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The Company and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

The Impact of the COVID-19 Pandemic on the Company's Business

The Impact of the COVID-19 Pandemic on the Company’s Business

The COVID-19 pandemic did not have a material effect on the Company's business, from either an operational or financial perspective, during the three- and nine-month periods ended September 30, 2023. Subject to the extent and duration of possible resurgences of the pandemic from time to time and the continuing uncertain economic environment that has resulted, in part, from the pandemic, the Company anticipates that the pandemic will continue to have little or no material effect on its business, from either an operational or financial perspective, in future periods. Nonetheless, the Company cannot give any assurance whether a resurgence of the pandemic in any location where its operations have employees or in which it operates would not adversely affect its operations and/or results of operations.

Restricted Cash

As of September 30, 2023 and December 31, 2022, the Company’s balance sheet includes $0.8 million in restricted cash, which was deposited into a separate account as collateral for the Company’s letters of credit.

The Company's cash and cash equivalents and restricted cash, as presented in the Consolidated Statements of Cash Flows, was as follows (in thousands):


	As of
	September 30,
	2023		2022
Cash and cash equivalents	$	110,624	$	121,589
Restricted cash		765		751
Total as presented in the Consolidated Statements of Cash Flows	$	111,389	$	122,340

Related Party

Substantially all of the Company’s television stations are Univision- or UniMás-affiliated television stations. The network affiliation agreement with TelevisaUnivision provides certain of the Company’s owned stations the exclusive right to broadcast TelvisaUnivision’s primary Univision network and UniMás network programming in their respective markets. Under the network affiliation agreement, the Company retains the right to sell no less than four minutes per hour of the available advertising time on stations that broadcast Univision network programming, and the right to sell approximately four and a half minutes per hour of the available advertising time on stations that broadcast UniMás network programming, subject to adjustment from time to time by TelevisaUnivision.

Under the network affiliation agreement, TelevisaUnivision acts as the Company’s exclusive third-party sales representative for the sale of certain national advertising on the Univision- and UniMás-affiliate television stations, and the Company pays certain sales representation fees to TelevisaUnivision relating to sales of all advertising for broadcast on its Univision- and UniMás-affiliate television stations. During the three-month periods ended September 30, 2023 and 2022, the amount the Company paid TelevisaUnivision in this capacity was $1.5 million and $2.0 million, respectively. During the nine-month periods ended September 30, 2023 and 2022, the amount the Company paid TelevisaUnivision in this capacity was $4.5 million and $5.4 million, respectively. These amounts were included in Direct Operating Expenses in the Company's Condensed Consolidated Statements of Operations.

The Company also generates revenue under two marketing and sales agreements with TelevisaUnivision, which give it the right to manage the marketing and sales operations of TelevisaUnivision-owned Univision affiliates in three markets – Albuquerque, Boston and Denver.

Under the Company’s current proxy agreement with TelevisaUnivision, the Company grants TelevisaUnivision the right to negotiate the terms of retransmission consent agreements for its Univision- and UniMás-affiliated television station signals. Among

other things, the proxy agreement provides terms relating to compensation to be paid to the Company by TelevisaUnivision with respect to retransmission consent agreements entered into with multichannel video programming distributors, (“MVPDs”). As of September 30, 2023, the amount due to the Company from TelevisaUnivision was $10.3 million related to the agreements for the carriage of its Univision and UniMás-affiliated television station signals. During the three-month periods ended September 30, 2023 and 2022, retransmission consent revenue accounted for $8.9 million and $8.9 million, respectively, of which $6.2 million and $6.2 million, respectively, relate to the TelevisaUnivision proxy agreement. During the nine-month periods ended September 30, 2023 and 2022, retransmission consent revenue accounted for $27.9 million and $27.2 million, respectively, of which $19.3 million and $18.7 million, respectively, relate to the TelevisaUnivision proxy agreement.

On October 2, 2017, the Company entered into the current affiliation agreement with TelevisaUnivision, which superseded and replaced the Company's prior affiliation agreements with TelevisaUnivision. Additionally, on the same date, the Company entered into the current proxy agreement and current marketing and sales agreements with TelevisaUnivision, each of which superseded and replaced the prior comparable agreements with TelevisaUnivision. The term of each of these current agreements expires on December 31, 2026 for all of the Univision and UniMás network affiliate stations, except that each current agreement expired on December 31, 2021 with respect to the Univision and UniMás network affiliate stations in Orlando, Tampa and Washington, D.C.

