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Audacy, Inc. (AUDAQ)
:AUDAQ
Risk Overview Q2, 2024
Risk Distribution
43% Finance & Corporate
20% Legal & Regulatory
10% Tech & Innovation
10% Production
10% Macro & Political
8% Ability to Sell
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Audacy Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q2, 2024
Main Risk Category
Finance & Corporate
With 17 Risks
Finance & Corporate
With 17 Risks
Number of Disclosed Risks
40
No changes from last report
S&P 500 Average: 32
40
No changes from last report
S&P 500 Average: 32
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Jun 2024
0Risks added
0Risks removed
0Risks changed
Since Jun 2024
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 4
0
No changes from last report
S&P 500 Average: 4
See the risk highlights of Audacy in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 40
Finance & Corporate
Total Risks: 17/40 (43%)Above Sector Average
Share Price & Shareholder Rights4 | 10.0%
Share Price & Shareholder Rights - Risk 1
We may terminate our Exchange Act reporting, if permitted by applicable law.Share Price & Shareholder Rights - Risk 2
Our Class A common stock will be cancelled and our debtholders are expected to receive 100% of the new equity issued in Reorganized Audacy.The terms of the Plan contemplate that our existing equity will be extinguished and our stockholders will receive no distribution as part of the Restructuring. The debtholders are expected to receive 100% of the equity in Reorganized Audacy. The Plan also contemplates that an equity-based incentive compensation plan pursuant to which certain of our directors, managers, officers and employees will be granted awards, will be adopted within 120 days following the effective date of the Plan. Pursuant to the Plan, 10% of the common stock of Reorganized Audacy on a fully diluted basis issued and outstanding as of the effective date of the Plan will be reserved under the equity-based incentive compensation plan. Current Debtholders receiving a recovery under the Plan will be subject to dilution from issuances under the equity-based incentive compensation plan.
Share Price & Shareholder Rights - Risk 3
Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks.Trading prices for our common stock are very volatile. Further, the terms of the Plan contemplate that our existing common stock will be canceled, released, discharged and extinguished, and our stockholders will receive no distribution as part of the Restructuring. In the event of a cancellation of our common stock, amounts invested by such stockholders in our outstanding common stock will not be recoverable. Consequently, our currently outstanding common stock is expected to have no value at the effective time of the Plan. Accordingly, we urge that extreme caution be exercised with respect to existing and future investments in our equity securities and any of our other securities.
Share Price & Shareholder Rights - Risk 4
Although the Plan has been confirmed by the Bankruptcy Court it is subject to certain conditions for its effectiveness.The consummation of the Plan is subject to certain conditions, including the receipt of approval from the FCC. We cannot guarantee that we will be able to satisfy these conditions, or satisfy them in a timely manner. The FCC must grant consent to the transfer of control and assignment of the Company and our FCC licenses, including certain waivers of FCC rules, before the Debtors can emerge from bankruptcy. If third parties file petitions to deny the FCC applications, or if the FCC declines our request for waivers, including in connection with the use of pre-paid special warrants (or requests other amendments or refiling of applications for relief), the timeline for the FCC's review could be prolonged, which would cause delays in emergence. Our existing debtor-in-possession financing and the Restructuring Support Agreement require that FCC approval be obtained by no later than 180 days after confirmation of our Plan, which occurred on February 20, 2024. Absent an extension from our lenders, delays in obtaining FCC approval could make it impossible to consummate the Plan. If we are unable to consummate the Plan, it is unclear whether we will be able to reorganize our business and what, if any, distributions holders of the remaining claims against, or equity interests in the Company ultimately would receive with respect to their claims or equity interests. An alternative plan of reorganization could contemplate the Company continuing as a going concern, the Company or its assets being acquired by a third party, the Company being merged with a competitor, or some other proposal. We may not believe that such an alternative plan of reorganization is in our stakeholders' best interests or fully values the benefits to be achieved by our current Plan of reorganization. An alternative plan of reorganization could potentially delay our emergence from Chapter 11 and expose us to a number of other risks, including potential limitations on our ability to execute our business plan and strategic initiatives; difficulties in hiring, retaining and motivating key personnel; negative reactions among our employees, vendors, strategic partners and service providers; and unease and uncertainty among our advertising customer base.
