Format of Presentation
Management's discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the consolidated financial statements and related footnotes contained in Item 1 of this Quarterly Report on Form 10-Q ofiHeartMedia, Inc. (the "Company," "iHeartMedia," "we," "our," or "us"). Our reportable segments are:
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These reporting segments reflect how senior management operates the Company. This structure provides visibility into the underlying performance, results, and margin profiles of our distinct businesses and enables senior management to monitor trends at the operational level and address opportunities or issues as they arise via regular review of segment-level results and forecasts with operational leaders. Additionally, Segment Adjusted EBITDA is the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as Revenue less operating expenses, excluding Restructuring expenses (as defined below) and share-based compensation expenses. We operate as a company with multiple platforms including radio, digital, podcasting, networks and events, as well as ad technology capabilities. We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience. We believe the presentation of our results by segment provides additional insight into our broadcast radio business and our fast-growing digital business. We believe that our ability to generate cash flow from operations from our business initiatives and our current cash on hand will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next twelve months. Description of our Business
Our strategy centers on delivering entertaining and informative content where our listeners want to find us across our various platforms.
The primary source of revenue for ourMultiplatform Group is from selling local and national advertising time on our radio stations, with contracts typically less than one year in duration. The programming formats of our radio stations are designed to reach audiences with targeted demographic characteristics. We work closely with our advertising and marketing partners to develop tools and leverage data to enable advertisers to effectively reach their desired audiences. OurMultiplatform Group also generates revenue from network syndication, nationally recognized events and other miscellaneous transactions. Management looks at ourMultiplatform Group's operations' overall revenue as well as the revenue from each type of advertising, including local advertising, which is sold predominately in a station's local market, and national advertising, which is sold across multiple markets. Local advertising is sold by each radio station's sales staff while national advertising is sold by our national sales team. We periodically review and refine our selling structures in all regions and markets in an effort to maximize the value of our offering to advertisers and, therefore, our revenue. Management also looks atMultiplatform Group's revenue by region and market size. Typically, larger markets can reach larger audiences with wider demographics than smaller markets. Additionally, management reviews our share of audio advertising revenues in markets where such information is available, as well as our share of target demographics listening in an average quarter hour. This metric gauges how well our formats are attracting and retaining listeners. 18 -------------------------------------------------------------------------------- Management also monitors revenue generated through our programmatic ad-buying platform, Soundpoint, and our data analytics advertising product, SmartAudio, to measure the success of our enhanced marketing optimization tools. We have made significant investments so we can provide the same ad-buying experience that once was only available from digital-only companies and enable our clients to better understand how our assets can successfully reach their target audiences. Management monitors average advertising rates and cost per mille, the cost of every 1,000 advertisement impressions ("CPM"), which are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent ratings service. In addition, our advertising rates are influenced by the time of day the advertisement airs, with morning and evening drive-time hours typically priced the highest. Our price and yield information systems enable our station managers and sales teams to adjust commercial inventory and pricing based on local market demand, as well as to manage and monitor different commercial durations in order to provide more effective advertising for our customers at what we believe are optimal prices given market conditions. Yield is measured by management in a variety of ways, including revenue earned divided by minutes of advertising sold. A portion of ourMultiplatform Group segment's expenses vary in connection with changes in revenue. These variable expenses primarily relate to costs in our programming and sales departments, including profit sharing fees and commissions, and bad debt. Our content costs, including music license fees for music delivered via broadcast, vary with the volume and mix of songs played on our stations.Digital Audio Group The primary source of revenue in theDigital Audio Group segment is the sale of advertising on the Company's iHeartRadio mobile application and website, station websites, and podcast network. Revenues for advertising spots are recognized over time based on impressions delivered or time elapsed, depending upon the terms of the contract.Digital Audio Group's contracts with advertisers are typically a year or less in duration and are generally billed monthly upon satisfaction of the performance obligations. Through ourDigital Audio Group , we continue to expand the choices for listeners. We derive revenue in this segment by developing and delivering our content and selling advertising across multiple digital distribution channels, including via our iHeartRadio mobile application, our station websites and other digital platforms that reach national, regional and local audiences. Our strategy has enabled us to extend our leadership in the rapidly growing podcasting sector, and iHeartMedia is the number one podcast publisher in America. Our reach now extends across more than 250 platforms and 2,000 different connected devices, and our digital business is comprised of streaming, subscription, display advertisements, and other content that is disseminated over digital platforms. A portion of ourDigital Audio Group segment's expenses vary in connection with changes in revenue. These variable expenses primarily relate to our content costs including profit sharing fees and third-party content costs, as well as sales commissions and bad debt. Certain of our content costs, including digital music performance royalties, vary with the volume of listening hours on our digital platforms.