TelevisaUnivision currently owns approximately 11% of the Company’s common stock on a fully-converted basis. The Company’s Class U common stock, all of which is held by TelevisaUnivision, has limited voting rights and does not include the right to elect directors. Each share of Class U common stock is automatically convertible into one share of the Company’s Class A common stock (subject to adjustment for stock splits, dividends or combinations) in connection with any transfer of such shares of Class U common stock to a third party that is not an affiliate of TelevisaUnivision. In addition, as the holder of all of the Company’s issued and outstanding Class U common stock, so long as TelevisaUnivision holds a certain number of shares of Class U common stock, the Company may not, without the consent of TelevisaUnivision, merge, consolidate or enter into a business combination, dissolve or liquidate the Company or dispose of any interest in any Federal Communications Commission (“FCC”) license with respect to television stations which are affiliates of TelevisaUnivision, among other things.

Stock-Based Compensation

The Company measures all stock-based awards using a fair value method and recognizes the related stock-based compensation expense in the consolidated financial statements over the requisite service period. As stock-based compensation expense recognized in the Company’s consolidated financial statements is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

Restricted Stock Units

Stock-based compensation expense related to restricted stock units is based on the fair value of the Company’s stock price on the date of grant and is amortized over the vesting period, generally between 1 to 4 years.

The following is a summary of non-vested restricted stock units granted (in thousands, except grant date fair value data):


	Three-Month Period				Nine-Month Period
	Ended September 30,				Ended September 30,
	2023		2022		2023		2022
Restricted stock units granted		1,000		-		4,813	175
Weighted average fair value	$	4.39	$	-	$	6.08	$	5.41

The 2023 restricted stock units reflect the annual grant, which was made in February 2023, the Board of Directors grant, which was made in June 2023, and the Company's current Chief Executive Officer (the "CEO") restricted stock units grant, which was made in connection with his hiring in July 2023. In previous years, the annual grant was typically in December of the same year.

Stock-based compensation expense related to restricted stock units was $6.7 million and $2.8 million for the three-month periods ended September 30, 2023 and 2022, respectively. Stock-based compensation expense related to restricted stock units was $16.7 million and $8.0 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, there was $22.9 million of total unrecognized compensation expense related to grants of restricted stock units that is expected to be recognized over a weighted-average period of 1.8 years.

Performance Stock Units

In connection with the hiring of the Company's CEO in July 2023, the Company has granted the CEO Performance Stock Units ("PSUs"), which are subject to both time-based vesting conditions and market-based conditions. Both the service and the market condition must be satisfied for the PSUs to vest. The PSUs consist of five equal tranches (each, a "Performance Tranche"), based on

achievement of a share price condition if the Company achieves share price targets of $5.75, $7.25, $9.00, $11.20, and $13.75, respectively, over 30 consecutive trading days during a performance period commencing on July 1, 2023 and ending on July 1, 2028. The fair value of each of the Performance Tranches was $0.8 million, $0.7 million, $0.7 million, $0.6 million, and $0.5 million, respectively, and have a grant date fair value per share of restricted stock of $3.98, $3.64, $3.31, $2.93, and $2.58, respectively. To the extent that any of the performance-based requirements are met, the Company's CEO must also provide continued service to the Company through at least July 1, 2024 to receive any shares of common stock underlying the PSUs and through July 1, 2028 to receive all of the shares of common stock underlying the PSUs that have satisfied the applicable market-based requirement. The maximum number of shares that can be earned under this PSU grant is 1,000,000 shares, with 20% of the total award allocated to each Performance Tranche. Between 0% and 100% of each Performance Tranche of the PSUs will vest on each of the tranche dates.

The Company recognizes compensation expense related to the PSUs using the accelerated attribution method over the requisite service period. Stock-based compensation expense for PSUs is based on a performance measurement of 100%. The compensation expense will not be reversed even if the performance metrics are not met.

Stock-based compensation expense related to PSUs was $0.3 million for the three- and nine-month periods ended September 30, 2023. There was no stock-based compensation expense related to PSUs for the three- and nine-month periods ended September 30, 2022.

As of September 30, 2023, there was $2.9 million of total unrecognized compensation expense related to grants of PSUs that is expected to be recognized over a weighted-average period of 2.8 years.