Our future results are dependent upon the timely and successful implementation of the Plan. If a restructuring is protracted, it could adversely affect our operating results, including our relationships with our advertising customers, business partners and employees. The longer it takes to implement the Plan, the more likely it is that our advertising customers will lose confidence in our ability to reorganize our business successfully and seek to establish alternative commercial relationships. If we experience a protracted reorganization, there is a significant risk that the value of our enterprise would be substantially eroded to the detriment of all stakeholders.
Accounting & Financial Operations2 | 5.0%
Accounting & Financial Operations - Risk 1
Impairments to our broadcasting licenses and goodwill have reduced our earnings.Accounting & Financial Operations - Risk 2
Increases in or new royalties, including through legislation, could adversely impact our business, financial condition and results of operations.We must pay royalties to the copyright owners of musical compositions (e.g., song composers, publishers, et al.) for the public performance of such musical compositions on our radio stations and internet streams. We satisfy this requirement by obtaining blanket public performance licenses from performing rights organizations ("PROs"). We pay fees to the PROs for these licenses, and the PROs in turn compensate the copyright owners. We currently maintain, and pay all fees associated with, public performance licenses from the following PROs: American Society of Composers, Authors and Publishers ("ASCAP"), Broadcast Music, Inc. ("BMI"), SESAC, Inc. ("SESAC"), and Global Music Rights ("GMR"). The royalty rates we pay to copyright owners for the public performance of musical compositions on our radio stations and internet streams could increase as a result of private negotiations and the emergence of new PROs, which could adversely impact our business, financial condition, results of operations and cash flows.
We must also pay royalties to the copyright owners of sound recordings (e.g., record labels, recording artists, et al.) for the digital audio transmission of such sound recordings on the Internet. We pay such royalties under federal statutory licenses and pay applicable license fees to SoundExchange, the non-profit organization designated by the United States Copyright Royalty Board ("CRB") to collect such license fees. The royalty rates applicable to sound recordings under federal statutory licenses are subject to adjustment by the CRB. The royalty rates we pay to copyright owners for the digital audio transmission of sound recordings on the Internet could increase as a result of private negotiations, regulatory rate-setting processes, or administrative and court decisions, which could adversely impact our businesses, financial condition, results of operations and cash flows.
We do not pay royalties for the public performance of sound recordings by means of terrestrial broadcasts on our radio stations. However, from time-to-time, Congress considers legislation that would require radio broadcasters to pay royalties to applicable copyright owners for the public performance of sound recordings by means of terrestrial broadcasts. Such proposed legislation has been the subject of considerable debate and activity by the radio broadcast industry and other parties that could be affected. We cannot predict whether or not any such proposed legislation will become law. New royalty rates for the public performance of sound recordings by means of terrestrial broadcasts on our radio stations could increase our expenses, which could adversely impact our businesses, financial condition, results of operations and cash flows.
Federal copyright law has historically provided copyright protection for sound recordings made and fixed to a tangible medium on or after February 15, 1972. The Music Modernization Act ("MMA") signed into law on October 11, 2018 (the "MMA Enactment Date") extends federal copyright protection, and preempts all State laws applicable, to sound recordings created prior to February 15, 1972 (the "Pre-1972 Recordings") as of the MMA Enactment Date. A number of recording artists and independent record labels claim the laws of certain States provide copyright protections for their Pre-1972 Recordings, and have brought claims in those States against several radio broadcasters (including CBS Radio) for allegedly infringing on the exclusive public performance right of such recording artists and record labels in their Pre-1972 Recordings.
An adverse decision against us or other broadcasters in these types of matters or new legislation in this area could impede our ability to broadcast or stream the Pre-1972 Recordings and/or increase our royalty payments, as well as expose us to liability for past broadcasts.
Debt & Financing8 | 20.0%
Debt & Financing - Risk 1
We are exposed to credit risk on our accounts receivable facility. This risk is heightened during periods of uncertain economic conditions.Debt & Financing - Risk 2
Our ability to emerge from Chapter 11 depends on our ability to obtain the anticipated exit financing and extend our receivables facility.The Bankruptcy Court entered an order confirming our Plan on February 20, 2024, with the effectiveness of the Plan and our emergence from Chapter 11 protection subject to certain conditions, including obtaining exit financing or capital to fund our emergence costs and support our business following emergence.
