Urban One, Inc.: Form 10-Q for the period ended Jun 30, 2024

Introduction

Revenue

Within our core radio business, we primarily derive revenue from the sale of advertising time and program sponsorships to local and national advertisers on our radio stations. Advertising revenue is affected primarily by the advertising rates our radio stations are able to charge, as well as the overall demand for radio advertising time in a market. These rates are largely based upon a radio station’s audience share in the demographic groups targeted by advertisers, the number of radio stations in the related market, and the supply of, and demand for, radio advertising time. Advertising rates are generally highest during morning and afternoon commuting hours.

Net revenues consist of gross revenues, net of local and national agency and outside sales representative commissions. Agency and outside sales representative commissions are calculated based on a stated percentage applied to gross billing.

The following table shows the percentage of consolidated net revenues generated by each reporting segment.

The following table shows the percentages generated from local and national advertising as a subset of net revenues from our core radio business.

National and local advertising also includes advertising revenue generated from our digital segment. The balance of net revenues from our radio broadcasting segment was generated from tower rental income, ticket sales and revenue related to our sponsored events, management fees and other revenue.

The following table shows the sources of our net revenues for the three months ended June 30, 2024 and 2023:

(In thousands)

(In thousands)

In the broadcasting industry, radio stations and television stations often utilize trade or barter agreements to reduce cash expenses by exchanging advertising time for goods or services. In order to maximize cash revenue for our spot inventory, we closely manage the use of trade and barter agreements.

Within our digital segment, Interactive One generates the majority of the Company’s digital revenue. Our digital revenue is principally derived from advertising services on non-radio station branded, but Company-owned websites. Advertising services include the sale of banner and sponsorship advertisements. As the Company runs its advertising campaigns, the customer simultaneously receives benefits as impressions are delivered, and revenue is recognized over time. The amount of revenue recognized each month is based on the number of impressions delivered multiplied by the effective per impression unit price and is equal to the net amount receivable from the customer.

Our cable television segment generates the Company’s cable television revenue and derives its revenue principally from advertising and affiliate revenue. Advertising revenue is derived from the sale of television airtime to advertisers and is recognized when the advertisements are run. Our cable television segment also derives revenue from affiliate fees under the terms of various multi-year affiliation agreements generally based on a per subscriber royalty for the right to distribute the Company’s programming under the terms of the distribution contracts.

Reach Media primarily derives its revenue from the sale of advertising in connection with its syndicated radio shows, including the Rickey Smiley Morning Show and the DL Hughley Show. Reach Media also operates www.BlackAmericaWeb.com (http://www.BlackAmericaWeb.com), an African-American targeted news and entertainment website, in addition to providing various other event-related activities.

Expenses

Our significant expenses are: (i) employee salaries and commissions; (ii) programming expenses; (iii) marketing and promotional expenses; (iv) rental of premises for office facilities and studios; (v) rental of transmission tower space; (vi) music license royalty fees; and (vii) content amortization. We strive to control these expenses by centralizing certain functions such as finance, accounting, legal, human resources and management information systems and, in certain markets, the programming management function. We also use our multiple stations, market presence and purchasing power to negotiate favorable rates with certain vendors and national representative selling agencies. In addition to salaries and commissions, major expenses for our internet business include membership traffic acquisition costs, software product design, post-application software development and maintenance, database and server support costs, the help desk function, data center expenses connected with internet service provider (“ISP”) hosting services and other internet content delivery expenses. Major expenses for our cable television business include content acquisition and amortization, sales and marketing.

We generally incur marketing and promotional expenses to increase and maintain our audiences. However, because Nielsen reports ratings either monthly or quarterly, depending on the particular market, any changed ratings and the effect on advertising revenue tends to lag behind both the reporting of the ratings and the occurrence of advertising and promotional expenditures.

RESULTS OF OPERATIONS

The following table summarizes our historical consolidated results of operations:

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

(In thousands)

36

Net revenues

During the three months ended June 30, 2024, we recognized approximately $117.7 million in net revenues compared to approximately $129.7 million during the three months ended June 30, 2023. These amounts are net of agency and outside sales representative commissions. We recognized approximately $42.0 million of revenue from our radio broadcasting segment during the three months ended June 30, 2024, compared to approximately $39.2 million during the three months ended June 30, 2023, an increase of approximately $2.8 million. This increase was primarily due to the Houston station acquisition, which was completed in August 2023, offset by a decrease in national advertising. We recognized approximately $18.9 million of revenue from our Reach Media segment during the three months ended June 30, 2024, compared to approximately $20.1 million for the three months ended June 30, 2023, a decrease of approximately $1.2 million. The decrease was primarily driven by the decrease in overall demand and attrition of advertisers. We recognized approximately $15.9 million of revenue from our digital segment during the three months ended June 30, 2024, compared to approximately $18.9 million for the three months ended June 30, 2023, a decrease of approximately $3.0 million. The decrease was primarily driven by a decrease in national markets digital sales and lower demand from the Company’s advertisers. We recognized approximately $41.5 million of revenue from our cable television segment during the three months ended June 30, 2024, compared to approximately $52.4 million for the three months ended June 30, 2023, a decrease of approximately $10.9 million. The decrease was primarily driven by a decrease in audience viewership affecting advertising sales and the consistent churn in subscribers.

Operating expenses

Programming and technical, excluding stock-based compensation

Programming and technical expenses include expenses associated with on-air talent and the management and maintenance of the systems, tower facilities, and studios used in the creation, distribution and broadcast of programming content on our radio stations. Programming and technical expenses for the radio broadcasting segment also include expenses associated with our programming research activities and music royalties. For our digital segment, programming and technical expenses include software product design, post-application software development and maintenance, database and server support costs, the help desk function, data center expenses connected with ISP hosting services and other internet content delivery expenses. For our cable television segment, programming and technical expenses include expenses associated with technical, programming, production, and content management. Programming and technical expenses were $33.3 million for the three months ended June 30, 2024, compared to $32.5 million for the three months ended June 30, 2023, an increase of approximately $0.7 million. Expenses in our radio broadcasting segment for the three months ended June 30, 2024 increased approximately $0.9 million, compared to the three months ended June 30, 2023. This increase was primarily driven by an increase in payroll, rent and utilities due to the Houston station acquisition, which was completed in August 2023. Expenses in our Reach Media segment for the three months ended June 30, 2024 decreased approximately $0.3 million compared to the three months ended June 30, 2023. This decrease was primarily driven by lower payroll expenses.