The grant date fair value for each PSU was estimated using a Monte-Carlo simulation model that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. The unobservable significant inputs to the valuation model at the time of award issuance were as follows:



Stock price at issuance	$	4.39
Expected volatility		58.0	%
Risk-free interest rate		4.13	%
Expected term		5.0
Expected dividend yield		0	%

During the nine-month period ended September 30, 2023, the Company had the following non-vested PSUs activity (in thousands, except grant date fair value data):


	Number of PSUs		Weighted-Average Grant Date Fair Value
Nonvested balance at December 31, 2022		-	$	-
Granted		1,000		3.29
Vested		-		-
Forfeited or cancelled		-		-
Nonvested balance at September 30, 2023		1,000		3.29

Income (Loss) Per Share

The following table illustrates the reconciliation of the basic and diluted income (loss) per share (in thousands, except share and per share data):


	Three-Month Period				Nine-Month Period
	Ended September 30,				Ended September 30,
	2023		2022		2023		2022
Basic earnings per share:
Numerator:
Net income (loss) attributable to common stockholders	$	2,719	$	9,393	$	2,771	$	19,747

Denominator:
Weighted average common shares outstanding		87,995,567		84,945,873		87,803,770		85,469,675

Per share:
Net income (loss) per share attributable to common stockholders	$	0.03	$	0.11	$	0.03	$	0.23

Diluted earnings per share:
Numerator:
Net income (loss) attributable to common stockholders	$	2,719	$	9,393	$	2,771	$	19,747

Denominator:
Weighted average common shares outstanding		87,995,567		84,945,873		87,803,770		85,469,675
Dilutive securities:
Stock options and restricted stock units		1,893,154		2,471,628		2,031,593		2,202,051
Diluted shares outstanding		89,888,721		87,417,501		89,835,363		87,671,726

Per share:
Net income (loss) per share attributable to common stockholders	$	0.03	$	0.11	$	0.03	$	0.23

For the three- and nine-month periods ended September 30, 2023, a total of 551,378 and 932,230 shares, respectively, of dilutive securities were not included in the computation of diluted income per share because the exercise prices of the dilutive securities were greater than the average market price of the common shares.

For the three- and nine-month periods ended September 30, 2022, a total of 4,052 and 34,388 shares, respectively, of dilutive securities were not included in the computation of diluted income per share because the exercise prices of the dilutive securities were greater than the average market price of the common shares.

Impairment

Long-lived assets, such as intangible assets subject to amortization, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

During the three- and nine-month periods ended September 30, 2023 the Company incurred an impairment charge related to intangible assets subject to amortization totaling $1.0 million, due to a termination of an agreement with a media company for which the Company acts as commercial partner in its digital segment.

Treasury Stock

On March 1, 2022, the Company's Board of Directors approved a share repurchase program of up to $20 million of the Company's Class A common stock. Under this share repurchase program, the Company is authorized to purchase shares of its Class A common stock from time to time through open market purchases or negotiated purchases, subject to market conditions and other factors.

In the three- and nine-month periods ended September 30, 2023, the Company did not repurchase any shares of its Class A common stock. As of September 30, 2023, the Company has repurchased a total of 1.8 million shares of its Class A common stock under the current share repurchase program for an aggregate purchase price of $11.3 million, or an average price per share of $6.43. All such repurchased shares were retired as of September 30, 2023.

Treasury stock is included as a deduction from equity in the Stockholders’ Equity section of the Condensed Consolidated Balance Sheets. Shares repurchased pursuant to the Company’s share repurchase program are retired during the same calendar year.

2017 and 2023 Credit Facility

2017 Credit Facility

The following discussion pertains to the Company’s previous credit facility (the "2017 Credit Facility") and the agreement, as amended (the “2017 Credit Agreement”), governing the 2017 Credit Facility. It does not purport to be a complete discussion of the full terms and conditions of the 2017 Credit Facility or the 2017 Credit Agreement. For more information, please refer to the 2017 Credit Agreement itself.

The 2017 Credit Agreement was amended and restated as of March 17, 2023, when the Company entered into the Amended and Restated Credit Agreement (the "2023 Credit Agreement"), establishing its current credit facility (the "2023 Credit Facility"). A discussion of the 2023 Credit Facility and the 2023 Credit Agreement follows this discussion.

On November 30, 2017 (the “2017 Closing Date”), the Company entered into the 2017 Credit Facility pursuant to the 2017 Credit Agreement. The 2017 Credit Facility consisted of a $300.0 million senior secured Term Loan B Facility (the “Term Loan B Facility”), which was drawn in full on the 2017 Closing Date.

Borrowings under the Term Loan B Facility were used on the 2017 Closing Date (a) to repay in full all of the outstanding obligations of the Company and its subsidiaries under the Company’s previous credit facility and to terminate the credit agreement relating thereto, (b) to pay fees and expenses in connection with the 2017 Credit Facility, and (c) for general corporate purposes.

The 2017 Credit Facility was guaranteed on a senior secured basis by certain of the Company’s existing and future wholly-owned domestic subsidiaries, and was secured on a first priority basis by the Company’s and those subsidiaries’ assets.

