upon the relevant factors at the time of such consideration, including, without limitation, compliance with the restrictions set forth in our Credit Facility, the 2027 Notes and the 2029 Notes.

Share Repurchase Program


During the nine months ended March 31, 2022, we did not repurchase any shares
under our share repurchase program (the "2017 Share Repurchase Program"). As of
March 31, 2022, $41.6 million is available for future share repurchases under
the 2017 Share Repurchase Program.

Income Taxes


Under the CARES Act, we were able to carry back our 2020 federal income tax loss
to prior tax years and file a refund claim with the IRS for $15.2 million.
During the three months ended March 31, 2022, we received a federal tax refund
of approximately $15.2 million. We do not anticipate making any federal income
tax payments in 2022 primarily as a result of the availability of NOLs to offset
federal tax due.

For federal income tax purposes, the acquisition of CBS Radio was treated as a
reverse acquisition which caused us to undergo an ownership change under Section
382 of the Internal Revenue Code ("Code"). This ownership change will limit the
utilization of our NOLs for post-acquisition tax years. We may need to make
additional state estimated tax payments during the remainder of the year.
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Capital Expenditures


Capital expenditures, including amortizable intangibles, for the three months
ended March 31, 2022 were $14.5 million. We anticipate that total capital
expenditures in 2022 will be between $70 million and $75 million as we increase
our investment in the rapidly growing digital audio advertising market.

Contractual Obligations


As of March 31, 2022, there have been no net material changes in the total
amount from the contractual obligations listed in our Form 10-K for the year
ended December 31, 2021, as filed with the SEC on March 1, 2022, other than as
described below.

As discussed above in the liquidity section, during the three months ended
March 31, 2022, we made a voluntary prepayments against our Revolver of $22.7
million. As a result of this activity, the amounts outstanding under our
long-term debt obligations decreased by $22.7 million during the three months
ended March 31, 2022.

Off-Balance Sheet Arrangements

As of March 31, 2022, we did not have any material off-balance sheet transactions, arrangements or obligations, including contingent obligations.


During 2022, we disposed of certain property that we considered as surplus to
our operations and that resulted in a gain of approximately $2.5 million. In
order to minimize the tax impact on a certain portion of these taxable gains, we
created an entity that serves as a qualified intermediary ("QI") for tax
purposes and that held the net sales proceeds of $2.5 million from this
transaction. As of March 31, 2022, the balance in the account of the QI is $2.5
million and this amount is reflected as restricted cash on our condensed
consolidated balance sheet. We plan to use a portion of these funds in a
tax-free exchange by using the net sales proceeds from relinquished property for
the purchase of replacement property. This entity was treated as a variable
interest entity ("VIE") and is included in our consolidated financial statements
as we are considered the primary beneficiary.

The use of a QI in a like-kind exchange enables us to effectively minimize our
tax liability in connection with certain asset dispositions. As discussed in
Note 1, Basis of Presentation and Significant Policies, we sold real property in
San Francisco, California for net proceeds of $2.5 million. These net sales
proceeds were deposited into the account of the QI to comply with requirements
under Section 1031 of the Code to execute a like-kind exchange and are reflected
as restricted cash on our condensed consolidated balance sheet as of March 31,
2022. Restrictions on these deposits will lapse prior to the end of the third
quarter of 2022.

We do not have any other relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet financial arrangements or other contractually
narrow or limited purposes as of March 31, 2022. Accordingly, we are not
materially exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.

Critical Accounting Policies


There have been no material changes to our critical accounting policies from the
information provided in Part II, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies, in
our Annual Report on Form 10-K for the year ended December 31, 2021, as filed
with the SEC on March 1, 2022.

Goodwill Valuation Risk


We no longer have any goodwill attributable to the broadcast reporting unit. Our
remaining goodwill as of March 31, 2022 is limited to the goodwill acquired in
the Cadence13 Acquisition and Pineapple Acquisition in 2019, the goodwill
acquired in the QLGG Acquisition in 2020, and the goodwill acquired in the
Podcorn Acquisition and WideOrbit Streaming Acquisition in 2021.

Future impairment charges may be required on our goodwill, as the discounted
cash flow model is subject to change based upon our performance, peer company
performance, overall market conditions, and the state of the credit markets. We
continue to monitor these relevant factors to determine if an interim impairment
assessment is warranted.
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A deterioration in our forecasted financial performance, an increase in discount
rates, a reduction in long-term growth rates, a sustained decline in our stock
price, or a failure to achieve analyst expectations could all be potential
indicators of an impairment to the remaining goodwill, which could be material,
in future periods. The COVID-19 pandemic increases the uncertainty with respect
to such market and economic conditions and, as such, increases the risk of
future impairment.

As of March 31, 2022, we evaluated whether the facts and circumstances and
available information result in the need for an impairment assessment for any
goodwill, and concluded no assessment was required. We will continue to evaluate
the impacts of the COVID-19 pandemic on our business, including the impacts of
overall economic conditions, which could result in the recognition of an
impairment charge in the future.

Broadcasting License Valuation at Risk


After the annual impairment test conducted on our broadcasting licenses in the
fourth quarter of 2021, the results indicated that there were 17 units of
accounting where the fair value exceeded their carrying value by 10% or less. In
aggregate, these 17 units of accounting had a carrying value of $875.2 million
at December 31, 2021.

If overall market conditions or the performance of the economy deteriorates,
advertising expenditures and radio industry results could be negatively
impacted, including expectations for future growth. This could result in future
impairment charges for these or other of our units of accounting, which could be
material. The COVID-19 pandemic increases the uncertainty with respect to such
market and economic conditions and, as such, increases the risk of future
impairment.

As of March 31, 2022, we evaluated whether the facts and circumstances and
available information result in the need for an impairment assessment for any of
our broadcasting licenses, and concluded no assessment was required. We will
continue to evaluate the impacts of the COVID-19 pandemic on our business,
including the impacts of overall economic conditions, which could result in the
recognition of an impairment charge, which could be material, in the future.

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