We obtained commitments from certain of our creditors under our Restructuring Support Agreement to convert certain of our debtor-in-possession term loans and certain other prepetition obligations into an exit credit facility upon emergence from Chapter 11 protection on substantially the terms set forth in the Restructuring Support Agreement. However, we cannot assure you that we will be able to meet the conditions required for such facility, which includes FCC approval of the exit capital structure, or that the final terms of the exit credit facility will be in a form acceptable to our creditors as required by the Restructuring Support Agreement.
In addition, we currently have access to a $100.0 million accounts receivable facility. However, the accounts receivable facility will terminate on the effective date of the Plan unless certain exit conditions relating to our emergence from Chapter 11 protection are satisfied on the effective date of the Plan, including the absence of a default or event of default, that customary representations and warranties are materially true and correct, and that the accounts receivable facility is amended to reflect certain additional terms, including amended events of default, and financial covenants.
We cannot assure you that the conditions to the availability of the exit credit facility or the continuation of the accounts receivable facility will be satisfied. If we are unable to obtain the exit credit facility or continue the accounts receivable facility, the Plan allows us to obtain alternative exit financing. We cannot presently determine the terms of such financing, nor can we assure you that we will be able to obtain it. If we cannot obtain the exit credit financing, continue the accounts receivable facility, or find alternative financing for the accounts receivable facility, our emergence from Chapter 11 protection may be delayed. Such delay could limit our alternatives and/or decrease our liquidity, which could result in our inability to continue as a going concern.
Debt & Financing - Risk 3
The Exit Credit Facility is expected to contain certain restrictions and limitations that could significantly affect Reorganized Audacy's ability to operate its business, as well as significantly affect its liquidity.The Exit Credit Facility is expected to contain a number of significant covenants that could adversely affect Reorganized Audacy's ability to operate its businesses, as well as significantly affect its liquidity, and therefore could adversely affect Reorganized Audacy's results of operations. These covenants are expected to restrict (subject to certain exceptions) Reorganized Audacy's ability to: incur additional debt; grant liens; consummate mergers, acquisitions, consolidations, liquidations and dissolutions; make dividends to shareholders; sell assets; make investments, loans and advances; make payments and modifications to subordinated and other material debt instruments; enter into transactions with affiliates; consummate sale-leaseback transactions; change its fiscal year; enter into hedging arrangements; allow third parties to manage its stations, and sell substantially all of the stations' programming or advertising; transfer or assign FCC licenses to third parties; and change its lines of business.
The breach of any covenants or obligations in the Exit Credit Facility, not otherwise waived or amended, could result in a default under the Exit Credit Facility and could trigger acceleration of those obligations. Any default under the Exit Credit Facility could adversely affect Reorganized Audacy's growth, financial condition, results of operations and ability to make payments on debt.
Debt & Financing - Risk 4
Our expected debt after emergence from Chapter 11 protection may adversely affect our operations and financial condition.We expect to have outstanding debt of approximately $350 million after emergence from Chapter 11 protection under (i) a proposed exit credit facility pursuant to a Credit Agreement with Wilmington Savings Fund Society, as administrative agent and collateral agent, and other lenders (the "Exit Credit Facility") and (ii) a proposed exit receivables facility pursuant to a Second Amended and Restated Receivables Financing Agreement with DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt AM Main, as agent, and the investors party thereto (the "Exit Receivables Facility" and, together with the Exit Credit Facility, the "Exit Debt Facilities"). We may also incur additional debt in the future.
Our ability to service our debt obligations after emergence from Chapter 11 protection will depend principally on our future operating performance which is subject to economic, financial, competitive and other factors beyond our control. We may not be able to generate sufficient cash from operations after emergence from Chapter 11 to meet our debt service obligations or fund necessary capital expenditures. We may also be unable to refinance our debt, obtain additional financing or sell assets or equity on commercially reasonable terms or at all.
Any default under either the Exit Credit Facility or the Exit Receivables Facility could adversely affect our growth, financial condition, results of operations, the value of our equity and our ability to service our debt.