Audio & Media Services Group revenue is generated by services provided to broadcast industry participants through ourKatz Media and RCS businesses. As a media representation firm,Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast software and media streaming, along with research services for radio stations, broadcast television stations, cable channels, record labels, ad agencies and Internet stations worldwide.
COVID-19
Our advertising revenue is highly correlated to changes in gross domestic product ("GDP") as advertising spending has historically trended in line with GDP. A recession or downturn in theU.S. economy could have a significant impact on the Company's ability to generate revenue. Beginning inMarch 2020 and continuing in the following months, we saw a sharp decline in each of our Broadcast radio, Networks and Sponsorships revenue streams as a result of the impact of the coronavirus pandemic ("COVID-19") and the resulting impact on theU.S. economy. OurMultiplatform Group revenues significantly increased for the first quarter of 2022 compared to the first quarter of 2021 as a result of continued recovery from the impact of the COVID-19 pandemic. OurDigital Audio Group revenues, including podcasting, have continued to grow each quarter 19 -------------------------------------------------------------------------------- during the COVID-19 pandemic. OurAudio & Media Services Group revenues have increased for the first quarter of 2022 compared to the first quarter of 2021 mainly due to the continued recovery from the impact of the COVID-19 pandemic. Refer to Note 1, Basis of Presentation, for more information regarding COVID-19 and its impact on our financial statements.
Cost Savings Initiatives
We have implemented key modernization initiatives and operating-expense-saving initiatives to take advantage of the significant investments we have made in new technologies to deliver incremental cost efficiencies, including initiatives to streamline our real estate footprint. We believe these initiatives position the Company for sustainable growth and value creation for stockholders.
Impairment Charges
As part of our operating-expense-savings initiatives, we have taken proactive steps to streamline our real estate footprint and reduce related lease and operating expenses incurred by the Company. These strategic actions typically result in impairment charges due to the write-down of the affected right-of-use assets and related fixed assets, including leasehold improvements. For the three months endedMarch 31, 2022 and 2021, we recognized non-cash impairment charges of$1.3 million and$37.7 million , respectively, as a result of these cost-savings initiatives. 20
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Executive Summary
Our revenues for the first quarter of 2022 increased significantly across ourMultiplatform Group ,Digital Audio Group andAudio & Media Services Group segments as a result of the continued recovery from the impacts of the COVID-19 pandemic and the continued increased demand for digital advertising, including podcasting.
