Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     

AUDACY, INC.

(AUD)
  Report
Delayed Nyse  -  04:00:02 2023-02-06 pm EST
0.3156 USD   -9.08%
01/30Audacy, Inc. : Entry into a Material Definitive Agreement, Regulation FD Disclosure, Other Events, Financial Statements and Exhibits (form 8-K)
AQ
01/10Audacy, Inc. : Change in Directors or Principal Officers (form 8-K)
AQ
2022Audacy, Inc. : Other Events, Financial Statements and Exhibits (form 8-K)
AQ
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisionsFunds 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

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

11/09/2022 | 04:56pm EST
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 nine and three months ended September 30,
2022 as compared to the comparable periods 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 nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021:

COVID-19 Pandemic and Current Macroeconomic Conditions


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. The pandemic has had, and may
continue to have, a material impact on the Company and its recovery. 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 June 2022 exceeded net revenues in each month from January 2021 to June 2021.
While we experienced sequential growth in net revenues month-over-month through
June 2022, the pace of such growth began to slow down in June 2022. Due to the
current macroeconomic conditions, the month-over-month improvement in net
revenues did not continue into the third quarter of 2022. However, sequential
month-over-month revenues increased in the third quarter of 2022, with September
2022 representing the highest monthly revenues recorded in 2022 thus far.

We are currently unable to predict the extent of the impact that the current
macroeconomic conditions will have on our financial condition, results of
operations and cash flows in future periods due to numerous uncertainties, but
we believe the impact could be material if conditions persist.

The extent to which the current macroeconomic conditions impact 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 nine months ended September 30, 2022, may not be
indicative of the results for the year ending December 31, 2022.



                                       37

--------------------------------------------------------------------------------

Table of Contents

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 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 nine months
ended September 30, 2022, reflect the results of AmperWave. Our condensed
consolidated financial statements for the nine months ended September 30, 2021
do not reflect the results of AmperWave.

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 nine months ended September 30, 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 nine months ended September 30, 2021: (i) reflect the results
of the acquired stations for the entire 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 nine months ended September 30, 2022, reflect the results of
Podcorn. Our condensed consolidated financial statements for the nine months
ended September 30, 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 COVID-19 pandemic, and in response to the current macroeconomic conditions, we incurred restructuring charges, including workforce reductions and other restructuring costs of $6.1 million and $4.2 million during the nine months ended September 30, 2022 and September 30, 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.


                                       38

--------------------------------------------------------------------------------

Table of Contents

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 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.

During the nine months ended September 30, 2022, we repurchased $10.0 million of
our 2027 Notes through open market purchases. This repurchase activity generated
a gain on retirement of the 2027 Notes in the amount of $0.6 million.

Impairment Loss


The impairment loss incurred during the nine months ended September 30, 2022
includes: (i) $159.1 million related to an interim impairment assessment of our
FCC broadcasting licenses; (ii) $18.1 million related to an interim impairment
assessment of our goodwill at the QLGG reporting unit; and (iii) $3.2 million
related to an early termination of leases in several markets. The impairment
loss incurred during the nine months ended September 30, 2021 includes a $0.8
million write down of property and equipment and $0.5 million related to an
early termination of certain leases.

Net (Gain) Loss on Sale or Disposal


During the nine months ended September 30, 2022, we entered into an agreement
with a third party Qualified Intermediary, 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. During the nine months ended September 30, 2022, we
finalized: (i) the sale of assets in San Francisco, California, which had
previously been classified within assets held for sale and recognized a loss of
approximately $0.5 million; and (ii) the sale of assets in Houston, Texas which
has previously been classified within assets held for sale and recognized a gain
of approximately $10.6 million. Additionally, we also recognized a gain of $0.6
million in connection with the bond repurchase activity discussed above. During
the nine months ended September 30, 2021, we recognized: (i) a gain of $4.0
million from the Urban One Exchange; and (ii) a gain of $0.8 million from the
liquidation of one of our investments. These gains were partially offset by a
$1.1 million loss on disposal of property, plant and equipment.