Selling, general and administrative, excluding stock-based compensation

Selling, general and administrative expenses include expenses associated with our sales departments, offices and facilities and personnel (outside of our corporate headquarters), marketing and promotional expenses, special events and sponsorships and back-office expenses. Expenses to secure ratings data for our radio stations and visitors’ data for our websites are also included in selling, general and administrative expenses. In addition, selling, general and administrative expenses for the radio broadcasting segment and digital segment include expenses related to the advertising traffic (scheduling and insertion) functions. Selling, general and administrative expenses also include membership traffic acquisition costs for our online business. Selling, general and administrative expenses were approximately $50.3 million for the three months ended June 30, 2024, compared to $49.8 million for the three months ended June 30, 2023, an increase of approximately $0.5 million. Expenses in our radio broadcasting segment increased approximately $1.0 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, due primarily to higher payroll, research, travel and entertainment costs and insurance costs as a result of the Houston station acquisition, which was completed in August 2023. Expenses in our Reach Media segment increased approximately $0.1 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, due primarily to higher event entertainment expenses offset by lower affiliate station costs. Expenses in our digital segment increased approximately $0.2 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, due primarily to an increase in traffic acquisition costs. Expenses in our cable television segment decreased approximately $1.0 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, due primarily to a decrease in content amortization expenses and music royalty expenses.

Corporate selling, general and administrative, excluding stock-based compensation

Corporate expenses consist of expenses associated with our corporate headquarters and facilities, including personnel as well as other corporate overhead functions. Corporate selling, general and administrative expenses were approximately $9.8 million for the three months ended June 30, 2024, compared to $11.4 million for the three months ended June 30, 2023, a decrease of approximately $1.6 million. The decrease was primarily due to a non-cash benefit related to the change in fair value of the Employment Agreement Award liability (as defined in Note 7 - Fair Value Measurements), offset by higher third-party consulting and audit expenses.

Stock-based compensation

Stock-based compensation expense was approximately $1.1 million for the three months ended June 30, 2024, compared to $2.3 million for the three months ended June 30, 2023, a decrease of approximately $1.2 million. The decrease in stock-based compensation was primarily due to the timing of grants and vesting of stock awards for executive officers and other management personnel.

Depreciation and amortization

Depreciation and amortization expense was approximately $3.0 million for the three months ended June 30, 2024, compared to approximately $1.9 million for the three months ended June 30, 2023, an increase of approximately $1.1 million due to additional depreciation on leasehold improvements and asset retirement obligation assets during the three months ended June 30, 2024.

Impairment of goodwill, intangible assets, and long-lived assets

Impairment of goodwill, intangible assets and long-lived assets was approximately $80.8 million during the three months ended June 30, 2024, compared to $22.1 million for the three months ended June 30, 2023. See Note 13 – Goodwill and Radio Broadcasting Licenses of the Company’s condensed consolidated financial statements for further discussion.

Interest income

Interest income was approximately $1.8 million for the three months ended June 30, 2024, compared to $1.9 million for the three months ended June 30, 2023. The decrease was driven by lower cash and cash equivalents balances in the three months ended June 30, 2024, than in the corresponding period in 2023.

Interest expense

Interest expense was approximately $12.4 million for the three months ended June 30, 2024, compared to approximately $14.0 million for the three months ended June 30, 2023, a decrease of approximately $1.6 million. The decrease was due to lower overall debt balances outstanding. During the three months ended June 30, 2024, the Company repurchased approximately $35.5 million of its 2028 Notes at an average price of approximately 78.0% of par, resulting in a net gain on retirement of debt of approximately $7.4 million.

Gain on retirement of debt

There was $7.4 million gain on retirement of debt for the three months ended June 30, 2024, compared to $0.0 million for the three months ended June 30, 2023. During the three months ended June 30, 2024, the Company repurchased approximately $35.5 million of its 2028 Notes at an average price of approximately 78.0% of par, resulting in a net gain on retirement of debt of approximately $7.4 million.

Other income, net

Other income, net, was approximately $0.0 million for the three months ended June 30, 2024, compared to $96.8 million for the three months ended June 30, 2023. As the Company sold its MGM investment in the three months ended June 30, 2023, the accumulated other comprehensive income was released to other income resulting in a $96.8 million gain.

(Benefit from) provision for income taxes

For the three months ended June 30, 2024, we recorded a benefit from income taxes of approximately 18.5 million. This amount is based on the actual effective tax rate of 29.1%. This rate includes $0.1 million of discrete tax benefits primarily related to deferred rate changes. For the three months ended June 30, 2023, we recorded a provision for income taxes of approximately $23.2 million on pre-tax income from consolidated operations of approximately $94.4 million which results in an effective tax rate of 24.6%. This rate includes $23.9 million of discrete tax expense primarily related to the gain on our MGM investment.

Net income attributable to non-controlling interests

Net income attributable to non-controlling interests was approximately $0.3 million for the three months ended June 30, 2024 compared to approximately $0.8 million for the three months ended June 30, 2023. The decrease in net income attributable to non-controlling interests was due primarily to an increase in ownership interest in Reach Media during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

The following table summarizes our historical consolidated results of operations:

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

(In thousands)

41

Net revenues

During the six months ended June 30, 2024, we recognized approximately $222.2 million in net revenues compared to approximately $239.5 million during the six months ended June 30, 2023. These amounts are net of agency and outside sales representative commissions. We recognized approximately $78.4 million of revenue from our radio broadcasting segment during the six months ended June 30, 2024, compared to approximately $74.4 million during the six months ended June 30, 2023, an increase of approximately $4.0 million. This increase was primarily due to the Houston station acquisition, which was completed in August 2023, offset by a decrease in national advertising. We recognized approximately $27.4 million of revenue from our Reach Media segment during the six months ended June 30, 2024, compared to approximately $31.0 million for the six months ended June 30, 2023, a decrease of approximately $3.6 million. The decrease was primarily driven by the decrease in overall demand and attrition of advertisers. We recognized approximately $29.9 million of revenue from our digital segment during the six months ended June 30, 2024, compared to approximately $34.0 million for the six months ended June 30, 2023, a decrease of approximately $4.1 million. The decrease was primarily driven by a decrease in national markets digital sales and lower demand from the Company’s advertisers. We recognized approximately $87.7 million of revenue from our cable television segment during the six months ended June 30, 2024, compared to approximately $102.1 million for the six months ended June 30, 2023, a decrease of approximately $14.4 million. The decrease was primarily driven by a decrease in audience viewership affecting advertising sales and the continued churn in subscribers.