The key developments that impacted our business during the quarter are summarized below:
•Consolidated Revenue of$843.5 million increased$136.8 million , or 19.4% during the quarter endedMarch 31, 2022 compared to Revenue of$706.7 million in the prior year's first quarter. •Revenue and Segment Adjusted EBITDA from ourMultiplatform Group increased$73.3 million and$29.1 million compared to the prior year's first quarter, respectively. •Revenue and Segment Adjusted EBITDA from ourDigital Audio Group increased$56.7 million and$12.5 million compared to the prior year's first quarter, respectively. •Revenue and Segment Adjusted EBITDA from ourAudio & Media Services Group increased$5.7 million and$1.0 million compared to the prior year's first quarter, respectively. •Operating income of$12.3 million was up from an Operating loss of$76.4 million in the prior year's first quarter. •Net loss of$48.7 million compared to a Net loss of$242.1 million in the prior year's first quarter. •Cash flows used for operating activities of$(52.2) million decreased from Cash flows provided by operating activities of$71.7 million in the prior year's first quarter. •Adjusted EBITDA(1) of$145.2 million , was up$43.0 million from$102.2 million in prior year's first quarter. •Free cash flow(2) of$(74.8) million decreased from$52.8 million in the prior year's first quarter. The table below presents a summary of our historical results of operations for the periods presented: (In thousands) Three Months Ended March 31, 2022 2021 Revenue $ 843,458$ 706,665 Operating income (loss) $ 12,335$ (76,356) Net loss $ (48,739)$ (242,056)
Cash provided by (used for) operating activities $ (52,212)
$ 71,728 Adjusted EBITDA(1) $ 145,218$ 102,247 Free cash flow(2) $ (74,769)$ 52,778 (1) For a definition of Adjusted EBITDA and a reconciliation to Operating income (loss), the most closely comparable GAAP measure, and to Net loss, please see "Reconciliation of Operating Income (Loss) to Adjusted EBITDA" and "Reconciliation of Net Loss to EBITDA and Adjusted EBITDA" in this MD&A. (2) For a definition of Free cash flow and a reconciliation to Cash provided by operating activities, the most closely comparable GAAP measure, please see "Reconciliation of Cash provided by operating activities to Free cash flow" in this MD&A. 21
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Results of Operations
The tables below present the comparison of our historical results of operations for the three months endedMarch 31, 2022 to the three months endedMarch 31, 2021 : (In thousands) Three Months Ended March 31, 2022 2021 Revenue$ 843,458 $ 706,665 Operating expenses: Direct operating expenses (excludes depreciation and amortization) 330,524 292,813 Selling, general and administrative expenses (excludes depreciation and amortization) 384,344 342,330 Depreciation and amortization 114,051 107,363 Impairment charges 1,334 37,744 Other operating expense, net 870 2,771 Operating income (loss) 12,335 (76,356) Interest expense, net 79,219 85,121 Gain (loss) on investments, net (1,765) 191 Equity in loss of nonconsolidated affiliates (29) (28) Other expense, net (270) (807) Loss before income taxes (68,948) (162,121) Income tax benefit (expense) 20,209 (79,935) Net loss (48,739) (242,056) Less amount attributable to noncontrolling interest (157) (333) Net loss attributable to the Company $
(48,582)
The tables below present the comparison of our revenue streams for the three
months ended
(In thousands) Three Months Ended March 31, % 2022 2021 Change Broadcast Radio$ 416,481 $ 358,536 16.2 % Networks 117,558 115,086 2.1 % Sponsorship and Events 33,601 22,393 50.1 % Other 3,520 1,882 87.0 % Multiplatform Group 571,160 497,897 14.7 % Digital, excluding Podcast 145,675 119,201 22.2 % Podcast 68,544 38,352 78.7 % Digital Audio Group 214,219 157,553 36.0 % Audio & Media Services Group 60,857 55,137 10.4 % Eliminations (2,778) (3,922) Revenue, total$ 843,458 $ 706,665 19.4 % 22
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Consolidated results for the three months ended
Revenue
Consolidated revenue increased$136.8 million during the three months endedMarch 31, 2022 compared to the same period of 2021. The increase in Consolidated revenue is attributable to the continued recovery from the macroeconomic effects of COVID-19 and the continuing growth of our operating businesses.Multiplatform Group revenue increased$73.3 million , or 14.7%, primarily resulting from strengthening demand for broadcast advertising and the return of live events compared to the first quarter of 2021.Digital Audio Group revenue increased$56.7 million , or 36.0%, driven primarily by continuing increases in demand for digital advertising and the continued growth of podcasting. Audio & Media Services revenue increased$5.7 million primarily due to the continued recovery from the impact of COVID-19.
Direct Operating Expenses
Consolidated direct operating expenses increased$37.7 million during the three months endedMarch 31, 2022 compared to the same period of 2021. The increase in direct operating expenses was primarily driven by higher variable content costs resulting from our significant increase in revenue, including profit sharing expenses, third-party digital costs, and production costs related to the return of local and national live events.