The Company’s borrowings under the 2017 Credit Facility bore interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to either: (i) the Eurodollar Rate (as defined in the 2017 Credit Agreement) plus 2.75%; or (ii) the Base Rate (as defined in the 2017 Credit Agreement) plus 1.75%. As of March 16, 2023, the interest rate on the Company's Term Loan B was 7.38%. The Term Loan B Facility had an expiration date on November 30, 2024 (the “Original Maturity Date”).

The amounts outstanding under the 2017 Credit Facility could be prepaid at the Company’s option without premium or penalty, provided that certain limitations were observed, and subject to customary breakage fees in connection with the prepayment of a LIBOR rate loan. The principal amount of the Term Loan B Facility was to be paid in installments on the dates and in the respective amounts set forth in the 2017 Credit Agreement, with the final balance due on the Original Maturity Date.

As further discussed below, on March 17, 2023, the Company repaid in full all of the outstanding obligations under the 2017 Credit Agreement and accounted for this repayment as an extinguishment of debt in accordance with Accounting Standards Codification ("ASC") 470, "Debt". The repayment resulted in a loss on debt extinguishment of $1.6 million, which included a write-off of unamortized debt issuance costs in the amount of $1.1 million.

2023 Credit Facility

The following discussion pertains to the 2023 Credit Facility and the 2023 Credit Agreement. It does not purport to be a complete discussion of the full terms and conditions of the 2023 Credit Facility or the 2023 Credit Agreement. For more information, please refer to the 2023 Credit Agreement itself.

On March 17, 2023 (the “2023 Closing Date”), the Company entered into the 2023 Credit Facility, pursuant to the 2023 Credit Agreement, by and among the Company, Bank of America, N.A., as Administrative Agent (the “Agent”), and the other financial institutions party thereto as Lenders (collectively, the “Lenders” and individually each a “Lender”).

As provided for in the 2023 Credit Agreement, the 2023 Credit Facility consists of (i) a $200.0 million senior secured Term A Facility (the "Term A Facility"), which was drawn in full on the 2023 Closing Date, and (ii) a $75.0 million Revolving Credit Facility (the “Revolving Credit Facility”), of which $11.5 million was drawn on the 2023 Closing Date. In addition, the 2023 Credit Agreement provides that the Company may increase the aggregate principal amount of the 2023 Credit Facility by an additional

amount equal to $100.0 million plus the amount that would result in the Company’s first lien net leverage ratio (as such term is used in the 2023 Credit Agreement) not exceeding 2.25 to 1.0, subject to the Company satisfying certain conditions.

Borrowings under the 2023 Credit Facility were used on the 2023 Closing Date (a) to repay in full all of the outstanding obligations of the Company and its subsidiaries under the 2017 Credit Facility, (b) to pay fees and expenses in connection the 2023 Credit Facility and (c) for general corporate purposes. The 2023 Credit Facility matures on March 17, 2028 (the “Maturity Date”).

The 2023 Credit Facility is guaranteed on a senior secured basis by certain of the Company’s existing and future wholly-owned domestic subsidiaries, and secured on a first priority basis by the Company’s and those subsidiaries’ assets.

The Company’s borrowings under the 2023 Credit Facility bear interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to either: (i) the Term SOFR (as defined in the 2023 Credit Agreement) plus a margin between 2.50% and 3.00%, depending on the Total Net Leverage Ratio or (ii) the Base Rate (as defined in the 2023 Credit Agreement) plus a margin between 1.50% and 2.00%, depending on the Total Net Leverage Ratio. In addition, the unused portion of the Revolving Credit Facility is subject to a rate per annum between 0.30% and 0.40%, depending on the Total Net Leverage Ratio.

As of September 30, 2023, the interest rate on the Company's Term A Facility and the drawn portion of the Revolving Credit Facility was 8.16%.

The amounts outstanding under the 2023 Credit Facility may be prepaid at the option of the Company without premium or penalty, provided that certain limitations are observed, and subject to customary breakage fees in connection with the prepayment of a Term SOFR loan. The principal amount of the Term A Facility shall be paid in installments on the dates and in the respective amounts set forth in the 2023 Credit Agreement, with the final balance due on the Maturity Date.

The Company incurred debt issuance costs of $1.8 million associated with the 2023 Credit Facility. Debt outstanding under the 2023 Credit Facility is presented net of issuance costs on the Company's condensed consolidated balance sheets. The debt issuance costs are amortized on an effective interest basis over the term of the 2023 Credit Facility, and are included in interest expense in the Company's Condensed Consolidated Statements of Operations.