Operating expenses

Programming and technical, excluding stock-based compensation

Programming and technical expenses include expenses associated with on-air talent and the management and maintenance of the systems, tower facilities, and studios used in the creation, distribution and broadcast of programming content on our radio stations. Programming and technical expenses for the radio broadcasting segment also include expenses associated with our programming research activities and music royalties. For our digital segment, programming and technical expenses include software product design, post-application software development and maintenance, database and server support costs, the help desk function, data center expenses connected with ISP hosting services and other internet content delivery expenses. For our cable television segment, programming and technical expenses include expenses associated with technical, programming, production, and content management. Programming and technical expenses were $65.9 million for the six months ended June 30, 2024, compared to $66.4 million for the six months ended June 30, 2023, a decrease of approximately $0.5 million. Expenses in our cable television segment for the six months ended June 30, 2024, decreased approximately $1.8 million compared to the six months ended June 30, 2023. The decrease was primarily driven by lower content amortization expense for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. Expenses in our Reach Media segment for the six months ended June 30, 2024, decreased approximately $0.9 million compared to the six months ended June 30, 2023. The decrease was primarily driven by lower contract labor and payroll expense for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. Expenses in our radio broadcasting segment for the six months ended June 30, 2024, increased approximately $1.9 million, compared to the six months ended June 30, 2023. This increase was primarily driven by an increase in payroll, rent and utilities due to the Houston station acquisition, which was completed in August 2023.

Selling, general and administrative, excluding stock-based compensation

Selling, general and administrative expenses include expenses associated with our sales departments, offices and facilities and personnel (outside of our corporate headquarters), marketing and promotional expenses, special events and sponsorships and back-office expenses. Expenses to secure ratings data for our radio stations and visitors’ data for our websites are also included in selling, general and administrative expenses. In addition, selling, general and administrative expenses for the radio broadcasting segment and digital segment include expenses related to the advertising traffic (scheduling and insertion) functions. Selling, general and administrative expenses also include membership traffic acquisition costs for our online business. Selling, general and administrative expenses were approximately $90.0 million for the six months ended June 30, 2024, compared to $86.5 million for the six months ended June 30, 2023, an increase of approximately $3.5 million. Expenses in our radio broadcasting segment increased approximately $3.4 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due primarily to higher payroll, research, travel and entertainment costs and insurance costs as a result of the Houston station acquisition, which was completed in August 2023. Expenses in our Reach Media segment decreased approximately $0.2 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due primarily to lower affiliate station costs. Expenses in our digital segment decreased approximately $0.2 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due primarily to a decrease in selling costs associated with our national clients. Expenses in our cable television segment increased approximately $0.3 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due primarily to an increase in research and payroll expenses offset by a decrease in promotional events expenses.

Corporate selling, general and administrative, excluding stock-based compensation

Corporate expenses consist of expenses associated with our corporate headquarters and facilities, including personnel as well as other corporate overhead functions. Corporate selling, general and administrative expenses were approximately $25.7 million for the six months ended June 30, 2024, compared to $19.9 million for the six months ended June 30, 2023, an increase of approximately $5.8 million. The increase was primarily due to higher third-party consulting and audit expenses, offset by a non-cash benefit related to the change in fair value of the Employment Agreement Award liability (as defined in Note 7 - Fair Value Measurements).

Stock-based compensation

Stock-based compensation expense was approximately $2.5 million for the six months ended June 30, 2024, compared to $5.6 million for the six months ended June 30, 2023, a decrease of approximately $3.1 million. The decrease in stock-based compensation was primarily due to the timing of grants and vesting of stock awards for executive officers and other management personnel.

Depreciation and amortization

Depreciation and amortization expense was approximately $4.8 million for the six months ended June 30, 2024, compared to approximately $4.5 million for the six months ended June 30, 2023, an increase of approximately $0.4 million due to the addition of asset retirement obligation assets during the six months ended June 30, 2024.

Impairment of goodwill, intangible assets, and long-lived assets

Impairment of goodwill, intangible assets and long-lived assets was approximately $80.8 million during the six months ended June 30, 2024, compared to $38.9 million for the six months ended June 30, 2023. See Note 13 – Goodwill and Radio Broadcasting Licenses of the Company’s condensed consolidated financial statements for further discussion.

Interest income

Interest income was approximately $3.8 million for the six months ended June 30, 2024, compared to $2.2 million for the six months ended June 30, 2023. The increase was driven by higher cash and cash equivalents balances in the six months ended June 30, 2024, than in the corresponding period in 2023.

Interest expense

Interest expense was approximately $25.4 million for the six months ended June 30, 2024, compared to approximately $28.0 million for the six months ended June 30, 2023, a decrease of approximately $2.6 million. The decrease was due to lower overall debt balances outstanding. During the six months ended June 30, 2024, the Company repurchased approximately $110.5 million of its 2028 Notes at an average price of approximately 85.0% of par.

Gain on retirement of debt

There was $15.3 million gain on retirement of debt for the six months ended June 30, 2024, compared to approximately $2.4 million for the six months ended June 30, 2023. During the six months ended June 30, 2024, the Company repurchased approximately $110.5 million of its 2028 Notes at an average price of approximately 85.0% of par, resulting in a net gain on retirement of debt of approximately $15.3 million. During the six months ended June 30, 2023, the Company repurchased $25.0 million of its 2028 Notes at an average price of approximately 89.1% of par resulting in a net gain of approximately $2.4 million.