Selling, General and Administrative ("SG&A") Expenses
Consolidated SG&A expenses increased$42.0 million during the three months endedMarch 31, 2022 compared to the same period of 2021. The increase in Consolidated SG&A expenses was driven primarily by higher national trade and barter expenses, including the impact of the timing of the iHeartRadio Music Awards, increased sales commission expenses as a result of higher revenue, and increased employee compensation costs related to increased workforce due to the investments in key infrastructure to support our growing digital operations.
Depreciation and Amortization
Depreciation and amortization increased$6.7 million during the three months endedMarch 31, 2022 compared to the same period of 2021, primarily as a result of acquired businesses and increased capital expenditures including IT and real estate optimization-related expenditures.
Impairment Charges
As part of our operating expense-savings initiatives, we have taken strategic actions to streamline our real estate footprint and related expenses, resulting in impairment charges due to the write-down of right-of-use assets and related fixed assets, including leasehold improvements. During the three months endedMarch 31, 2022 and 2021, we recognized non-cash impairment charges of$1.3 million and$37.7 million related to certain of our right-of-use assets and leasehold improvements as a result of these cost-savings initiatives.
Other Operating Expense, Net
Other operating expense, net of
Interest Expense
Interest expense decreased$5.9 million during the three months endedMarch 31, 2022 compared to the same period of 2021, primarily as a result of the interest rate reduction of our incremental term loan facility as amended inJuly 2021 and the$250.0 million voluntary repayment made inJuly 2021 on our term loan credit facilities in connection with the repricing transaction.
Gain (Loss) on Investments, Net
During the three months endedMarch 31, 2022 , we recognized a loss on investments, net of$1.8 million in connection with declines in the value of our investments. During the three months endedMarch 31, 2021 , we recognized a gain of$0.2 million . 23
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Other Expense, Net
Other expense, net was
Income Tax Benefit (Expense)
The effective tax rate for the Company for the three months endedMarch 31, 2022 was 29.3%. The effective tax rate was primarily impacted by the forecasted increase in valuation allowance against certain deferred tax assets, related primarily to disallowed interest expense carryforwards and net operating loss carryforwards, due to uncertainty regarding the Company's ability to utilize those assets in future periods.
Net Loss Attributable to the Company
Net loss attributable to the Company decreased$193.1 million to Net loss attributable to the Company of$48.6 million during the three months endedMarch 31, 2022 compared to a Net loss attributable to the Company of$241.7 million during the three months endedMarch 31, 2021 , primarily as a result of the increase in revenue from the continuing recovery from the macroeconomic effects of the COVID-19 pandemic and the continuing growth of our operating businesses. Multiplatform Group Results Three Months Ended (In thousands) March 31, % 2022 2021 Change Revenue$ 571,160 $ 497,897 14.7 % Operating expenses(1) 437,253 393,106 11.2 % Segment Adjusted EBITDA$ 133,907 $ 104,791 27.8 %
Segment Adjusted EBITDA margin 23.4 % 21.0 %
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
Revenue from ourMultiplatform Group increased$73.3 million compared to the prior year, primarily as a result of the continued recovery from the impact of the COVID-19 pandemic. Broadcast revenue grew$57.9 million , or 16.2%, year-over-year, driven by higher spot revenue as well as higher trade and barter revenue including the impact of the timing of the iHeartRadio Music Awards Show, while Networks grew$2.5 million , or 2.1%, year-over-year. Revenue from Sponsorship and Events increased by$11.2 million , or 50.1%, year-over-year, primarily as a result of the return of live events. Operating expenses increased$44.1 million , driven primarily by higher trade and barter expense and event costs in connection with the return of live events including the impact of the timing of the iHeartRadio Music Awards Show, as well as higher sales commissions in connection with the increase in revenue. The increase was also impacted by the employee retention credit recognized in the first quarter of 2021 related to the CARES Act. Digital Audio Group Results Three Months Ended (In thousands) March 31, % 2022 2021 Change Revenue$ 214,219 $ 157,553 36.0 % Operating expenses(1) 161,711 117,542 37.6 % Segment Adjusted EBITDA$ 52,508 $ 40,011 31.2 %
Segment Adjusted EBITDA margin 24.5 % 25.4 %
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
24 -------------------------------------------------------------------------------- Revenue from ourDigital Audio Group increased$56.7 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew$26.5 million , or 22.2%, year-over-year, driven by increased demand for digital advertising as well as Podcast revenue which increased by$30.2 million , or 78.7%, year-over-year, driven by higher revenues from the development of new podcasts as well as growth from existing podcasts.Digital Audio Group revenue increased as a result of general increased demand for digital advertising and the growing popularity of podcasting. Operating expenses increased$44.2 million in connection with ourDigital Audio Group's significant revenue growth, including the impact of higher variable sales commissions, content and profit share expenses due to higher revenue and the development of new podcasts. In addition, operating expenses increased due to our investments in increased headcount and key infrastructure to support our growing digital operations.