Subject to certain exceptions, the 2023 Credit Agreement contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things:

•

incur certain liens on its property or assets;

•

make certain investments;

•

incur certain additional indebtedness;

•

consummate any merger, dissolution, liquidation, consolidation or sale of substantially all assets;

•

dispose of certain assets;

•

make certain restricted payments;

•

make certain acquisitions;

•

enter into substantially different lines of business;

•

enter into certain transactions with affiliates;

•

use loan proceeds to purchase or carry margin stock or for any other prohibited purpose;

•

change or amend the terms of organizational documents of the Company or certain restricted subsidiaries in a materially adverse way to the lenders, or change or amend the terms of certain indebtedness;

•

permit certain financial ratios to fall out of compliance;

•

enter into sale and leaseback transactions;

•

make prepayments of any subordinated indebtedness, subject to certain conditions;

•

violate the Foreign Corrupt Practices Act or other anti-bribery laws of other jurisdictions; or

•

change its fiscal year, or accounting policies or reporting practices.

The 2023 Credit Facility also requires compliance with financial covenants related to total net leverage ratio and interest coverage ratio (calculated as set forth in the 2023 Credit Agreement).

The 2023 Credit Agreement includes the following events of default and certain other customary events of default:

•

any revocation, termination, substantial and adverse modification, or refusal by final order to renew, any media license, or the requirement (by final non-appealable order) to sell a television or radio station, where any such event or failure is reasonably expected to have a material adverse effect;

•

the interruption of operations of any television or radio station for more than 96 consecutive hours during any period of seven consecutive days;

•

default for three (3) business days in the payment when due of principal or interest on borrowings under the 2023 Credit Facility;

•

default for five (5) business days in the payment when due of any other amounts due under the 2023 Credit Facility;

•

failure by the Company or any subsidiary to comply with the negative covenants (including the financial covenants) and certain other covenants contained in the 2023 Credit Agreement;

•

material breaches of certain representations and warranties by the Company or any subsidiary;

•

failure by the Company or any subsidiary to comply with certain other covenants in the 2023 Credit Agreement and related loan documents that continues for thirty (30) days (or ten (10) days in the case of failure to comply with covenants related to inspection rights of the administrative agent and lenders and permitted uses of proceeds from borrowings under the 2023 Credit Facility) after the Company’s officers first become aware of such failure or first receive written notice of such failure from any lender;

•

default in the payment of other indebtedness if the amount of such indebtedness aggregates to $15.0 million or more, or failure to comply with the terms of any agreements related to such indebtedness if the holder or holders of such indebtedness can cause such indebtedness to be declared due and payable;

•

certain events of bankruptcy or insolvency with respect to the Company or any significant subsidiary;

•

final judgment is entered against the Company or any restricted subsidiary in an aggregate amount over $15.0 million, and either enforcement proceedings are commenced by any creditor or there is a period of 30 consecutive days during which the judgment remains unpaid and no stay is in effect;

•

any material provision of any agreement or instrument governing the 2023 Credit Facility ceases to be in full force and effect;

•

a change of control of the Company; or

•

the failure to create, or the cessation of, any liens contemplated by the 2023 Credit Agreement.

The security agreement that the Company entered into with respect to its 2017 Credit Facility remains in effect with respect to its 2023 Credit Facility.

The carrying amount of the Term Loan A Facility as of September 30, 2023 approximated its fair value and was $196.3 million, net of $1.2 million of unamortized debt issuance costs and original issue discount.

As of September 30, 2023, the Company believes that it is in compliance with all covenants in the 2023 Credit Agreement.

Concentrations of Credit Risk and Trade Receivables

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. From time to time, the Company has had, and may have, bank deposits in excess of Federal Deposit Insurance Corporation ("FDIC") insurance limits. As of September 30, 2023, the majority of all U.S. deposits are maintained in two financial institutions. The Company has not experienced any losses in such accounts and believes that it is not exposed to significant credit risk on cash and cash equivalents. In addition, to the Company's knowledge, all of the bank deposits held in banks outside the United States are not insured.

The Company’s credit risk is spread across a large number of customers in the United States, Latin America, Asia and various other countries, therefore spreading the trade receivable credit risk. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that it is managing its trade receivable credit risk effectively. Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly

basis. An allowance for doubtful accounts is provided for known and anticipated credit losses, as determined by management in the course of regularly evaluating individual customer receivables. This evaluation takes into consideration a customer’s financial condition and credit history, as well as current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. No interest is charged on customer accounts.

Aggregate receivables from the largest five advertisers represented 5% and 2% of the Company's total trade receivables as of September 30, 2023 and December 31, 2022, respectively. No single advertiser represents more than 5% of the Company's total trade receivables.