Other income, net

Other income, net, was approximately $0.9 million for the six months ended June 30, 2024, compared to $96.5 million for the six months ended June 30, 2023. As the Company sold its MGM investment in the six months ended June 30, 2023, the accumulated other comprehensive income was released to other income resulting in a $96.8 million gain.

(Benefit from) provision for income taxes

For the six months ended June 30, 2024, we recorded a benefit from income taxes of approximately $16.0 million. This amount is based on the actual effective tax rate of 30.0%. This rate includes $0.1 million of discrete tax benefits primarily related to deferred rate changes. For the six months ended June 30, 2023, we recorded a provision for income taxes of approximately $22.0 million. This amount is based on the actual effective tax rate of 24.3%. The Company also recorded approximately $23.9 million of discrete tax expense related to the gain on our MGM investment.

Loss from unconsolidated joint venture

For the six months ended June 30, 2024, we recognized approximately $0.4 million loss from unconsolidated joint venture related to the Company’s investment on RVAEH.

Net income attributable to non-controlling interests

Net income attributable to non-controlling interests was approximately $0.6 million for the six months ended June 30, 2024, compared to approximately $1.3 million for the six months ended June 30, 2023. The decrease in net income attributable to non-controlling interests was due primarily to the change in ownership interest in Reach Media during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Non-GAAP Financial Measures

The presentation of non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to the financial information prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). We use non-GAAP financial measures including broadcast and digital operating income and Adjusted EBITDA as additional means to evaluate our business and operating results through period-to-period comparisons. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures are included below for review. Reliance should not be placed on any single financial measure to evaluate our business.

Measurement of Performance

We monitor and evaluate the growth and operational performance of our business using net (loss) income and the following key metrics:

(a) Net revenues: The performance of an individual radio station or group of radio stations in a particular market is customarily measured by its ability to generate net revenues. Net revenues consist of gross revenues, net of local and national agency and outside sales representative commissions consistent with industry practice. Net revenues are recognized in the period in which advertisements are broadcast. Net revenues also include advertising aired in exchange for goods and services, which is recorded at fair value, revenue from sponsored events and other revenue. Net revenues are recognized for our online business as impressions are delivered. Net revenues are recognized for our cable television business as advertisements are run, and during the term of the affiliation agreements at levels appropriate for the most recent subscriber counts reported by the affiliate, net of launch support.

(b) Broadcast and digital operating income: The radio broadcasting industry commonly refers to “station operating income” which consists of net (loss) income before depreciation and amortization, income taxes, interest expense, interest income, non-controlling interests in income of subsidiaries, other income, net, loss from unconsolidated joint venture, corporate selling, general and administrative expenses, stock-based compensation, impairment of goodwill, intangible assets, and long-lived assets and (gain) loss on retirement of debt. However, given the diverse nature of our business, station operating income is not truly reflective of our multi-media operation and, therefore, we use the term “broadcast and digital operating income.” Broadcast and digital operating income is not a measure of financial performance under GAAP. Nevertheless, broadcast and digital operating income is a significant measure used by our management to evaluate the operating performance of our core operating segments. Broadcast and digital operating income provides helpful information about our results of operations, apart from expenses associated with our fixed assets and goodwill, intangible assets, and long-lived assets, income taxes, investments, impairment charges, debt financings and retirements, corporate overhead and stock-based compensation. Our measure of broadcast and digital operating income is similar to industry use of station operating income; however, it reflects our more diverse business and therefore is not completely analogous to “station operating income” or other similarly titled measures as used by other companies. Broadcast and digital operating income does not represent operating income or loss, or cash flow from operating activities, as those terms are defined under GAAP, and should not be considered as an alternative to those measurements as an indicator of our performance.

Broadcast and digital operating income decreased to approximately $34.2 million for the three months ended June 30, 2024, compared to approximately $47.3 million for the comparable period in 2023, a decrease of approximately $13.1 million or 27.7%. The decrease was primarily due to lower broadcast and digital operating income at all segments but our radio broadcasting segment. Our digital segment generated approximately $2.9 million of broadcast and digital operating income during the three months ended June 30, 2024, compared to approximately $6.1 million during the three months ended June 30, 2023. Reach Media generated approximately $4.3 million of broadcast and digital operating income during the three months ended June 30, 2024, compared to approximately $5.2 million during the three months ended June 30, 2023. Cable television generated approximately $16.0 million of broadcast and digital operating income during the three months ended June 30, 2024, compared to approximately $25.9 million during the three months ended June 30, 2023. The decrease in the cable television segment’s broadcast and digital operating income was primarily from lower net revenues and higher selling, general and administrative costs offset by lower programming and technical expenses. Finally, our radio broadcasting segment generated approximately $10.8 million of broadcast and digital operating income during the three months ended June 30, 2024, compared to approximately $9.9 million during the three months ended June 30, 2023, primarily due to higher revenue due to the Houston station acquisition, which was completed in August 2023, offset by a decrease in national advertising expenses.

Broadcast and digital operating income decreased to approximately $66.2 million for the six months ended June 30, 2024, compared to approximately $86.6 million for the comparable period in 2023, a decrease of approximately $20.4 million or 23.6%. The decrease was primarily due to lower broadcast and digital operating income at all segments. Our digital segment generated approximately $5.9 million of broadcast and digital operating income during the six months ended June 30, 2024, compared to approximately $9.9 million during the six months ended June 30, 2023. Reach Media generated approximately $6.9 million of broadcast and digital operating income during the six months ended June 30, 2024, compared to approximately $9.4 million during the six months ended June 30, 2023. Cable television generated approximately $35.5 million of broadcast and digital operating income during the six months ended June 30, 2024, compared to approximately $48.3 million during the six months ended June 30, 2023. The decrease in the cable television segment’s broadcast and digital operating income was primarily from lower net revenues and higher selling, general and administrative costs offset by lower programming and technical expenses. Finally, our radio broadcasting segment generated approximately $17.4 million of broadcast and digital operating income during the six months ended June 30, 2024, compared to approximately $18.8 million during the six months ended June 30, 2023, primarily due to higher selling, general and administrative costs.

