INTANGIBLE ASSETS AND GOODWILL

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and certain intangible assets are not amortized for book purposes. They may, however, be amortized for tax purposes. The Company accounts for its acquired broadcasting licenses as indefinite-lived intangible assets and, similar to goodwill, these assets are reviewed at least annually for impairment. At the time of each review, if the fair value is less than the carrying value of the reporting unit, then a charge is recorded to the results of operations.

The following table presents the changes in the carrying value of broadcasting licenses. Refer to Note 2, Business Combinations, and Note 14, Assets Held For Sale, for additional information.


	Broadcasting Licenses Carrying Amount
	September 30, 2022		December 31, 2021
	(amounts in thousands)
Broadcasting licenses balance as of January 1,	$	2,251,546	$	2,229,016

Acquisitions (See Note 2)	—		23,233
Loss on impairment	(159,089)		—
Assets held for sale (See Note 14)	(4,380)		(703)
Ending period balance	$	2,088,077	$	2,251,546

The following table presents the changes in goodwill. Refer to Note 2, Business Combinations, for additional information.


	Goodwill Carrying Amount
	September 30, 2022		December 31, 2021
	(amounts in thousands)
Goodwill balance before cumulative loss on impairment as of January 1,	$	1,062,723	$	1,042,762
Accumulated loss on impairment as of January 1,	(980,547)		(980,547)
Goodwill beginning balance after cumulative loss on impairment as of January 1,	82,176		62,215
Loss on impairment	(18,126)		—

Acquisitions (See Note 2)	—		20,099
Measurement period adjustments to acquired goodwill (See Note 2)	(134)		(138)
Ending period balance	$	63,916	$	82,176

Interim Impairment Assessment

In evaluating whether events or changes in circumstances indicate that an interim impairment assessment is required, management considers several factors in determining whether it is more likely than not that the carrying value of the Company’s broadcasting licenses or goodwill exceeds the fair value of the Company’s broadcasting licenses or goodwill. The analysis considers: (i) macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; (ii) industry and market considerations such as deterioration in the environment in which the Company operates, an increased competitive environment, a change in the market for the Company’s products or services, or a regulatory or political development; (iii) cost factors such as increases in labor or other costs that have a negative effect on earnings and cash flows; (iv) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; (v) other relevant entity-specific events such as changes in management, key personnel, strategy, or customers, bankruptcy, or litigation; (vi) events affecting a reporting unit such as a change in the composition or carrying amount of the Company’s net assets; and (vii) a sustained decrease in the Company’s share price.

The Company evaluates the significance of identified events and circumstances on the basis of the weight of evidence along with how they could affect the relationship between the carrying value of the Company’s broadcasting licenses and goodwill and their respective fair value amounts, including positive mitigating events and circumstances.

Subsequent to the annual impairment test conducted during the fourth quarter of 2021, the Company continued to monitor these factors listed above. Due to a sustained decrease in the Company's share price, the increase in interest rates and related impact on the weighted average cost of capital, a contraction in the expected future economic and market conditions utilized in the annual impairment test conducted in the fourth quarter of 2021, and a reduction in projected operating performance at the QLGG reporting unit, the Company determined that the changes in circumstances warranted an interim impairment assessment on its broadcasting licenses and goodwill during the third quarter of the current year. Due to changes in facts and circumstances, the Company revised its estimates with respect to projected operating performance and discount rates used in the interim impairment assessments.

Broadcasting Licenses Impairment Test

During the fourth quarter of 2021, the Company completed its annual impairment test for broadcasting licenses and determined that the fair value of its broadcasting licenses was greater than the amount reflected in the balance sheet for each of the Company's markets and, accordingly, no impairment was recorded.

During the third quarter of the current year, the Company completed an interim impairment assessment for its broadcasting licenses at the market level using the Greenfield method. As a result of this interim impairment assessment, the Company determined that the fair value of its broadcasting licenses was less than the amount reflected in the balance sheet for certain of the Company's 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. The Company determines the fair value of the broadcasting licenses in each of its 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. The Company’s 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 the Company in determining its key estimates and assumptions was applied consistently to each market. Of the seven variables identified above, the Company believes 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%

The Company believes it has made reasonable estimates and assumptions to calculate the fair value of its 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 the Company, or if events occur or circumstances change that would reduce the fair value of the Company’s broadcasting licenses below the amount reflected in the condensed consolidated balance sheet, the Company 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. The Company will conduct its annual impairment test for broadcast licenses during the fourth quarter of 2022.

Goodwill Impairment Test

In March 2021, the Company completed the Podcorn Acquisition. Cadence13, Pineapple and Podcorn represent a single podcasting division one level beneath the single operating segment. Since the operations are economically similar, Cadence13, Pineapple and Podcorn were aggregated into a single podcasting reporting unit for the quantitative impairment assessment conducted in the fourth quarter of 2021.

During the fourth quarter of 2021, the Company completed its annual impairment test for its podcasting reporting unit and determined that the fair value of its podcast reporting unit was greater than the carrying value and, accordingly, no impairment was recorded. During the fourth quarter of 2021, the Company completed its annual impairment test for its QLGG reporting unit and determined that the fair value of its QLGG reporting unit was greater than the carrying value and, accordingly, no impairment was recorded.

In October 2021, the Company completed the WideOrbit Streaming Acquisition. AmperWave represents a separate division one level beneath the single operating segment and its own reporting unit. For the goodwill acquired in the WideOrbit Streaming Acquisition, similar valuation techniques that were applied in the valuation of goodwill under purchase price accounting were also used in the annual impairment testing process. The valuation of the acquired goodwill approximated fair value.

During the third quarter of the current year, the Company completed an interim impairment assessment for its goodwill at the podcast reporting unit and the QLGG reporting unit. As a result of this interim impairment assessment, the Company determined that the fair value of its podcast reporting unit was greater than the carrying value, and accordingly, no impairment was recorded. As a result of this interim impairment assessment, the Company determined that the fair value of its 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 assessment, the Company no longer has any goodwill attributable to the QLGG reporting unit.

The Company elected to bypass the qualitative assessment for the interim impairment tests of its 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. The Company’s 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 the Company's estimates of the fair value of these assets could result in material future period write-downs of the carrying value of the Company's goodwill.

Assumptions and Results - Goodwill

The following table reflects the estimates and assumptions used in the interim and 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%

The Company believes it has made reasonable estimates and assumptions to calculate the fair value of its reporting units. 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 the Company, or if events occur or circumstances change that would reduce the fair value of the Company’s goodwill below the amount reflected in the condensed consolidated balance sheet, the Company 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. The Company will conduct its annual impairment test for goodwill during the fourth quarter of 2022.