Revenue from the largest advertiser represented 14% and 11% of the Company's total revenue for the three-month periods ended September 30, 2023 and 2022, respectively, and 13% of the Company's total revenue for each of the nine-month periods ended September 30, 2023 and 2022. This advertiser is a global media company and pays on a frequent basis and therefore management does not believe that this concentration of credit represents a significant risk to the Company. No other advertiser represented more than 5% of the Company's total revenue.

Estimated losses for bad debts are provided for in the consolidated financial statements through a charge to expense that aggregated $0.3 million and $1.2 million for the three-month periods ended September 30, 2023 and 2022, respectively, and $2.0 million and $2.2 million for the nine-month periods ended September 30, 2023 and 2022, respectively. The net charge off of bad debts aggregated $1.0 million and $1.3 million for the three-month periods ended September 30, 2023 and 2022, respectively, and $1.3 million and $1.8 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

Dependence on Global Media Companies

The Company is dependent on the continued commercial agreements with, as well as the financial and business strength of, the global media companies for which the Company acts as a commercial partner in the digital segment, as well as the companies from which it obtains programming in the television and audio segments. The Company could be at risk should any of these entities fail to perform its respective obligations to the Company or terminate its relationship with the Company. This in turn could materially adversely affect the Company’s business, results of operations and financial condition.

Revenue related to a single global media company for which the Company acts as a commercial partner represented 54% and 49% of the Company's total revenue for the three-month periods ended September 30, 2023 and 2022, respectively, and 53% and 51% of the Company's total revenue for the nine-month periods ended September 30, 2023 and 2022, respectively. The Company expects that this dependence will continue. Based on communications with this media company, the Company has received a lower rate of payment on the Company's sales made on behalf of this media company beginning in the second half of 2023, resulting in lower margins.

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date.

ASC 820, “Fair Value Measurements and Disclosures”, defines and establishes a framework for measuring fair value and expands disclosures about fair value measurements. In accordance with ASC 820, the Company has categorized its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below.

Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the company has the ability to access at the measurement date.

Level 2 – Assets and liabilities whose values are based on quoted prices for similar attributes in active markets; quoted prices in markets where trading occurs infrequently; and inputs other than quoted prices that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring and nonrecurring basis in the condensed consolidated balance sheets (in millions):


	September 30, 2023
	Total Fair Value and Carrying Value on Balance Sheet		Fair Value Measurement Category
Recurring fair value measurements			Level 1		Level 2		Level 3		Total Gains (Losses)
Assets:
Money market account	$	0.4	$	0.4	$	—	$	—
Corporate bonds and notes	$	17.4		—	$	17.4		—
Asset-backed securities	$	0.6		—	$	0.6		—
U.S. Government securities	$	0.1		—	$	0.1		—

Liabilities:
Contingent consideration	$	21.6	$	—		—	$	21.6


	December 31, 2022
	Total Fair Value and Carrying Value on Balance Sheet		Fair Value Measurement Category
Recurring fair value measurements			Level 1		Level 2		Level 3			Total Gains (Losses)
Assets:
Money market account	$	1.4	$	1.4	$	—	$	—
Corporate bonds and notes	$	44.5		—	$	44.5		—

Liabilities:
Contingent consideration	$	63.8	$	—		—	$	63.8

Nonrecurring fair value measurements:
FCC licenses	$	24.5		—		—	$	24.5	$	(1.6	)

The Company’s money market account is comprised of cash and cash equivalents, which are recorded at their fair market value within Cash and cash equivalents in the Condensed Consolidated Balance Sheets.

The Company’s available for sale debt securities are comprised of corporate bonds and notes, asset-backed securities, and U.S. Government securities. The majority of the carrying value of these securities held by the Company are investment grade. These securities are valued using quoted prices for similar attributes in active markets (Level 2). Since these investments are classified as available for sale, they are recorded at their fair market value within Marketable securities in the Condensed Consolidated Balance Sheets and their unrealized gains or losses are included in other comprehensive income. Realized gains and losses from the sale of available for sale securities are included in the Condensed Consolidated Statements of Operations and were determined on a specific identification basis.

As of September 30, 2023, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities (in thousands):



	Corporate Bonds and Notes					Asset-Backed Securities					U.S. Government securities
	Amortized Cost		Unrealized gains (losses)			Amortized Cost		Unrealized gains (losses)			Amortized Cost		Unrealized gains (losses)
Due within a year	$	5,893	$	(92	)	$	-	$	-		$	98	$	-
Due after one year		11,991		(415	)		591		(3	)		-		-
Total	$	17,884	$	(507	)	$	591	$	(3	)	$	98	$	-

The Company’s available for sale debt securities are considered for credit losses under the guidance of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326). As of September 30, 2023 and December 31, 2022, the Company determined that a credit loss allowance is not required.