                                       39

--------------------------------------------------------------------------------

Table of Contents


 Nine Months Ended September 30, 2022 As Compared To The Nine Months Ended September 30,
                                           2021



                                                                    NINE MONTHS ENDED SEPTEMBER 30,
                                                           2022                2021                % Change
                                                            (dollars in millions)
NET REVENUES                                           $    911.7          $   874.7                        4  %

OPERATING EXPENSE:
Station operating expenses                                  746.9              718.9                        4  %
Depreciation and amortization expense                        47.5               38.7                       23  %
Corporate general and administrative expenses                72.8               71.5                        2  %

Restructuring charges                                         6.1                4.2                       45  %
Impairment loss                                             180.1                1.3                   13,754  %
Net gain on sale or disposal                                (13.2)              (3.7)                     257  %
Refinancing expenses                                            -                0.5                     (100) %
Change in fair value of contingent consideration             (8.8)                 -                      100  %
Other expenses                                                0.4                0.6                      (33) %
Total operating expense                                   1,031.8              832.0                       24  %
OPERATING INCOME (LOSS)                                    (120.1)              42.7                     (381) %

INTEREST EXPENSE                                             76.1               66.5                       14  %
Net loss on extinguishment of debt                              -                8.2                     (100) %
Other income                                                 (0.2)              (0.5)                     (60) %
OTHER INCOME (EXPENSE)                                       (0.2)               7.7                        -100

LOSS BEFORE INCOME TAX BENEFIT                             (196.0)             (31.5)                     522  %

INCOME TAX BENEFIT                                          (43.2)              (6.5)                     565  %

NET LOSS                                               $   (152.8)         $   (25.0)                     511  %


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. In the current year, we continued
to report sequential growth in net revenues month-over-month through June 2022.
Due to current macroeconomic conditions, this trend did not continue and
revenues declined in the third quarter.

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 $3.0 million
and $3.1 million for the nine months ended September 30, 2022 and September 30,
2021, respectively.
                                       40

--------------------------------------------------------------------------------

Table of Contents

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
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 $4.0 million and $6.7 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Restructuring Charges

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

Impairment Loss


The impairment loss incurred during the nine months ended September 30, 2022
consists of: (i) a $159.1 million impairment charge as a result of an interim
impairment assessment on our FCC broadcasting licenses; (ii) an $18.1 million
impairment charge as a result of an interim impairment assessment on our
Goodwill; and (iii) a $3.2 million charge related to an early termination of
certain leases. The impairment loss incurred during the nine months ended
September 30, 2021 includes a $0.8 million write down of property and equipment
and $0.5 million related to an early termination of certain leases.

Net Gain on Sale or Disposal


During the nine months ended September 30, 2022, we recognized: (i) a gain of
approximately $2.5 million on the sale of a land easement in San Francisco,
California; (ii) a gain on bond repurchases of $0.6 million; and (iii) a gain of
approximately $10.6 million on the sale of assets in Houston, Texas. These gains
were partially offset by a loss on sale of a station in San Francisco,
California of $0.5 million. During the nine months ended September 30, 2021, we
recognized; (i) a gain of approximately $4.0 million from the Urban One
Exchange; and (ii) a gain of approximately $0.8 million from the liquidation of
one of our investments. These gains were partially offset by a $1.1 million loss
on disposal of property, plant and equipment.

Refinancing Expenses

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

Change in Fair Value of Contingent Consideration


In connection with the Podcorn Acquisition, we recorded a contingent
consideration liability during the first quarter of 2021, which is subject to
fair value remeasurements. Due to fluctuation in the market-based inputs used to
develop the discount rate, the discount rate has increased during the nine
months ended September 30, 2022. Additionally, a reduction in projected Adjusted
EBITDA values resulted in a lower expected present value of the contingent
consideration. As a result, the fair value of the contingent consideration
decreased $8.8 million during the nine months ended September 30, 2022.

Interest Expense


During the nine months ended September 30, 2022, we incurred an additional $9.6
million in interest expense as compared to the nine months ended September 30,
2021.

This increase in interest expense was primarily attributable to an increase in the outstanding fixed-rate indebtedness and variable-rate indebtedness upon which interest is computed coupled with an increase in variable interest rates.