Audio & Media Services Group Results
Three Months Ended (In thousands) March 31, % 2022 2021 Change Revenue$ 60,857 $ 55,137 10.4 % Operating expenses(1) 44,470 39,788 11.8 % Segment Adjusted EBITDA$ 16,387 $ 15,349 6.8 %
Segment Adjusted EBITDA margin 26.9 % 27.8 %
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.
Revenue from ourAudio & Media Services Group increased$5.7 million compared to the comparative period in the prior year due to the continued recovery from the impact of the COVID-19 pandemic.
Operating expenses increased
Reconciliation of Operating Income (Loss) to Adjusted EBITDA
(In thousands) Three Months Ended March 31, 2022 2021 Operating income (loss)$ 12,335 $ (76,356) Depreciation and amortization 114,051 107,363 Impairment charges 1,334 37,744 Other operating expense, net 870 2,771 Share-based compensation expense 5,535 5,685 Restructuring expenses 11,093 25,040 Adjusted EBITDA(1)$ 145,218 $ 102,247 25
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Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(In thousands) Three Months Ended March 31, 2022 2021 Net loss$ (48,739) $ (242,056) Income tax (benefit) expense (20,209) 79,935 Interest expense, net 79,219 85,121 Depreciation and amortization 114,051 107,363 EBITDA$ 124,322 $ 30,363 Loss (gain) on investments, net 1,765 (191) Other expense, net 270 807 Equity in loss of nonconsolidated affiliates 29 28 Impairment charges 1,334 37,744 Other operating expense, net 870 2,771 Share-based compensation expense 5,535 5,685 Restructuring expenses 11,093 25,040 Adjusted EBITDA(1)$ 145,218 $ 102,247 (1)We define Adjusted EBITDA as consolidated Operating income (loss) adjusted to exclude restructuring expenses included within Direct operating expenses and SG&A expenses, and share-based compensation expenses included within SG&A expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization, Impairment charges and Other operating expense, net. Alternatively, Adjusted EBITDA is calculated as loss, adjusted to exclude Income tax (benefit) expense, Interest expense, net, Depreciation and amortization, Loss (gain) on investments, net, Other expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating expense, net, Share-based compensation expense, and restructuring expenses. Restructuring expenses primarily include expenses incurred in connection with cost-saving initiatives, as well as certain expenses, which, in the view of management, are outside the ordinary course of business or otherwise not representative of the Company's operations during a normal business cycle. We use Adjusted EBITDA, among other measures, to evaluate the Company's operating performance. This measure is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management. We believe this measure is an important indicator of our operational strength and performance of our business because it provides a link between operational performance and operating income. It is also a primary measure used by management in evaluating companies as potential acquisition targets. We believe the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management. We believe it helps improve investors' ability to understand our operating performance and makes it easier to compare our results with other companies that have different capital structures or tax rates. In addition, we believe this measure is also among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing our operating performance to other companies in our industry. Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income (loss) or net income (loss) as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs. Because it excludes certain financial information compared with operating income (loss) and compared with consolidated net income (loss), the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded. 26 -------------------------------------------------------------------------------- Reconciliation of Cash Provided by (Used for) Operating Activities to Free Cash Flow (In thousands) Three Months Ended March 31, 2022 2021
Cash provided by (used for) operating activities $ (52,212)
$ 71,728 Purchases of property, plant and equipment (22,557) (18,950) Free cash flow(1) $ (74,769)$ 52,778 (1)We define Free cash flow ("Free Cash Flow") as Cash provided by (used for) operating activities less capital expenditures, which is disclosed as Purchases of property, plant and equipment in the Company's Consolidated Statements of Cash Flows. We use Free Cash Flow, among other measures, to evaluate the Company's liquidity and its ability to generate cash flow. We believe that Free Cash Flow is meaningful to investors because we review cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations. In addition, we believe that Free Cash Flow helps improve investors' ability to compare our liquidity with other companies. Since Free Cash Flow is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, Cash provided by (used for) operating activities and may not be comparable to similarly titled measures employed by other companies. Free Cash Flow is not necessarily a measure of our ability to fund our cash needs.