Included in interest income for the three-month periods ended September 30, 2023 and 2022 was interest income related to the Company’s available for sale securities of $0.2 million and $0.6 million, respectively. Included in interest income for the nine-month periods ended September 30, 2023 and 2022 was interest income related to the Company’s available for sale securities of $1.0 million and $1.7 million, respectively.

The fair value of the contingent consideration is related to the acquisitions of:

•

the remaining 49% of the issued and outstanding shares of stock of a digital advertising solutions company that, together with its subsidiaries, does business under the name Cisneros Interactive ("Cisneros Interactive").

As of December 31, 2022, the contingent liability was $41.4 million, of which $30.0 million was a current liability and $11.4 million was a noncurrent liability. As of September 30, 2023 the contingent liability was $8.0 million, of which $7.1 million is a current liability and $0.9 million is a noncurrent liability. The change in the fair value of the contingent liability during the three-month periods ended September 30, 2023 and 2022, of $0.0 million expense and $5.9 million expense, respectively, is reflected in the Condensed Consolidated Statements of Operations. The change in the fair value of the contingent liability during the nine-month periods ended September 30, 2023 and 2022, of $5.8 million income and $6.9 million expense, respectively, is reflected in the Condensed Consolidated Statements of Operations.

•

100% of the issued and outstanding shares of stock of a digital advertising solutions company in Southeast Asia that, together with its subsidiaries, does business under the name MediaDonuts ("MediaDonuts").

As of December 31, 2022, the contingent liability was $22.2 million, of which $6.5 million was a current liability and $15.7 million was a noncurrent liability. As of September 30, 2023 the contingent liability was $11.6 million, all of which is a noncurrent liability. The change in the fair value of the contingent liability during the three-month periods ended September 30, 2023 and 2022, of $5.9 million income and $2.0 million income, respectively, is reflected in the Condensed Consolidated Statements of Operations. The change in the fair value of the contingent liability during the nine-month periods ended September 30, 2023 and 2022, of $3.7 million income and $1.3 million expense, respectively, is reflected in the Condensed Consolidated Statements of Operations.

•

100% of the issued and outstanding shares of stock of a digital advertising solutions company headquartered in South Africa, that, together with its subsidiaries, does business under the name 365 Digital ("365 Digital").

As of December 31, 2022, the contingent liability was $0.2 million, all of which was a noncurrent liability. As of September 30, 2023 the contingent liability fair value was $0.0 million. The change in the fair value of the contingent liability during the three-month periods ended September 30, 2023 and 2022, of $0.2 million income and $3.2 million income, respectively, is reflected in the Condensed Consolidated Statements of Operations. The change in the fair value of the contingent liability during the nine-month periods ended September 30, 2023 and 2022, of $0.5 million expense and $1.4 million income, respectively, is reflected in the Condensed Consolidated Statements of Operations.

•

the remaining 85% of the issued and outstanding shares of stock of a digital marketing services company that, together with its subsidiaries, does business under the name Jack of Digital ("Jack of Digital").

As of September 30, 2023, the contingent liability fair value was $0.3 million, all of which is a noncurrent liability.

•

100% of the issued and outstanding shares of stock of a global mobile app marketing solutions company that, together with its subsidiaries, does business under the name BCNMonetize ("BCNMonetize").

As of September 30, 2023, the contingent liability fair value was $1.7 million, of which $1.1 million is a current liability and $0.6 million is a noncurrent liability. The change in the fair value of the contingent liability during each of the three- and nine-month periods ended September 30, 2023, of $0.1 million expense, is reflected in the Condensed Consolidated Statements of Operations.

The fair value of the contingent consideration was estimated by applying the real options approach. Key assumptions include risk-neutral expected growth rates based on management’s assessments of expected growth in EBITDA, adjusted by appropriate factors capturing their correlation with the market and volatility, discounted at a cost of debt. These are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. The following table presents the changes in the contingent consideration (in millions):


	Nine-Month Period
	Ended September 30,
	2023			2022
Beginning balance	$	63.8		$	114.9
Additions from acquisitions		1.8			-
Payments to sellers		(35.1	)		(65.3	)
(Gain) loss recognized in earnings		(8.9	)		6.8
Ending balance	$	21.6		$	56.4

As of September 30, 2023 the contingent liability fair value was included in the Condensed Consolidated Balance Sheets in the amount of $8.2 million as a current liability within Accounts payable and accrued expenses, and $13.4 million as a noncurrent liability within Other long-term liabilities.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) includes foreign currency translation adjustments and changes in the fair value of available for sale securities.