(c) Adjusted EBITDA: Adjusted EBITDA consists of net (loss) income plus (1) depreciation and amortization, income taxes, interest expense, net income attributable to non-controlling interests, impairment of goodwill, intangible assets, and long-lived assets, stock-based compensation, (gain) loss on retirement of debt, corporate costs, severance-related costs, investment income, loss from unconsolidated joint venture, less (2) other income, net and interest income. Net (loss) income before interest income, interest expense, income taxes, depreciation and amortization is commonly referred to in our business as “EBITDA.” Adjusted EBITDA and EBITDA are not measures of financial performance under GAAP. We believe Adjusted EBITDA is often a useful measure of a company’s operating performance and is a significant measure used by our management to evaluate the operating performance of our business. Accordingly, based on the previous description of Adjusted EBITDA, we believe that it provides useful information about the operating performance of our business, apart from the expenses associated with our fixed assets and goodwill, intangible assets, and long-lived assets or capital structure. Adjusted EBITDA is frequently used as one of the measures for comparing businesses in the broadcasting industry, although our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including, but not limited to the fact that our definition includes the results of all four of our operating segments (radio broadcasting, Reach Media, digital and cable television). Business activities unrelated to these four segments are included in an “all other” category which the Company refers to as “All other - corporate/eliminations.” Adjusted EBITDA and EBITDA do not purport to represent operating income or cash flow from operating activities, as those terms are defined under GAAP, and should not be considered as alternatives to those measurements as an indicator of our performance.

Summary of Performance

The tables below provide a summary of our performance based on the metrics described above:

(In thousands)

(In thousands)

47

The reconciliation of net (loss) income attributable to common stockholders to broadcast and digital operating income is as follows:

(In thousands)

(In thousands)

48

The reconciliation of net (loss) income attributable to common stockholders to adjusted EBITDA is as follows:

(In thousands)

(In thousands)

(a) Corporate costs include professional fees related to the material weakness remediation efforts.

(b) Investment expense from MGM National Harbor is included in Other income, net.

LIQUIDITY AND CAPITAL RESOURCES

From time to time, the Company may repurchase its outstanding debt and/or equity securities in open market purchases. Under open authorizations, repurchases of our outstanding debt and/or equity securities may be made from time to time in the open market or in privately negotiated transactions in accordance with applicable laws and regulations. Repurchased debt and equity securities are retired when repurchased. The timing and extent of any repurchases will depend upon prevailing market conditions, the trading price of the Company’s outstanding debt and/or equity securities and other factors, and subject to restrictions under applicable law.

Our primary source of liquidity is cash provided by operations and, to the extent necessary, borrowings available under our asset-backed credit facility. Our cash, cash equivalents and restricted cash balance was approximately $132.4 million as of June 30, 2024. As of June 30, 2024, there were no borrowings outstanding on the Current ABL Facility (as defined below) which has $50.0 million in overall capacity.

The Company regularly considers the impact of macroeconomic conditions on our business. Uncertainty in the macroeconomic environment with continued increases in inflation and interest rates, along with banking volatility, may have an adverse effect on our revenues.

On September 27, 2022, the Compensation Committee authorized the repurchase of up to $0.5 million (the “Employee Stock Repurchase Authorization”) worth of shares in the aggregate from employees who want to sell in connection with the Company’s most recent employee stock grant. During the six months ended June 30, 2024 and 2023, the Company did not repurchase any shares of Class A stock in connection with the Employee Stock Repurchase Authorization. During the six months ended June 30, 2024, the Company repurchased 25,285 shares of Class D stock under Employee Stock Repurchase Authorization at an average price of $3.76 for a total amount of $0.1 million. The Company did not repurchase any shares of Class D stock during the six months ended June 30, 2023, under this authorization. The Company has $0.3 million remaining under the Employee Stock Repurchase Authorization.

In addition, the Company has limited but ongoing authority to purchase shares of Class D common stock (in one or more transactions at any time there remain outstanding grants) under the 2019 Equity and Performance Incentive Plan. This limited authority is used to satisfy any employee or other recipient tax obligations in connection with the exercise of an option or a share grant under the 2019 Equity and Performance Incentive Plan, to the extent that the Company has capacity under its financing agreements (i.e., its current credit facilities and indentures) (each a “Stock Vest Tax Repurchase”).

On June 10, 2024, the Company’s board of directors approved a share repurchase authorization to repurchase up to $20.0 million of the Company's outstanding Class A and/or Class D common stock (collectively, the “Stock Repurchase Program”). The Stock Repurchase Program will remain in effect for up to 24 months or until the authorization is exhausted.

During the six months ended June 30, 2024, the Company repurchased 449,277 shares of Class A Common Stock in the amount of approximately $0.9 million at an average price of $2.06 per share. During the six months ended June 30, 2023, the Company did not repurchase any shares of Class A Common Stock.

During the six months ended June 30, 2024, the Company repurchased 87,659 shares of Class D Common Stock in the amount of approximately $0.1 million at an average price of $1.59 per share. During the six months ended June 30, 2023, the Company repurchased 824 shares of Class D Common Stock in the amount of approximately $3,000 at an average price of $3.99 per share. See Note 19 - Subsequent Events of our condensed consolidated financial statements for additional purchases subsequent to June 30, 2024.

During the six months ended June 30, 2024 and 2023, the Company executed Stock Vest Tax Repurchases of 396,391 shares of Class D Common Stock in the amount of approximately $1.3 million at a price of $3.35 per share and 274,077 shares of Class D Common Stock in the amount of approximately $1.4 million at an average price of $5.22 per share.

On March 8, 2023, Radio One Entertainment Holdings, LLC (“ROEH”) issued a Put Notice with respect to its Put Interest in MGM National Harbor (the “MGM Investment”). Upon issuance of the Put Notice, no later than thirty (30) days following receipt, MGM Investment was required to repurchase the Put Interest for cash. On April 21, 2023, ROEH closed on the sale of the Put Interest and received approximately $136.8 million at the time of settlement of the Put Interest, representing the put price. During the six months ended June 30, 2023, the Company received $8.8 million representing the Company’s annual distribution from MGM Investment with respect to fiscal year 2022.