Share-Based Compensation Expense
OnApril 21, 2021 , our 2021 Long-Term Incentive Award Plan (the "2021 Plan") was approved by stockholders and replaced the prior plan. Pursuant to our 2021 Plan, we will grant restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals. Share-based compensation expenses are recorded in SG&A expenses and were$5.5 million and$5.7 million for the three months endedMarch 31, 2022 and 2021, respectively. OnMarch 28, 2022 , we issued performance-based restricted stock units ("Performance RSUs") to certain key employees. Such Performance RSUs vest upon the achievement of certain total stockholder return goals and continued service, which are being measured over an approximately 50-month period from the date of issuance. As ofMarch 31, 2022 , there was$34.0 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions. This cost is expected to be recognized over a weighted average period of approximately 1.9 years. In addition, as ofMarch 31, 2022 , there was$12.5 million of unrecognized compensation costs related to unvested share-based compensation arrangements that will vest based on performance and service conditions. This cost will be recognized over a 50-month period from the date of issuance. 27
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LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following discussion highlights cash flow activities during the periods presented: Three Months Ended (In thousands) March 31, 2022 2021 Cash provided by (used for): Operating activities$ (52,212) $ 71,728 Investing activities$ (19,690) $ (249,324) Financing activities$ (461) $ (13,811) Free Cash Flow(1)$ (74,769) $ 52,778 (1) For a definition of Free cash flow from operations and a reconciliation to Cash provided by (used for) operating activities, the most closely comparable GAAP measure, please see "Reconciliation of Cash provided by (used for) operating activities to Free cash flow from operations" in this MD&A.
Operating Activities
Cash provided by operating activities decreased from$71.7 million in the three months endedMarch 31, 2021 to cash used for operating activities of$52.2 million in the three months endedMarch 31, 2022 primarily due to an increase in the payment of bonuses and commissions in the first quarter of 2022. The Company did not pay bonuses to the vast majority of employees in the first quarter of 2021. Investing Activities Cash used for investing activities of$19.7 million during the three months endedMarch 31, 2022 primarily reflects$22.6 million in cash used for capital expenditures. We spent$12.3 million for capital expenditures in ourMultiplatform Group segment primarily related to our real estate optimization initiatives,$5.2 million in ourDigital Audio Group segment primarily related to IT infrastructure,$1.7 million in ourAudio & Media Services Group segment, primarily related to software, and$3.4 million in Corporate primarily related to equipment and software purchases. Cash used for investing activities of$249.3 million during the three months endedMarch 31, 2021 primarily reflects the net cash payment made to acquire Triton Digital for$228.4 million . In addition,$19.0 million in cash was used for capital expenditures. We spent$10.1 million for capital expenditures in ourMultiplatform Group segment and$5.4 million for capital expenditures in ourDigital Audio Group segment primarily related to IT infrastructure,$1.1 million in ourAudio & Media Services Group segment, primarily related to software, and$2.4 million in Corporate primarily related to equipment and software purchases.
