4. LEASES

The Company’s leases are considered operating leases and primarily consist of real estate such as office space, broadcasting towers, land and land easements. The operating leases are reflected within the consolidated balance sheet as Operating leases right of use asset with the related liability presented as Operating lease liabilities and Long-term operating lease liabilities. Lease expense is recognized on a straight-line basis over the lease term. Generally, lease terms include options to renew or extend the lease. Unless the renewal option is considered reasonably certain, the exercise of any such options has been excluded from the calculation of lease liabilities.

The Company’s existing leases have remaining terms of less than one year up to 25 years. The weighted average remaining lease term and the weighted average discount rate used to calculate the Company’s lease liabilities as of March 31, 2026 were 8.3 years and 6.3%, respectively. The weighted average remaining lease term and the weighted average discount rate used to calculate the Company’s lease liabilities as of March 31, 2025 were 8.4 years and 6.3%, respectively.

The Company’s corporate headquarters and main operational offices for its audio operations are currently located in Burbank, California. The Company's corporate headquarters and main operational offices for its audio operations were previously located in Santa Monica, California. The Company occupied approximately 38,000 square feet of space in the building housing its previous corporate headquarters under a lease, as amended, that was scheduled to expire on January 31, 2034. The Company vacated the facility in February 2025 and ceased making further lease payments. As a result, during the first quarter of 2025 the Company recorded a loss on lease abandonment charges of $16.1 million related to the right of use asset associated with this lease, and $9.1 million related to leasehold improvements associated with this lease. As of March 31, 2026, the Company's Condensed Consolidated Balance Sheet included $4.9 million of operating lease liabilities and $19.1 million of long-term operating lease liabilities related to this lease.

For the three-month period ended March 31, 2026, lease cost of $1.5 million and $1.0 million, were recorded to direct operating expenses and selling, general and administrative expenses. For the three-month period ended March 31, 2025, lease cost of $1.4 million, $1.2 million and $0.2 million, were recorded to direct operating expenses, selling, general and administrative expenses and corporate expenses, respectively.

As discussed above, in February 2025 the Company's management decided to vacate its previous corporate headquarters in Santa Monica, California and cease making further payments under the lease, as amended, which lease was scheduled to expire June 30, 2034. On or about July 22, 2025, the Company’s now former landlord of the Company’s former headquarters in Santa Monica, California commenced litigation against the Company in Los Angeles County Superior Court. The plaintiff alleges that the Company breached its lease and the plaintiff seeks at least $31.5 million in damages. The plaintiff filed an amended complaint on or about August 26, 2025 and the Company filed an answer on or about September 25, 2025, denying the plaintiff's allegations. Discovery has commenced and the court has tentatively set a trial date in June 2027. The Company intends to vigorously defend against the claims brought by the plaintiff and assert defenses to the claims raised. The Company is currently unable to estimate possible costs and other expenses or charges that may be incurred by the Company as a result of the lease termination.