The following table provides a roll-forward of accumulated other comprehensive income (loss) (in thousands):


	Foreign Currency Translation			Marketable Securities			Total
Accumulated other comprehensive income (loss) as of December 31, 2022	$	(1,345	)	$	(165	)	$	(1,510	)
Other comprehensive income (loss)		16			138			154
Income tax (expense) benefit		-			(35	)		(35	)
Amounts reclassified from AOCI		-			31			31
Income tax (expense) benefit		-			(8	)		(8	)
Other comprehensive income (loss), net of tax		16			126			142
Accumulated other comprehensive income (loss) as of March 31, 2023		(1,329	)		(39	)		(1,368	)
Other comprehensive income (loss)		(71	)		106			35
Income tax (expense) benefit		-			(27	)		(27	)
Amounts reclassified from AOCI		-			29			29
Income tax (expense) benefit		-			(7	)		(7	)
Other comprehensive income (loss), net of tax		(71	)		101			30
Accumulated other comprehensive income (loss) as of June 30, 2023		(1,400	)		62			(1,338	)
Other comprehensive income (loss)		(408	)		(11	)		(419	)
Amounts reclassified from AOCI		-			33			33
Income tax (expense) benefit		-			(5	)		(5	)
Other comprehensive income (loss), net of tax		(408	)		17			(391	)
Accumulated other comprehensive income (loss) as of September 30, 2023		(1,808	)		79			(1,729	)

Foreign Currency

The Company’s reporting currency is the U.S. dollar. All transactions initiated in foreign currencies are translated into U.S. dollars in accordance with ASC 830, “Foreign Currency Matters” and the related rate fluctuation on transactions is included in the Condensed Consolidated Statements of Operations.

For foreign operations with the local currency as the functional currency, assets and liabilities are translated from the respective local currencies into U.S. dollars at the exchange rate prevailing at the balance sheet date, and equity and long-term assets are translated at historical rates. Revenues and expenses are translated at the average exchange rate for the period. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive (income) loss.

Based on data reported by the International Monetary Fund, Argentina has been identified as a country with a highly inflationary economy. According to GAAP, a registrant should apply highly inflationary accounting in the first reporting period after such determination. Therefore, the Company transitioned the accounting for its Argentine operations to highly inflationary status as of July 1, 2018 and, commencing that date, changed the functional currency from the Argentine peso to the U.S. dollar.

Cost of Revenue

Cost of revenue related to the Company’s digital segment consists primarily of the costs of online media acquired from third-party media companies.

Assets Held For Sale

Assets are classified as held for sale when the carrying value is expected to be recovered through a sale rather than through their continued use and all of the necessary classification criteria have been met. Assets held for sale are recorded at the lower of their carrying value or estimated fair value less selling costs and classified as current assets. Depreciation is not recorded on assets classified as held for sale.

During 2023, the Company entered into a sales agreement for a tower site in the Phoenix market for $2.5 million. The transaction met the criteria for classification as assets held for sale and the carrying value of $0.9 million is presented as Assets Held for Sale in the Consolidated Balance Sheet as of September 30, 2023. In addition, during 2023, the Company entered into a sales agreement for a tower site in the Boston market for $1.3 million. The transaction met the criteria for classification as assets held for sale and the carrying value of $0.3 million is presented as Assets Held for Sale in the Consolidated Balance Sheet as of September 30, 2023. These transactions are expected to close in the fourth quarter of 2023.

Variable Interest Entities

In accordance with the provisions of the Financial Accounting Standards Board or ASC 810, “Consolidation,” the Company evaluates entities for which control is achieved through means other than voting rights to determine if the Company is the primary beneficiary of a variable interest entity (a "VIE"). An entity is a VIE if it has any of the following characteristics:(1) the entity has insufficient equity to permit it to finance its activities without additional subordinated financial support; (2) equity holders, as a group, lack the characteristics of a controlling financial interest; or (3) the entity is structured with non-substantive voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company consolidates its investment in a VIE when it determines that the Company is the primary beneficiary of such entity.

In determining whether it is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; and the significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses. Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions.

The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis. See Note 7 for more details.

Recent Accounting Pronouncements

There were no new accounting pronouncements that were issued or became effective since the issuance of the 2022 10-K that had, or are expected to have, a material impact on the Company’s consolidated financial statements.

Newly Adopted Accounting Standards

There were no new accounting standards that were adopted since the issuance of the 2022 10-K.