Financing Activities
Cash used for financing activities totaled$0.5 million during the three months endedMarch 31, 2022 . Due to the$250.0 million voluntary repayment of our term loan credit facilities in the third quarter of 2021, our Term Loan Facility no longer requires quarterly principal payments.
Cash used for financing activities of
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Sources of Liquidity and Anticipated Cash Requirements
Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of$279.7 million as ofMarch 31, 2022 , cash flow from operations and borrowing capacity under our$450.0 million ABL Facility. As ofMarch 31, 2022 ,iHeartCommunications had no amounts outstanding under the ABL Facility, a borrowing base of$443.6 million and$26.9 million in outstanding letters of credit, resulting in$416.7 million of borrowing base availability. Together with our cash balance of$279.7 million as ofMarch 31, 2022 and our borrowing capacity under the ABL Facility, our total available liquidity1 was approximately$696 million . We continue to evaluate the ongoing impact of COVID-19 on our business. The challenges that COVID-19 has created for advertisers and consumers had an adverse impact on our revenue for the three months endedMarch 31, 2021 . For the three months endedMarch 31, 2022 , our revenues increased significantly compared to the three months endedMarch 31, 2021 due to recovery from the macroeconomic effects of COVID-19, among other factors discussed in the Results of Operations section of the MD&A. We believe that we have sufficient liquidity to continue to fund our operations for at least the next twelve months. We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as ofMarch 31, 2022 , while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, commitments under non-cancelable operating lease agreements, and employment and talent contracts. In addition to our contractual obligations, we expect that our primary anticipated uses of liquidity in 2022 will be to fund our working capital, make interest and tax payments, fund capital expenditures, pursue certain strategic opportunities and maintain operations.
Assuming the current level of borrowings and interest rates in effect at
We believe that our cash balance, our cash flow from operations and availability under our ABL Facility provide us with sufficient liquidity to fund our core operations, maintain key personnel and meet our other material obligations for at least the next twelve months. In addition, none of our long-term debt includes maintenance covenants that could trigger early repayment. We appreciate the challenges posed by the COVID-19 pandemic, however, we remain confident in our business, our employees and our strategy. Further, we believe our available liquidity will allow us to fund capital expenditures and other obligations and make interest payments on our long-term debt. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms or at all in the future. We frequently evaluate strategic opportunities, and we expect from time to time to pursue acquisitions or dispose of certain businesses, which may or may not be material.
1 Total available liquidity is defined as cash and cash equivalents plus available borrowings under the ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.
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Summary Debt Capital Structure
As of
(In thousands) March 31, 2022 December 31, 2021 Term Loan Facility due 2026$ 1,864,032 $ 1,864,032 Incremental Term Loan Facility due 2026 401,220 401,220 Asset-based Revolving Credit Facility due 2023 - - 6.375% Senior Secured Notes due 2026 800,000 800,000 5.25% Senior Secured Notes due 2027 750,000 750,000 4.75% Senior Secured Notes due 2028 500,000 500,000 Other Secured Subsidiary Debt 5,184 5,350 Total Secured Debt$ 4,320,436
8.375% Senior Unsecured Notes due 2027 1,450,000 1,450,000 Other Subsidiary Debt 90 90 Original issue discount (12,745) (13,454) Long-term debt fees (17,641) (18,370) Total Debt$ 5,740,140 $ 5,738,868 Less: Cash and cash equivalents 279,683 352,129$ 5,460,457 $ 5,386,739
For additional information regarding our debt refer to Note 5, Long-Term Debt.
Supplemental Financial Information under Debt Agreements
Pursuant toiHeartCommunications' material debt agreements, Capital I, the parent guarantor and a subsidiary of iHeartMedia, is permitted to satisfy its reporting obligations under such agreements by furnishing iHeartMedia's consolidated financial information and an explanation of the material differences between iHeartMedia's consolidated financial information, on the one hand, and the financial information of Capital I and its consolidated restricted subsidiaries, on the other hand. Because neither iHeartMedia nor iHeartMediaCapital II, LLC , a wholly-owned direct subsidiary of iHeartMedia and the parent of Capital I, have any operations or material assets or liabilities, there are no material differences between iHeartMedia's consolidated financial information for the three months endedMarch 31, 2022 , and Capital I's and its consolidated restricted subsidiaries' financial information for the same period. Further, as ofMarch 31, 2022 , we were in compliance with all covenants related to our debt agreements in all material respects.