Debt & Financing - Risk 5
Transfers of our equity and issuances of equity in connection with the Chapter 11 Cases may impair our ability to utilize our federal income tax net operating loss carryforwards in future years.Under federal income tax law, a corporation is generally permitted to deduct from taxable income net operating losses ("NOLs") carried forward from prior years. Our ability to utilize our NOL carryforwards to offset future taxable income and to reduce federal income tax liability is subject to certain requirements and restrictions. If we experience an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), then our ability to use our NOL carryforwards may be substantially limited, which could have a negative impact on our financial position and results of operations. Generally, an "ownership change" occurs if the percentage (by value) of the stock of a corporation owned by one or more "5-percent shareholders" has increased by more than 50 percentage points over the lowest percentage of stock owned by such shareholders at any time during the relevant testing period (usually three years). As a result of a plan of reorganization in the Chapter 11 Cases, it is expected that we will experience an "ownership change." We have also previously undergone other ownership changes. Absent an applicable exception, if a corporation undergoes an "ownership change," the amount of its NOLs that may be utilized to offset future taxable income generally is subject to an annual limitation generally equal to the value of its stock immediately prior to the ownership change multiplied by the long-term tax-exempt rate, subject to adjustments to reflect the differences between the fair market value of the corporation's assets and the tax basis in such assets. Accordingly, it is possible an ownership change would materially limit our ability to utilize our federal income tax NOL carryforwards in the future. In addition, as a result of the plan of reorganization in the Chapter 11 Cases, some or all of our federal income tax NOL carryforwards may be eliminated. As such, there can be no assurance that we will be able to utilize our federal income tax NOL carryforwards to offset future taxable income.
Debt & Financing - Risk 6
We may not have sufficient cash to fund our operations and our emergence costs.Our cash flows from operations may not provide sufficient liquidity during the Chapter 11 Cases, and exit financing or capital may not be sufficient to support our operations after emergence from Chapter 11 protection. Our operating cash flows and exit financing or capital may not be sufficient to pay our debt as it comes due, interest on our debt, emergence costs and other operating expenses.
Our ability to maintain adequate liquidity through and beyond the Chapter 11 Cases depends on the successful operation of our business and appropriate management of operating expenses and capital spending. Our anticipated liquidity needs will remain highly sensitive to changes in these factors after emergence from Chapter 11 protection.
Debt & Financing - Risk 7
Our cash flows may not provide sufficient liquidity during or after the Chapter 11 Cases.Our ability to fund our operations and our capital expenditures require a significant amount of cash. Our principal sources of liquidity historically have been cash flow from operations, borrowing capacity under the senior secured credit facility and the accounts receivable facility and issuances of notes. If our cash flow from operations decreases as a result of lower advertising prices, decreased listener demand, or otherwise, we may not have the ability to expend the capital necessary to improve or maintain our current operations, resulting in decreased revenues over time.
We face uncertainty regarding the adequacy of our liquidity and capital resources and, during our Chapter 11 Cases, have extremely limited access to additional financing. In addition to the cash requirements necessary to fund ongoing operations, we have incurred significant professional fees and other costs in connection with preparation for the Chapter 11 Cases and expect that we will continue to incur significant professional fees and costs throughout our Chapter 11 Cases. We cannot assure you that cash on hand, cash flow from operations and cash from our existing debtor-in-possession financing will be sufficient to continue to fund our operations and allow us to satisfy our obligations related to the Chapter 11 Cases until we are able to emerge from Chapter 11 protection.
Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to comply with the terms and conditions of the order approving our post-petition debtor-in-possession financing entered by the Bankruptcy Court in connection with the Chapter 11 Cases, (ii) our ability to maintain adequate cash on hand, (iii) our ability to generate cash flow from operations, (iv) our ability to consummate the Plan or other alternative plans of reorganization or restructuring transactions, and (v) the cost, duration and outcome of the Chapter 11 Cases.
Debt & Financing - Risk 8
Upon our emergence from bankruptcy, the composition of our Board may change significantly.Under the Plan, the composition of our Board may change significantly. The Restructuring Support Agreement contemplates upon emergence from Chapter 11 protection, the Board will be comprised of seven directors nominated as follows: Five members nominated by the first lien lender group, one member nominated by the second lien noteholder group, and David Field while employed by Reorganized Audacy or any of its subsidiaries or affiliates. The new directors may have different backgrounds, experiences and perspectives from those individuals who previously served on our board of directors and, thus, may have different views on the issues that will determine our future. As a result, our future strategy and plans for the Company may differ materially from those of the past.