On January 25, 2021, the Company closed on an offering (the “2028 Notes Offering”) of $825.0 million in aggregate principal amount of senior secured notes due 2028 (the “2028 Notes”) in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The 2028 Notes are general senior secured obligations of the Company and are guaranteed on a senior secured basis by certain of the Company’s direct and indirect restricted subsidiaries. The 2028 Notes mature on February 1, 2028, and interest on the Notes accrues and is payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2021 at the rate of 7.375% per annum.

The 2028 Notes and the guarantees are secured, subject to permitted liens and except for certain excluded assets (i) on a first priority basis by substantially all of the Company’s and the Guarantors’ current and future property and assets (other than accounts receivable, cash, deposit accounts, other bank accounts, securities accounts, inventory and related assets that secure our asset-backed revolving credit facility on a first priority basis (the “ABL Priority Collateral”), including the capital stock of each guarantor (collectively, the “Notes Priority Collateral”) and (ii) on a second priority basis by the ABL Priority Collateral.

During the three months ended June 30, 2024, the Company repurchased approximately $35.5 million of its 2028 Notes at an average price of approximately 78.0% of par, resulting in a net gain on retirement of debt of approximately $7.4 million. During the three months ended June 30, 2023, the Company did not repurchase any of its 2028 Notes.

During the six months ended June 30, 2024, the Company repurchased approximately $110.5 million of its 2028 Notes at an average price of approximately 85.0% of par, resulting in a net gain on retirement of debt of approximately $15.3 million. During the six months ended June 30, 2023, the Company repurchased approximately $25.0 million of its 2028 Notes at an average price of approximately 89.1% of par. The Company recorded a net gain on retirement of debt of approximately $2.4 million during the six months ended June 30, 2023. As of June 30, 2024, the total outstanding aggregate principal amount of the senior secured notes due 2028 is $614.5 million. See Note 14 – Long-Term Debt of our condensed consolidated financial statements for further information.

On February 19, 2021, the Company closed on a new asset backed credit facility (the “Current ABL Facility”). The Current ABL Facility is governed by a credit agreement by and among the Company, the other borrowers party thereto, the lenders party thereto from time to time and Bank of America, N.A., as administrative agent. The Current ABL Facility provides for up to $50.0 million revolving loan borrowings in order to provide for the working capital needs and general corporate requirements of the Company. The Current ABL Facility also provides for a letter of credit facility up to $5.0 million as a part of the overall $50.0 million in capacity. As of June 30, 2024, there were no borrowings outstanding on the Current ABL Facility.

At the Company’s election, the interest rate on borrowings under the Current ABL Facility are based on either (i) the then applicable margin relative to Base Rate Loans (as defined in the Current ABL Facility) or (ii) until execution of the Waiver and Amendment (as defined below) took effect, the then applicable margin relative to LIBOR Loans (as defined in the Current ABL Facility) corresponding to the average availability of the Company for the most recently completed fiscal quarter.

On April 30, 2023, the Company entered into a waiver and amendment (the “Waiver and Amendment”) to the Current ABL Facility. The Waiver and Amendment waived certain events of default under the Current ABL Facility related to the Company’s failure to timely deliver certain Annual Financial Deliverables for the Fiscal Year ended December 31, 2022. Additionally, under the Waiver and Amendment, the Current ABL Facility was amended to provide that from and after the date thereof, any request for a new LIBOR Loan (as defined in the Current ABL Facility), for a continuation of an existing LIBOR Loan (as defined in the Current ABL Facility) or for a conversion of a Loan to a LIBOR Loan (as defined in the Current ABL Facility) shall be deemed to be a request for a loan bearing interest at Term SOFR (as defined in the Amended Current ABL Facility) (the “SOFR Interest Rate Change”).

Between June 5, 2023, and May 30, 2024, the Company entered into six more waivers and amendments related to the Company’s failure to timely deliver certain financial deliverables as required under the Current ABL Facility Most recently, on May 30, 2024, the Company entered into a seventh waiver and amendment (the “Seventh Waiver and Amendment” to the Current ABL Facility. The Seventh Waiver and Amendment waived certain events of default under the Current ABL Facility related to the Company’s failure to timely deliver both the Annual Financial Deliverables for the year ended December 31, 2023 (the “2023 Form 10-K”) and Quarterly Financial Deliverables for the three and six months ended June 30, 2024 as required under the Current ABL Facility (the “2024 Q1 Form 10-Q” and, together with the “2023 Form 10-K”, the “Delayed Reports”). The Seventh Waiver and Amendment sets a due date of June 17, 2024 for the Delayed Reports. The Delayed Reports were filed on June 7, 2024, bringing the Company back into compliance with the requirements under the Current ABL Facility.

Advances under the Current ABL Facility are limited to (a) eighty-five percent (85%) of the amount of Eligible Accounts (as defined in the Current ABL Facility), less the amount, if any, of the Dilution Reserve (as defined in the Current ABL Facility), minus (b) the sum of (i) the Bank Product Reserve (as defined in the Current ABL Facility), plus (ii) the AP and Deferred Revenue Reserve (as defined in the Current ABL Facility), plus (iii) without duplication, the aggregate amount of all other reserves, if any, established by Administrative Agent.

All obligations under the Current ABL Facility are secured by a first priority lien on all (i) deposit accounts (related to accounts receivable), (ii) accounts receivable, and (iii) all other property which constitutes ABL Priority Collateral (as defined in the Current ABL Facility). The obligations are also guaranteed by all material restricted subsidiaries of the Company.

As the Company was undrawn under the Current ABL Facility as of the date of the Waiver and Amendment, the SOFR Interest Rate Change would only bear upon future borrowings by the Company such that they bear an interest rate relating to the secured overnight financing rate. These provisions of the Waiver and Amendment are intended to transition loans under the Current ABL Facility to the new secured overnight financing rate as the benchmark rate.