                                       41

--------------------------------------------------------------------------------

Table of Contents

Income Tax Benefit

Tax Rate for the Nine Months Ended September 30, 2022


We recognized an income tax benefit at an effective income tax rate of 22.0% for
the nine months ended September 30, 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, discrete income tax expense items related to stock
based compensation, a valuation allowance for certain state net operating
losses, adjustments related to amended federal income tax returns for 2018 and
2019, and interest and penalties associated with uncertain tax positions.

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 net operating losses ("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, which we received in the first quarter of
2022. During the third quarter of 2022, we filed amended federal income tax
returns for 2018 and 2019, in which we requested a refund of $5.5 million for
2018.

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 Nine Months Ended September 30, 2021

We recognized an income tax benefit at an effective income tax rate of 20.7% for the nine months ended September 30, 2021, which was determined using a forecasted rate based upon projected taxable income for the year.

                                       42

--------------------------------------------------------------------------------

Table of Contents


Three Months Ended September 30, 2022 As Compared To The Three Months Ended September 30,
                                           2021


                                                                    THREE MONTHS ENDED SEPTEMBER 30,
                                                             2022              2021               % Change
                                                             (dollars in millions)
NET REVENUES                                             $   316.9          $  329.4                      (4) %

OPERATING EXPENSE:
Station operating expenses                                   260.0             260.9                       -  %
Depreciation and amortization expense                         18.3              12.5                      46  %
Corporate general and administrative expenses                 21.2              24.2                     (12) %

Restructuring charges                                          4.2               2.3                      83  %
Impairment loss                                              176.8                 -                     100  %

Net gain on sale or disposal                                 (10.7)                -                     100  %
Change in fair value of contingent consideration              (1.1)                -                     100  %
Other expenses                                                 0.1               0.2                     (50) %
Total operating expense                                      468.8             300.1                      56  %
OPERATING INCOME (LOSS)                                     (151.9)             29.3                    (618) %
INTEREST EXPENSE                                              28.1              22.8                      23  %

OTHER INCOME                                                     -                 -                       -  %

INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)                 (180.0)              6.5                  (2,869) %

INCOME TAX (BENEFIT) EXPENSE                                 (39.0)             11.2                    (448) %

NET LOSS                                                 $  (141.0)         $   (4.7)                  2,900  %


Net Revenues

Revenues decreased compared to prior year primarily due to the current
macroeconomic conditions. In the current year, we reported sequential growth in
net revenues month-over-month. This trend may not continue in future periods due
to the current macroeconomic conditions.

Net revenues were 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 Norfolk markets. Net revenues decreased the most for our stations located in the Los Angeles and New York City markets.

Station Operating Expenses


Station operating expenses decreased compared to prior year primarily due to a
decrease in 2022 revenues which resulted in a corresponding decrease in variable
sales-related expenses. These reductions were partially offset by an increase in
payroll and related expenses in the current year and an increase in digital
expenses related to user acquisition, content licenses and podcast host and
talent fees;

Station operating expenses include non-cash compensation expense of $0.8 million
and $0.9 million for the three months ended September 30, 2022 and September 30,
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.

                                       43

--------------------------------------------------------------------------------

Table of Contents

Corporate General and Administrative Expenses


Corporate general and administrative expenses decreased primarily as a result of
a decrease in non-cash compensation expense. This reduction was attributable to
the reversal of performance-based compensation expense upon reassessment.

Corporate general and administrative expenses include non-cash compensation expense of $0.1 million and $3.5 million for the three months ended September 30, 2022 and September 30, 2021, respectively.

Restructuring Charges

We incurred restructuring charges in 2022 and 2021 primarily in response to the COVID-19 pandemic and the current macroeconomic conditions. These costs primarily included workforce reduction charges and were expensed as incurred.

Impairment Loss


The impairment loss incurred during the three months ended September 30, 2022
primarily consists of: (i) a $159.1 million impairment charge as a result of an
interim impairment assessment on our FCC broadcasting licenses; and (ii) a $18.1
million impairment charge as a result of an interim impairment assessment on our
goodwill.

Net Gain on Sale or Disposal

During the three months ended September 30, 2022, we recognized a gain of approximately $10.6 million on the sale of assets in Houston, Texas.