Corporate Activity and Growth3 | 7.5%
Corporate Activity and Growth - Risk 1
We cannot assure you that we will be able to achieve our goals after the Plan is consummated and we emerge from Chapter 11 protection.Corporate Activity and Growth - Risk 2
We filed for reorganization under Chapter 11 on January 7, 2024 and even though our Plan was confirmed by the Bankruptcy Court on February 20, 2024, we are still subject to the risks and uncertainties associated with the Chapter 11 Cases.We are currently operating as debtors-in-possession under Chapter 11 and our continuation as a going concern is contingent upon, among other things, our ability to consummate the Plan. Even though our Plan was confirmed by the Bankruptcy Court on February 20, 2024, it is subject to certain conditions of its effectiveness, including the receipt of approval from the FCC. So long as our Chapter 11 Cases continue, our operations, including our ability to execute our business plan, are subject to the risks and uncertainties associated with bankruptcy.
Risks and uncertainties associated with our Chapter 11 Cases include the following:
- we may not be able to consummate the Plan or may be delayed in doing so;- third parties may take actions or make decisions that are inconsistent with and detrimental to the plans we believe to be in the best interests of the Company;- we may be unable to obtain court approval with respect to certain matters in the Chapter 11 Cases;- the Bankruptcy Court may not agree with our objections to positions taken by other parties; we may be unable to generate sufficient cash flows or obtain sufficient financing to fund both operations and the costs of our Chapter 11 Cases, particularly if the Chapter 11 Cases extend beyond the maturity date of our existing approved financing;- we may not be able to obtain and maintain normal credit terms with vendors, strategic partners and service providers;- we may not be able to continue to invest in our products and services, which could hurt our competitiveness;- we may not be able to enter into or maintain contracts that are critical to our operations at competitive rates and terms, if at all; and - our customers may choose to advertise with our competitors.
These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with our Chapter 11 Cases could adversely affect our ability to compete for advertising dollars and our relationship with our customers, as well as with our business partners, vendors and employees, which in turn could adversely affect our operations and financial condition, particularly if the Chapter 11 Cases are protracted. Because of the risks and uncertainties associated with our Chapter 11 Cases, the ultimate impact that the events that occur during these proceedings will have on our business, financial condition and results of operations cannot be predicted or quantified. If any one or more of these risks materializes, it could affect our ability to continue as a going concern.
Corporate Activity and Growth - Risk 3
We may be unable to effectively integrate our acquisitions, which could have a material adverse effect on our business.The integration of acquisitions involves numerous risks, including:
- the possibility of faulty assumptions underlying our expectations regarding the integration process;- the potential coordination of a greater number of diverse businesses and/or businesses located in a greater number of geographic locations;- retaining existing customers and attracting new customers;- the potential diversion of management's focus and resources from other strategic opportunities and from operational matters;- unforeseen expenses or delays in anticipated timing;- attracting and retaining the necessary personnel;- creating uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters; and - integrating accounting, finance, sales, billing, payroll, purchasing and regulatory compliance systems.
In addition, most dispositions and acquisitions outside of the ordinary course of business during the Chapter 11 Cases will be subject to Bankruptcy Court approval.
Legal & Regulatory
Total Risks: 8/40 (20%)Above Sector Average
Regulation4 | 10.0%
Regulation - Risk 1
Congress or federal agencies that regulate us could impose new regulations or fees on our operations that could have a material adverse effect on us.Regulation - Risk 2
The FCC has engaged in vigorous enforcement of its indecency rules against the broadcast industry, which could have a material adverse effect on our business.FCC regulations prohibit the broadcast of obscene material at any time and indecent or profane material between the hours of 6:00 a.m. and 10:00 p.m. The FCC has threatened on more than one occasion to initiate license revocation proceedings against a broadcast licensee that commits a "serious" indecency violation. Further, broadcasting obscene, indecent or profane programming may potentially subject broadcasters to license revocation, or licensee qualification proceedings. We may in the future become subject to inquiries or proceedings arising from our stations programming. We cannot predict the outcome of any such inquiries or proceedings to which we may become subject. However, to the extent that these proceedings or inquiries result in the imposition of fines, a settlement with the FCC, revocation of any of our station licenses or denials of license or license renewal applications, our business, financial condition, results of operations and cash flow could be adversely impacted.
Regulation - Risk 3
We are subject to extensive regulations and are dependent on federally-issued licenses to operate our radio stations. Failure to comply with such regulations could have a material adverse impact on our business.The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act. See Federal Regulation of Radio Broadcasting under Part I, Item 1, "Business." We are required to obtain licenses from the FCC to operate our radio stations. Licenses are normally granted for a term of eight years and are renewable. Although the vast majority of FCC radio station licenses are routinely renewed, there can be no assurance that the FCC will approve our future renewal applications or that the renewals will not include conditions or qualifications. During the periods when a renewal application is pending, informal objections and petitions to deny the renewal application can be filed by interested parties, including members of the public, on a variety of grounds. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse impact on our business, financial condition, results of operations and cash flows.