Commitments, Contingencies and Guarantees
We are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued our estimate of the probable costs for resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. Please refer to "Legal Proceedings" in Part II, Item 1 of this Quarterly Report on Form 10-Q. We have future cash obligations under various types of contracts. We lease office space, certain broadcast facilities and equipment. Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance. We also have non-cancellable contracts in our radio broadcasting operations related to program rights and music license fees. In the normal course of business, our broadcasting operations have minimum future payments associated with employee and talent contracts. These contracts typically contain cancellation provisions that allow us to cancel the contract with good cause. 30 --------------------------------------------------------------------------------
SEASONALITY
Typically, our businesses experience their lowest financial performance in the first quarter of the calendar year. We expect this trend to continue in the future. Due to this seasonality and certain other factors, the results for the interim periods may not be indicative of results for the full year. In addition, we are impacted by political cycles and generally experience higher revenues in congressional election years, and particularly in presidential election years. This may affect the comparability of results between years.
MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates and inflation.
Interest Rate Risk
A significant amount of our long-term debt bears interest at variable rates. Accordingly, our earnings will be affected by changes in interest rates. As ofMarch 31, 2022 , approximately 39% of our aggregate principal amount of long-term debt bore interest at floating rates. Assuming the current level of borrowings and assuming a 50% change in LIBOR, it is estimated that our interest expense for the three months endedMarch 31, 2022 would have changed by$0.3 million . In the event of an adverse change in interest rates, management may take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.
Inflation
Inflation is a factor in our business and we continue to seek ways to mitigate its effect. Inflation has affected our performance in terms of higher costs for employee compensation, equipment and third party services. We believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. Although we are unable to determine the exact impact of inflation, we believe the impact will continue to be immaterial considering the actions we may take in response to these higher costs that may arise as a result of inflation.
Critical Accounting Estimates
The preparation of our financial statements in conformity withU.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material. There have been no significant changes to our critical accounting policies and estimates disclosed in "Critical Accounting Estimates" of Item 7, Management's Discussion and Analysis of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 31
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, the anticipated impacts of and recovery from the COVID-19 pandemic on our business, financial position and results of operations, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, expected interest rate savings from our amendment to and$250 million voluntary prepayment on our Term Loan credit facilities, our business plans, strategies and initiatives, benefits of acquisitions, our expectations about certain markets, expected cash interest payments and our anticipated financial performance and liquidity. Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables which could impact our future performance. These statements are made on the basis of management's views and assumptions, as of the time the statements are made, regarding future events and performance. There can be no assurance, however, that management's expectations will necessarily come to pass. Actual future events and performance may differ materially from the expectations reflected in our forward-looking statements. We do not intend, nor do we undertake any duty, to update any forward-looking statements.
A wide range of factors could materially affect future developments and performance, including but not limited to:
•risks associated with weak or uncertain global economic conditions and their impact on the level of expenditures for advertising; •the impact of the COVID-19 pandemic on our business, financial position and results of operations; •intense competition including increased competition from alternative media platforms and technologies; •dependence upon the performance of on-air talent, program hosts and management as well as maintaining or enhancing our master brand; •fluctuations in operating costs; •technological changes and innovations; •shifts in population and other demographics; •the impact of our substantial indebtedness; •the impact of acquisitions, dispositions and other strategic transactions; •legislative or regulatory requirements; •the impact of legislation or ongoing litigation on music licensing and royalties; •regulations and consumer concerns regarding privacy and data protection, and breaches of information security measures; •risks related to our Class A common stock, including our significant number of outstanding warrants; •regulations impacting our business and the ownership of our securities; and •certain other factors set forth in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , as updated by "Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q, and other filings with theSecurities and Exchange Commission ("SEC").
This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
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