Change in Fair Value of Contingent Consideration


In connection with the Podcorn Acquisition, we recorded a contingent
consideration liability during the first quarter of 2021, which is subject to
fair value remeasurements. Due to fluctuation in the market-based inputs used to
develop the discount rate, the discount rate has increased during the three
months ended September 30, 2022. Additionally, a reduction in projected Adjusted
EBITDA values resulted in a lower expected present value of the contingent
consideration. As a result, the fair value of the contingent consideration
decreased $1.1 million during the three months ended September 30, 2022.

Interest Expense


During the three months ended September 30, 2022, we incurred an additional $5.3
million in interest expense as compared to the three months ended September 30,
2021.

This increase in interest expense was primarily attributable to an increase in
the outstanding fixed-rate and variable-rate indebtedness upon which interest is
computed coupled with an increase in variable interest rates.

Income Tax Benefit


For the three months ended September 30, 2022, the effective income tax rate was
21.7%. The effective income tax rate for the quarter was impacted by permanent
items, state tax expense, discrete income tax expense items related to stock
based compensation, a valuation allowance for certain state net operating
losses, and interest and penalties associated with uncertain tax positions.

For the three months ended September 30, 2021, the effective income tax rate was
173.5%, which was determined using a forecasted rate based upon projected
taxable income for the full year along with the impact of discrete items for the
quarter.
                                       44

--------------------------------------------------------------------------------

Table of Contents

Liquidity and Capital Resources

Liquidity


The COVID-19 pandemic and current macroeconomic conditions have created, and may
continue to create, significant uncertainty in operations, including disrupted
supply chains, rising inflation and interest rates, and significant volatility
in financial markets, which have had, and are expected to continue to have a
material impact on our business operations, financial position, cash flows,
liquidity, and capital resources and results of operations. We anticipate that
our business will continue to generate sufficient cash flow from operating
activities and 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 liquidity, capital requirements and meet
our covenant requirements for at least the next twelve months. 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, our ability to contain costs and to collect accounts
receivable, and various other factors, many of which are beyond our control.
Moreover, if current macroeconomic conditions continue to create higher
inflation and interest rates and significant disruptions in the credit or
financial markets, or impact 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.

We continue to execute on cash management and strategic operational plans
including evaluation of contractual obligations, workforce reductions,
management of operating expenses, and divesting non-strategic assets along with
other cash and debt management plans for the benefit of the covenant
calculation, as permitted under the credit agreement related to both our Credit
Facility and Accounts Receivable Facility. We are unable to predict with
certainty the impact of the COVID-19 pandemic and current macroeconomic
conditions on our ability to maintain compliance with the debt covenants
contained in the credit agreement related to both our Credit Facility and
Accounts Receivable Facility. While we were in compliance with such financial
covenants through September 30, 2022, failure to meet the covenant requirement
in the future would cause us to be in default and the maturity of the related
debt could be accelerated and become immediately payable. This may require us to
obtain waivers or amendments in order to maintain compliance and there can be no
certainty that any such waiver or amendment would be available, or what the cost
of such waiver or amendment, if obtained, would be. If we are unable to obtain
necessary waivers or amendments and the debt is accelerated, we would be
required to obtain replacement financing at prevailing market rates, which may
not be favorable to us. There is no guarantee that we would be able to satisfy
our obligations if any of our indebtedness is accelerated. This could adversely
affect our ability to meet our long-term liquidity and capital requirements.

In the event revenues in future quarters are lower than we currently anticipate,
we may be forced to take remedial actions which could include, among other
things (and where allowed by the lenders): (i) implementing further cost
reductions; (ii) seeking replacement financing; (iii) raising funds through the
issuance of additional equity or debt securities or incurring additional
borrowings; or (iv) disposing of certain assets or businesses. Such remedial
actions, which may not be available on favorable terms or at all, could have a
material adverse impact on our business.

The Credit Facility, as amended, is comprised of the $250.0 million Revolver and
the Term B-2 Loan. As of September 30, 2022, we had $632.4 million outstanding
under the Term B-2 Loan and $165.0 million outstanding under the Revolver. In
addition, we had $6.0 million in outstanding letters of credit. During the nine
months ended September 30, 2022, we repaid $22.7 million outstanding under our
Revolver and borrowed an additional $90.0 million under our Revolver.