We must comply with extensive FCC regulations and policies in the ownership and operation of our radio stations. FCC regulations limit the number of radio stations that a licensee can own in a market, which could restrict our ability to consummate future transactions and in certain circumstances could require us to divest some radio stations. The FCC's rules governing our radio station operations impose costs on our operations, and changes in those rules could have an adverse effect on our business. The FCC also requires radio stations to comply with certain technical requirements to limit interference between two or more radio stations. If the FCC relaxes these technical requirements, it could impair the signals transmitted by our radio stations and could adversely impact our business, financial condition and results of operation. Moreover, these FCC regulations may change over time, and there can be no assurance that changes would not adversely impact our business, financial condition and results of operations. From time to time, we are the subject of investigations by the FCC in the normal course of business.
Regulation - Risk 4
Operating under Chapter 11 may restrict our ability to pursue our business strategies.Under Chapter 11, certain transactions are subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond in a timely manner to certain events or take advantage of certain opportunities.
Litigation & Legal Liabilities3 | 7.5%
Litigation & Legal Liabilities - Risk 1
The Chapter 11 Cases have required, and will continue to require, a substantial amount of time and attention of our senior management, which may have an adverse effect on our business and results of operations.Litigation & Legal Liabilities - Risk 2
As a result of the Chapter 11 Cases, our historical financial information may be volatile and not be indicative of our future financial performance.We expect our financial results to continue to be volatile until we are able to emerge from Chapter 11, as asset impairments, asset dispositions, restructuring activities and expenses, contract terminations and rejections, and claims assessments may significantly impact our consolidated financial statements. As a result, our historical financial performance may not be indicative of our future financial performance.
Our capital structure will be significantly altered under the Plan. Under fresh-start accounting rules that will apply to us upon the effective date of the plan, our assets and liabilities would be adjusted to fair value, which could have a significant impact on our financial statements. Accordingly, if fresh-start accounting rules apply, our financial condition and results of operations following our emergence from Chapter 11 protection would not be comparable to the financial condition and results of operations reflected in our historical financial statements. In connection with the Chapter 11 Cases and the development of the Plan, it is also possible that additional restructuring and related charges may be identified and recorded in future periods. Such charges could be material to our consolidated financial position, liquidity and results of operations.
Litigation & Legal Liabilities - Risk 3
We may be subject to litigation that could negatively impact our cash flow, financial condition and results of operations.We are a party from time to time in lawsuits and regulatory proceedings relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we may not be able to accurately predict the ultimate outcome of any such litigation or proceedings. A significant unfavorable outcome could negatively impact our cash flow, financial condition and results of operations. For example, the Company has been, and may continue to be, subject to music licensing fee disputes in the future. See "Legal Proceedings" in Part I, Item 3 and Note 21, Contingencies and Commitments for additional information.
Environmental / Social1 | 2.5%
Environmental / Social - Risk 1
Failure to comply with evolving state, federal and international privacy laws and regulations may result in significant liability, negative publicity, and/or erosion of trust and could have an adverse effect on our revenues, our results of operations and financial condition.Tech & Innovation
Total Risks: 4/40 (10%)Above Sector Average
Trade Secrets1 | 2.5%
Trade Secrets - Risk 1
The failure to protect our intellectual property could adversely impact our business, financial condition and results of operations.Cyber Security1 | 2.5%
Cyber Security - Risk 1
Cybersecurity threats could have a material adverse effect on our business.Technology2 | 5.0%
Technology - Risk 1
Our business depends on keeping pace with technological developments.Technology - Risk 2
Our business is dependent upon the proper functioning of our internal business processes and information systems, and modification or interruption of such systems may disrupt our business, processes and internal controls.The proper functioning of our internal business processes and availability, integrity or confidentiality of the information systems is critical to the efficient operation and management of our business. If these information technology systems fail or are interrupted, our operations and operating results may be adversely affected. Our business processes and information systems need to be sufficiently scalable to support the future growth of our business and may require modifications or upgrades that expose us to a number of operational risks. Our information technology systems, and those of third-party providers, may also be vulnerable to damage or disruption caused by circumstances beyond our control. While we maintain policies and procedures to recover our systems and information in the event of a failure of our systems, there can be no assurance that such policies and procedures will be effective. These include catastrophic events, power anomalies or outages, computer system or network failures and natural disasters. Any material disruption, malfunction or similar challenges with our business processes or information systems, or disruptions or challenges relating to the transition to new processes, systems or providers, could adversely impact our business, financial position, results of operations and cash flow.