The Current ABL Facility matures on the earlier to occur of: (a) the date that is five years from the effective date of the Current ABL Facility, and (b) 91 days prior to the maturity of the Company’s 2028 Notes. The Current ABL Facility is subject to the terms of the Revolver Intercreditor Agreement (as defined in the Current ABL Facility) by and among the Administrative Agent and Wilmington Trust, National Association.

The following table provides a summary of our statements of cash flows for the six months ended June 30, 2024, and 2023, respectively:

(In thousands)

Net cash flows provided by operating activities were approximately $3.7 million and $41.8 million for the six months ended June 30, 2024, and 2023, respectively. Net cash flow from operating activities for the six months ended June 30, 2024 decreased from the prior year primarily due to decreased profitability, lower collections of accounts receivable and higher payments for content liabilities.

Cash flows from operations, cash and cash equivalents, and other sources of liquidity are expected to be available and sufficient to meet foreseeable cash requirements.

Net cash flows (used in) provided by investing activities were approximately $(0.3) million and $113.3 million for the six months ended June 30, 2024, and 2023, respectively. The sale of the MGM investment and the effect of the RVAEH deconsolidation was the main driver for the increase in investing cash flows for the six months ended June 30, 2023.

Net cash flows used in financing activities were approximately $(104.6) million and $(25.7) million for the six months ended June 30, 2024, and 2023, respectively. During the six months ended June 30, 2024, and 2023, we paid approximately $93.9 million and $22.3 million, respectively, to repurchase $110.5 million and $25.0 million of our 2028 Notes. We repurchased approximately $2.5 million and $1.4 million of our Class A and D Common Stock during the six months ended June 30, 2024, and 2023, respectively. In addition, the non-controlling interest shareholders of Reach Media exercised 50% of their Put Right on January 26, 2024, which resulted in a cash outflow of approximately $7.6 million. Finally, Reach Media paid approximately $1.8 million and $2.0 million in dividends to non-controlling interest shareholders during the six months ended June 30, 2024, and 2023, respectively.

Credit Rating Agencies

On a continuing basis, Standard and Poor’s, Moody’s Investor Services and other rating agencies may evaluate our indebtedness in order to assign a credit rating. Our corporate credit ratings by Standard & Poor's Rating Services and Moody's Investors Service are speculative-grade and have been downgraded and upgraded at various times during the last several years. Any reductions in our credit ratings could increase our borrowing costs, reduce the availability of financing to us or increase our cost of doing business or otherwise negatively impact our business operations.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note 3 – Summary of Significant Accounting Policies of the consolidated financial statements in our 2023 Form 10-K. There have been no significant changes in our critical accounting policies from those presented in our Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates are described in our Form 10-K for the year ended December 31, 2023, under the heading Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no significant changes in our critical accounting estimates from those presented in our Form 10-K.

Radio Broadcasting Licenses

As of June 30, 2024, an increase in the discount rate, and a decline in the projected gross market revenues and operating profits triggered a qualitative impairment assessment for broadcasting licenses across all radio markets. The Company performed a quantitative impairment assessment for the broadcasting licenses for all radio markets to determine whether they were impaired. To determine the fair value of the broadcasting licenses, the Company utilized the income approach which values a license by calculating the value of a hypothetical startup company that initially has no assets except the asset to be valued (the broadcasting license). The Company performed a discounted cash flow analysis for all 13 radio markets. The key assumptions used in the discounted cash flow analysis for broadcasting licenses include market revenue and projected revenue growth by market, mature market share, operating profit margin, terminal growth rate, and discount rate.

Based on this analysis, the Company recognized an impairment loss of approximately $80.8 million associated with 9 radio markets within the radio broadcasting segment, included in impairment of goodwill, intangible assets, and long-lived assets, on the condensed consolidated statement of operations during the three and six months ended June 30, 2024.

Excluding the radio broadcasting licenses in the 9 radio markets where an impairment loss was recognized during the three months ended June 30, 2024, the fair value of radio broadcasting licenses in two radio markets, approximately $162.0 million, exceeded its carrying value by less than 10% as of June 30, 2024. The radio broadcasting licenses in those markets are considered at risk of failing the quantitative impairment assessment in future quarters if financial performance decreases.

Below are the key assumptions used in the income approach model for estimating the fair value of the broadcasting licenses for the 13 radio markets in the most recent interim impairment assessment performed as of June 30, 2024.

(a) The units of accounting are not disclosed on a specific market basis in order to not make publicly available sensitive information that could be competitively harmful to the Company. Units of accounting, not presented in this table, were previously disposed by the Company.

To the extent that there is a potential recession that further disrupts the economic environment impacting the financial performance or interest rates continue to rise in response to persistent inflation, these events could negatively affect the key assumptions and result in significantly lower fair value of the broadcasting licenses.

See Note 13 – Goodwill and Radio Broadcasting Licenses of our condensed consolidated financial statements for further discussion.

Goodwill

As of June 30, 2024, the Company performed a qualitative impairment assessment for goodwill at four reporting units because of a decline in operating cash flows. Based on the impairment assessment performed, no goodwill impairment losses were recognized for the period ended June 30, 2024. We believe the assumptions and analysis are reasonable, which considers the inherent uncertainty in how the current economic environment may impact our future cash flows. However, if there were an adverse change to the facts and circumstances, then an impairment charge may be necessary in the future.

Fair Value Measurements

The Company estimated the fair value of the Employment Agreement Award as of June 30, 2024 and December 31, 2023, at approximately $16.7 million and $23.0 million, respectively, and, accordingly, adjusted the liability to that amount. The fair value estimate incorporated a number of assumptions and estimates, including but not limited to revenue growth rates, future operating profit margins, discount rate, peer companies, EBITDA multiples and weighting of the income and market approach. As the Company will measure changes in the fair value of this award at each reporting period as warranted by certain circumstances, different estimates or assumptions may result in a change to the fair value of the award amount previously recorded.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 11 – New Accounting Standards of our condensed consolidated financial statements for a summary of recent accounting pronouncements.