During the nine months ended September 30, 2022, we repurchased $10.0 million of
our 2027 Notes through open market purchases. This repurchase activity generated
a gain on retirement of the 2027 Notes in the amount of $0.6 million.

As of September 30, 2022, total liquidity was $115.4 million, which was
comprised of $79.0 million available under the Revolver and $36.4 million in
cash, cash equivalents and restricted cash. For the nine months ended
September 30, 2022, we increased our outstanding debt by $60.3 million due to
the previously discussed revolver pay down and borrowing activity and the bond
repurchase activity against the 2027 Notes.

As of September 30, 2022, our Consolidated Net First Lien Leverage Ratio was 3.8
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.


                                       45

--------------------------------------------------------------------------------

Table of Contents

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


In connection with the CBS Radio business acquisition in November 2017 (the
"Merger"), we assumed CBS Radio Inc.'s (now Audacy Capital Corp.'s) indebtedness
outstanding under: (i) a credit agreement (the "Credit Facility") among CBS
Radio Inc. (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., 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 $460.0 million 2027 Notes.

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 September 30, 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 and current macroeconomic conditions, 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 and current macroeconomic conditions on our
ability to comply with the covenants under the Credit Facility.
                                       46

--------------------------------------------------------------------------------

Table of Contents


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 current macroeconomic conditions 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 (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.

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 was 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. The Covenant Relief Period
ended in the fourth quarter of 2021.

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
                                       47

--------------------------------------------------------------------------------

Table of Contents

"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 receivable 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.

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 receivable) are not available to creditors of Audacy NY, Audacy
Operations or the Company, and the accounts receivable 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 has usual and customary covenants including, but not
limited to, a net first lien leverage ratio, a required minimum tangible net
worth, and a minimum liquidity requirement (the "financial covenants").
Specifically, the Receivables Facility requires the Company to comply with a
certain financial covenant which is a defined term within the agreement,
including a maximum Consolidated Net First-Lien Leverage Ratio that cannot
exceed 4.0 times at September 30, 2022. As of September 30, 2022, the Company's
Consolidated Net First Lien Leverage Ratio was 3.8 times. The Receivables
Facility also requires the Company to maintain a minimum tangible net worth, as
defined within the agreement, of at least $300.0 million. Additionally, the
Receivables Facility requires the Company to maintain liquidity of $75.0
million. As of September 30, 2022, the Company was compliant with the financial
covenants.

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 September 30,
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.
                                       48

--------------------------------------------------------------------------------

Table of Contents


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 Inc. (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 nine months ended September 30, 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 used in operating activities were $19.6 million for the nine months ended September 30, 2022. Net cash flows provided by operating activities were $45.6 million for the nine months ended September 30, 2021.


The cash flows provided by operating activities decreased primarily due to: (i)
an increase in net investment in working capital of $41.1 million; (ii) an
increase in net gain on disposals of assets of $9.5 million; (iii) an increase
in gain on remeasurement of contingent consideration of $8.8 million; (iv) a
decrease in net gains on deferred compensation of $8.6 million; and (iv) a
decrease in loss on extinguishment of debt of $8.2 million.

These decreases in cash flows provided by operating activities were partially
offset by a decrease in net loss, as adjusted for certain non-cash charges and
income tax benefits of $4.8 million and an increase in depreciation and
amortization of $8.8 million.

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

The decrease in net loss, as adjusted for certain non-cash charges and income tax benefits is primarily attributable to an increase in net loss of $127.8 million which is offset by: (i) an increase in impairment loss of $178.7 million; and (ii) an increase in deferred tax benefits of $46.1 million.

                                       49

--------------------------------------------------------------------------------

Table of Contents

Investing Activities

Net cash flows used in investing activities were $59.0 million and $53.4 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.


During 2022, net cash flows used in investing activities increased primarily due
to an increase in additions to tangible and intangible assets of $33.3 million
in connection with investments in our A2 platform. This increase in cash flows
used in financing activities was partially offset by: (i) an increase in
proceeds from the sale of property, equipment, intangibles and other assets of
$17.4 million; and (ii) a decrease in purchases of business and audio assets of
$10.3 million.