Production
Total Risks: 4/40 (10%)Above Sector Average
Employment / Personnel2 | 5.0%
Employment / Personnel - Risk 1
The loss of, or difficulty attracting, motivating and retaining, key personnel could have a material adverse effect on our business.Employment / Personnel - Risk 2
We may experience increased levels of employee attrition as a result of the Chapter 11 Cases.As a result of the Chapter 11 Cases, we may experience increased levels of employee attrition, and our employees likely will face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. While we have entered into retention bonus agreements with certain executive officers and members of senior management in order to incentivize retention of employees who are significant to our business, our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Cases is limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our financial condition, liquidity and results of operations.
Costs2 | 5.0%
Costs - Risk 1
Our operations may be adversely affected by changes in programming and competition for advertising revenues.Costs - Risk 2
We have significant obligations relating to our current operating leases.As of December 31, 2023, we had future operating lease commitments of approximately $284.2 million that are disclosed in Note 21, Contingencies and Commitments, in the accompanying notes to our audited consolidated financial statements. We are required to make certain estimates at the inception of a lease in order to determine whether the lease is an operating or finance lease. In February 2016, the accounting guidance was modified to increase transparency and comparability among organizations by requiring the recognition of right-of-use ("ROU") assets and lease liabilities on the balance sheet. The most notable change in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases with a term of more than one year. This guidance was effective for us as of January 1, 2019. The impact of this guidance had a material impact on our financial position and the impact to our results of operations and cash flows was not material. As of January 1, 2019, we recorded a cumulative-effect adjustment to our accumulated deficit of $4.7 million, net of taxes of $1.7 million. This adjustment was attributable to the recognition of deferred gains from a sale and leaseback transaction under the previous accounting guidance for leases. The most significant impact of the adoption of the new leasing guidance was the recognition of ROU assets and lease liabilities for operating leases on the balance sheet of $288.7 million and $306.2 million, respectively, on January 1, 2019. The difference between the ROU assets and lease liabilities recorded upon implementation was primarily attributable to deferred rent balances and unfavorable lease liabilities which were combined and presented net within the ROU assets.
Macro & Political
Total Risks: 4/40 (10%)Above Sector Average
Economy & Political Environment2 | 5.0%
Economy & Political Environment - Risk 1
We may be adversely affected by the effects of inflation.Economy & Political Environment - Risk 2
Our results may be impacted by economic trends.Our results of operations could be negatively impacted by economic fluctuations or future economic downturns. Also, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions. The risks associated with our business could be more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in advertising expenditures. A decrease in advertising expenditures could adversely impact our business, financial condition and results of operations.
There can be no assurance that we will not experience an adverse impact on our ability to access capital, which could adversely impact our business, financial condition and results of operations. In addition, our ability to access the capital markets may be severely restricted at a time when we would like or need to do so, which could have an adverse impact on our capacity to react to changing economic and business conditions.
Natural and Human Disruptions1 | 2.5%
Natural and Human Disruptions - Risk 1
Pandemics, epidemics or other health crises may have a material adverse effect on our business, financial condition, results of operations, cash flows, or liquidity.Capital Markets1 | 2.5%
Capital Markets - Risk 1
Risks of trading in the Over-the-Counter MarketAbility to Sell
Total Risks: 3/40 (8%)Above Sector Average
Competition1 | 2.5%
Competition - Risk 1
We cannot predict the competitive effect of changes in audio content distribution or changes in technology.Demand1 | 2.5%
Demand - Risk 1
We depend on selected market clusters of radio stations for a material portion of our revenues.Sales & Marketing1 | 2.5%
Sales & Marketing - Risk 1
We rely on key contracts and business relationships, and if our business partners or contracting counterparties fail to perform or terminate any of their contractual arrangements with us for any reason or cease operations, our business could be disrupted and our revenues could be adversely affected.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.