CAPITAL AND COMMERCIAL COMMITMENTS

Radio Broadcasting Licenses

Each of the Company’s radio stations operates pursuant to one or more licenses issued by the Federal Communications Commission that have a maximum term of eight years prior to renewal. The Company’s radio broadcasting licenses expire at various times beginning in October 2028, through August 2031. Although the Company may apply to renew its radio broadcasting licenses, third parties may challenge the Company’s renewal applications. The Company is not aware of any facts or circumstances that would prevent the Company from having its current licenses renewed. A station may continue to operate beyond the expiration date of its license if a timely filed license renewal application was filed and is pending.

Indebtedness

As of June 30, 2024, we had approximately $614.5 million of our 2028 Notes outstanding within our corporate structure. See Note 14 - Long-Term Debt of our condensed consolidated financial statements. The Company had no other indebtedness.

Royalty Agreements

Musical works rights holders, generally songwriters and music publishers, have been traditionally represented by performing rights organizations, such as the American Society of Composers Authors and Publishers (“ASCAP”), Broadcast Music, Inc (“BMI”) and SESAC, Inc. (“SESAC”). The market for rights relating to musical works is changing rapidly. Songwriters and music publishers have withdrawn from the traditional performing rights organizations, particularly ASCAP and BMI, and new entities, such as Global Music Rights Inc. ("GMR"), have been formed to represent rights holders. These organizations negotiate fees with copyright users, collect royalties and distribute them to the rights holders. These licenses periodically come up for renewal, and as a result certain of our performing rights organizations (“PRO”) licenses are currently the subject of renewal negotiations. The outcome of these renewal negotiations could impact, and potentially increase, our music license fees. In addition, there is no guarantee that additional PROs will not emerge, which could impact, and in some circumstances increase, our royalty rates and negotiation costs.

The Radio Music Licensing Committee (“RMLC”), of which we are a represented participant, has negotiated and entered into, on behalf of participating members, an Interim License Agreement with ASCAP effective January 1, 2022 and to remain in effect until the date on which the parties reach agreement as to, or there is court determination of, new interim or final fees, terms, and conditions of a new license for the five year period commencing on January 1, 2022 and concluding on December 31, 2026. On February 7, 2022, the RMLC and GMR reached a settlement and achieved certain conditions which effectuate a four-year license to which the Company is a party for the period April 1, 2022, to March 31, 2026. The license includes an optional three-year extended term that the Company may effectuate prior to the end of the initial term. The RMLC is negotiating with BMI and SESAC.

Lease Obligations

We have non-cancelable operating leases for office space, studio space, broadcast towers and transmitter facilities that expire over the next forty-eight years.

Operating Contracts and Agreements

We have other operating contracts and agreements including employment contracts, on-air talent contracts, severance obligations, retention bonuses, consulting agreements, equipment rental agreements, programming related agreements, and other general operating agreements that expire over the next five years.

Reach Media Non-controlling Interest

Beginning on January 1, 2018, the non-controlling interest shareholders of Reach Media have had an annual right to require Reach Media to purchase all or a portion of their shares at the then current fair market value for such shares (the “Put Right”). This annual right is exercisable for a 30-day period beginning January 1 of each year. The purchase price for such shares may be paid in cash and/or registered Class D common stock of the Company, at the discretion of the Company.

On January 26, 2024, the non-controlling interest shareholders of Reach Media exercised their right to require Reach Media to repurchase 50% of their shares (the “Put Interest”) at the fair market value for such shares. On March 8, 2024, Reach Media closed on the Put Interest increasing the Company’s interest in Reach Media to 90% and decreasing the interest of the non-controlling interest shareholders from 20% to 10%.

Contractual Obligations Schedule

The following table represents our scheduled contractual obligations as of June 30, 2024:

(In thousands)

(a) Includes interest obligations based on interest rates on senior secured notes outstanding as of June 30, 2024.

(b) Includes employment contracts (including the Employment Agreement Award), severance obligations, on-air talent contracts, consulting agreements, equipment rental agreements, programming related agreements, launch liability payments, asset-backed credit facility (if applicable) and other general operating agreements. Also includes contracts that our cable television segment has entered into to acquire entertainment programming rights and programs from distributors and producers. These contracts relate to their content assets as well as prepaid programming related agreements.

Of the total amount of other operating contracts and agreements included in the table above, approximately $86.3 million has not been recorded on the balance sheet as of June 30, 2024, as it does not meet recognition criteria. Approximately $22.4 million relates to certain commitments for content agreements for our cable television segment, approximately $27.5 million relates to employment agreements, and the remainder relates to other agreements.

Off-Balance Sheet Arrangements

As of March 31, 2024, the Company closed its letter of credit reimbursement and security agreement with capacity of up to $1.2 million and received a $1.2 million deposit held with the counterparty in connection with the agreement. In addition, the Current ABL Facility provides for letter of credit capacity of up to $5.0 million subject to certain limitations on availability.

(a) Evaluation of disclosure controls and procedures

We have carried out an evaluation, under the supervision and with the participation of our CEO (“Chief Executive Officer”) and the Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired disclosure controls objectives. Based on this evaluation and as a result of material weaknesses in our internal control over financial reporting as described in the Form 10-K for the fiscal year ended December 31, 2023, our CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2024.

(b) Changes in internal control over financial reporting

During the second quarter of 2024, we continued to make progress towards strengthening our control environment to address the identified material weaknesses. We hired an Assistant Corporate Controller and Director-Financial Systems and continue to augment our accounting team with external experts in financial controls and operations as needed. The Company is actively evaluating and redesigning information technology general controls and has taken steps to revamp financial close processes and management review controls over areas requiring significant judgment through implementation of checklists and procedure documentation.

We will not be able to conclude that we have remediated a material weakness until the remediation plans are fully implemented; the applicable controls operate for a sufficient period of time; and management has concluded, through formal testing, that these controls are operating effectively. We will continue to monitor the design and effectiveness of these and other processes, procedures and controls and make any further changes management deems appropriate. Except as described above, there were no changes in our internal control over financial reporting during the six months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our risk factors are described in our Form 10-K for the year ended December 31, 2023, under the heading Part I, “Item 1A. Risk Factors”. There have been no changes to our risk factors from those disclosed in our Form 10-K filed June 7, 2024.