Financing Activities

Net cash flows provided by financing activities were $55.6 million and $39.7
million for the nine months ended September 30, 2022 and September 30, 2021,
respectively.

During 2022, net cash flows provided by financing activities increased primarily
due to: (i) a decrease in cash outflows related to the redemption of fixed rate
debt of $390.0 million; (ii) a decrease in payments against the Revolver of
$101.3 million; (iii) a decrease of payments of long-term debt of $77.0 million;
(iv) an increase in borrowing under the Revolver of $38.0 million; (v) a
decrease in payments of call premiums and other fees of $14.5 million; and (vi)
a decrease in payments for debt issuance costs of $9.4 million. These increases
in cash flows provided by financing activities were partially offset by: (i) a
decrease in proceeds from issuance of long term debt of $540.0 million; and (ii)
a reduction in proceeds from the borrowing under the Receivables Facility of
$75.0 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 September 30, 2022, we did not repurchase any shares under our share repurchase program (the "2017 Share Repurchase Program"). As of September 30, 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 nine months ended September 30, 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.

Capital Expenditures


Capital expenditures, including amortizable intangibles, for the nine months
ended September 30, 2022 were $72.5 million. We anticipate that total capital
expenditures in 2022 will be approximately $80 million as we increase our
investment in the rapidly growing digital audio advertising market.
                                       50

--------------------------------------------------------------------------------

Table of Contents

Contractual Obligations


As of September 30, 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 nine months ended
September 30, 2022, we made a voluntary prepayment against our Revolver of $22.7
million. We borrowed an additional $90.0 million under our Revolver, and also
made opportunist repurchases under our 2027 Notes in the amount of $10.0
million. As a result of this activity, the amounts outstanding under our
long-term debt obligations increased by $60.3 million during the nine months
ended September 30, 2022.

Off-Balance Sheet Arrangements

As of September 30, 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. We used 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 was included in our consolidated financial statements as we were
considered the primary beneficiary.

The use of a QI in a like-kind exchange enabled 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. During the second
quarter of 2022, we used a portion of these proceeds to repurchase replacement
property in the amount of $2.4 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.

All restrictions on these deposits have lapsed as of September 30, 2022. As a
result, there is no restricted cash on our condensed consolidated balance sheet
as of September 30, 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 September 30, 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.
                                       51

--------------------------------------------------------------------------------

Table of Contents

Goodwill Interim Impairment Test


As of September 30, 2022, we evaluated whether the facts and circumstances and
available information result in the need for an impairment assessment for any
goodwill, particularly the results of operations, increase in interest rates and
related impact on the weighted average cost of capital and changes in stock
price, and concluded and interim impairment assessment was warranted.

During the third quarter of 2022, we completed an interim impairment test for
our goodwill at the podcast reporting unit and the QLGG reporting unit. As a
result of this interim impairment assessment, we determined that the fair value
of our podcasting reporting unit was greater than the amount reflected in the
balance sheet and, accordingly, no impairment was recorded for the podcast
reporting unit. However, we determined that the fair value of our QLGG reporting
unit was less than the amount reflected in the balance sheet and, accordingly,
recorded an impairment loss of $18.1 million. As a result of this impairment
loss, we no longer have any goodwill attributable to the QLGG reporting unit.

We elected to bypass the qualitative assessment for the interim impairment tests
of our podcast reporting unit and QLGG reporting unit and proceeded directly to
the quantitative goodwill impairment test by using a discounted cash flow
approach (a 5-year income model). Potential impairment is identified by
comparing the fair value of each reporting unit to its carrying value. Our fair
value analysis contains assumptions based upon past experience, reflects
expectations of industry observers and includes judgments about future
performance using industry normalized information. The cash flow projections for
the reporting units include significant judgments and assumptions relating to
the revenue, operating expenses, projected operating profit margins, and the
discount rate. Changes in our estimates of the fair value of these assets could
result in material future period write-downs of the carrying value of our
goodwill.

Assumptions and Results - Goodwill

The following table reflects the estimates and assumptions used in the annual goodwill impairment assessments of each year:

Estimates And Assumptions

                                                             Third Quarter 2022                  Fourth Quarter 2021
Discount rate - podcast reporting unit                                       11.0  %                                  9.5%
Discount rate - QLGG reporting unit                                          13.0  %                                 12.0%


We believe we have made reasonable estimates and assumptions to calculate the fair value of our podcast reporting unit and QLGG reporting unit. These estimates and assumptions could be materially different from actual results.


If actual market conditions are less favorable than those projected by the
industry or us, or if events occur or circumstances change that would reduce the
fair value of our goodwill below the amount reflected in the condensed
consolidated balance sheet, we may be required to conduct an interim test and
possibly recognize impairment charges, which could be material, in future
periods. The current macroeconomic conditions increase the uncertainty with
respect to such market and economic conditions and, as such, increases the risk
of future impairment.

Goodwill Valuation Risk

We no longer have any goodwill attributable to the broadcast reporting unit or
the QLGG reporting unit. Our remaining goodwill as of September 30, 2022 is
limited to the goodwill acquired in the Cadence13 Acquisition and Pineapple
Acquisition in 2019, 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.

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. Due to the uncertainty of the current market and economic
conditions, there is an increased risk of future impairment.
                                       52

--------------------------------------------------------------------------------

Table of Contents


We will continue to evaluate the impacts of the current macroeconomic conditions
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.

Sensitivity of Key Goodwill Assumptions


If we were to assume changes in certain of our key assumptions used to determine
the fair value of our podcasting reporting unit, we would not be required to
record an impairment charge.
                                             Sensitivity Analysis (1)
                                                         Percentage Decrease in Reporting Unit Carrying Value
Increase the discount rate from 11.0% to 12.0%                                                                 -  %
Reduction in forecasted growth rate (including
long-term growth rate) to 0%                                                                                   -  %
Reduction in operating profit margin by 10%                                                                    -  %


(1) Each assumption used in the sensitivity analysis is independent of the other assumptions.


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 our podcast reporting unit or other of our units of
accounting, which could be material. Due to the uncertainty of the current
market and economic conditions, there is an increased risk of future impairment.

We will continue to evaluate the impacts of the current macroeconomic conditions
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.
                                       53

--------------------------------------------------------------------------------

Table of Contents

Broadcasting Licenses Interim Impairment Test


As of September 30, 2022, we evaluated whether the facts and circumstances and
available information result in the need for an impairment assessment for our
FCC broadcasting licenses, particularly the results of operations, increase in
interest rates and related impact on the weighted average cost of capital and
changes in stock price, and concluded and interim impairment assessment was
warranted.

During the third quarter of the current year, we completed an interim impairment
assessment for our broadcasting licenses at the market level using the
Greenfield method. As a result of this interim impairment assessment, we
determined that the fair value of our broadcasting licenses was less than the
amount reflected in the balance sheet for certain of our markets and,
accordingly, recorded an impairment loss of $159.1 million ($116.7 million, net
of tax).

Each market's broadcasting licenses are combined into a single unit of
accounting for purposes of testing impairment, as the broadcasting licenses in
each market are operated as a single asset. We determine the fair value of the
broadcasting licenses in each of our markets by relying on a discounted cash
flow approach (a 10-year income model) assuming a start-up scenario in which the
only assets held by an investor are broadcasting licenses. Our fair value
analysis contains assumptions based upon past experience, reflects expectations
of industry observers and includes judgments about future performance using
industry normalized information for an average station within a certain market.
These assumptions include, but are not limited to: (i) the discount rate; (ii)
the profit margin of an average station within a market, based upon market size
and station type; (iii) the forecast growth rate of each radio market; (iv) the
estimated capital start-up costs and losses incurred during the early years; (v)
the likely media competition within the market area; (vi) the tax rate; and
(vii) future terminal values.
The methodology used by us in determining our key estimates and assumptions was
applied consistently to each market. Of the seven variables identified above, we
believe that the assumptions in items (i) through (iii) above are the most
important and sensitive in the determination of fair value.

Assumptions and Results - Broadcasting Licenses

The following table reflects the estimates and assumptions used in the interim and annual broadcasting licenses impairment assessments of each year.

Estimates And Assumptions

                                                              Third Quarter 2022         Fourth Quarter 2021
Discount rate                                                               9.5  %                    8.5  %

Operating profit margin ranges for average stations in markets where the Company operates

                                  19.6% to 32.9%            19.6% to 33.3%

Forecasted growth rate (including long-term growth rate) range of the Company's markets

                                        0.0% to 0.6%              0.0% to 0.6%


We believes we have made reasonable estimates and assumptions to calculate the
fair value of our broadcasting licenses. These estimates and assumptions could
be materially different from actual results.

If actual market conditions are less favorable than those projected by the
industry or us, or if events occur or circumstances change that would reduce the
fair value of our broadcasting licenses below the amount reflected in the
condensed consolidated balance sheet, we may be required to conduct an interim
test and possibly recognize impairment charges, which may be material, in future
periods. The current macroeconomic conditions increase the uncertainty with
respect to such market and economic conditions and, as such, increases the risk
of future impairment.

Broadcasting License Valuation Risk


The table below presents the percentage within a range by which the fair value
exceeded the carrying value of our broadcasting licenses as of September 30,
2022. Rather than presenting the percentage separately for each unit of
accounting, our opinion is that this table in summary form is more meaningful to
the reader in assessing the recoverability of the broadcasting licenses. In
addition, the units of accounting are not disclosed with the specific market
name as such disclosure could be competitively harmful to us.
                                       54

--------------------------------------------------------------------------------

Table of Contents


After the interim impairment test conducted on our broadcasting licenses in the
third quarter of 2022, the results indicated that there were 41 units of
accounting where the fair value exceeded their carrying value by 10% or less. In
aggregate, these 41 units of accounting had a carrying value of $2,019.5 million
at September 30, 2022. As discussed above, as a result of the interim impairment
assessment conducted in the third quarter of 2022, we wrote down the carrying
value of our broadcasting licenses in 38 markets.

                                                         Units of 

Accounting as of September 1, 2022

                                                      Based Upon the 

Valuation as of September 1, 2022

                                               Percentage Range by Which 

Fair Value Exceeds the Carrying Value

                                                                  Greater              Greater              Greater
                                            0% To                 Than 5%              Than 10%              Than
                                              5%                  To 10%                To 15%                15%
Number of units of accounting                        41                     -                    1                   1

Carrying value (in thousands) $ 2,019,531 $ -

$ 4,174 $ 63,783

Sensitivity of Key Broadcasting Licenses Assumptions

If we were to assume changes in certain of our key assumptions used to determine the fair value of our broadcasting licenses, the following would be the incremental impact:

                                              Sensitivity Analysis (1)
                                                      Percentage Decrease in Broadcasting Licenses Carrying Value
Increase the discount rate from 9.5% to 10.5%                                                                 12.6  %
Reduction in forecasted growth rate (including
long-term growth rate) to 0% for all markets                                                                   3.3  %
Reduction in operating profit margin by 10%                                                                   11.6  %


(1) Each assumption used in the sensitivity analysis is independent of the other assumptions.


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. Due to the uncertainty of the current market and economic conditions,
there is an increased risk of future impairment.

We will continue to evaluate the impacts of the current macroeconomic conditions
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.
                                       55

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses

All news about AUDACY, INC.
01/30Audacy, Inc. : Entry into a Material Definitive Agreement, Regulation FD Disclosure, Other..
AQ
01/10Audacy, Inc. : Change in Directors or Principal Officers (form 8-K)
AQ
2022Audacy, Inc. : Other Events, Financial Statements and Exhibits (form 8-K)
AQ
2022Audacy, Inc. Announces Board Changes
CI
2022Audacy : Taps Seema Kumar as Senior Vice President of Advertising Platforms
PU
2022Guggenheim Adjusts Price Target on Audacy to $1 From $2, Maintains Buy Rating
MT
2022AUDACY, INC. Management's Discussion And Analysis Of Financial Condition And Results O..
AQ
2022Tranche Update on Audacy, Inc.'s Equity Buyback Plan announced on November 2, 2017.
CI
2022Transcript : Audacy, Inc., Q3 2022 Earnings Call, Nov 08, 2022
CI
2022Audacy, Inc. : Results of Operations and Financial Condition (form 8-K)
AQ
More news
Analyst Recommendations on AUDACY, INC.
More recommendations