MediaCo Holding Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unless otherwise noted, financial statement amounts below are in millions of dollars. At quarter-end, MediaCo’s operating business was principally two New York City radio stations; the Estrella acquisition described below closed after the quarter.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net revenue | $6.706 | $7.335 |
| Operating expenses | $10.173 | $9.241 |
| Operating loss | $(3.467) | $(1.906) |
| Net loss | $(3.677) | $(2.107) |
| Net loss attributable to common shareholders | $(4.400) | $(2.697) |
| Basic and diluted loss per share | $(0.18) | $(0.11) |
| Continuing operating cash flow | $0.412 | $0.818 |
Revenue declined 8.6%; operating loss widened, with operating margin approximately negative 51.7%, versus negative 26.0% a year earlier. Revenue was mainly spot radio advertising ($4.348 million), digital ($0.862 million), syndication ($0.598 million), events and sponsorships ($0.121 million), and other ($0.777 million). Cash used in investing was $0.172 million and cash used in financing was $0.080 million. Cash, cash equivalents and restricted cash were reported at $7.2 million at quarter-end.
At March 31, total assets were $96.954 million and total liabilities were $34.187 million. Current liabilities of $16.495 million exceeded current assets of $15.112 million, resulting in negative working capital of approximately $1.4 million. The company had $6.458 million of current Emmis convertible note debt, due November 25, 2024; management cited $7.3 million of debt-service requirements over the following 12 months. The note accrues interest and is convertible into Class A shares at Emmis’s option. Series A preferred stock was recorded at $29.477 million outside permanent equity.
Changes versus prior year
- Revenue fell $0.629 million. Management attributed weakness mainly to lower media and financial-sector spending, partly offset by stronger telecommunications and healthcare spending. New York market gross revenue grew 4.5%, while MediaCo’s gross revenue reported to Miller Kaplan fell 6.6%.
- Operating expenses excluding depreciation and amortization decreased 8.1% to $6.650 million, reflecting lower salary, lease, music-license and professional-service costs. Corporate expense rose 79.9% to $3.390 million, largely due to Estrella transaction-related professional fees.
- Net loss increased to $3.677 million from $2.107 million. Interest expense rose to $0.136 million, primarily reflecting the higher Emmis note balance after interest was paid in kind.
- Continuing operating cash flow declined to $0.412 million from $0.818 million, which management attributed mainly to working-capital changes. The 2024 figure included a $4.210 million cash-flow benefit from accounts payable and accrued liabilities.
Outlook, transactions and risks
- Estrella acquisition: On April 17, 2024, MediaCo acquired substantially all Estrella assets and assumed substantially all related liabilities, excluding certain broadcast assets. Estrella operates seven TV stations and 12 radio stations; assets include its network, content, digital and commercial operations. Consideration included a warrant for up to 28.2 million Class A shares, 60,000 Series B preferred shares, a $30 million second-lien term loan and approximately $30 million cash. The acquired broadcast assets are subject to an option/put arrangement for 7.05 million Class A shares, subject to FCC approval.
- Acquisition financing: A $35 million first-lien loan funded the transaction, certain debt repayment and related costs; the facility allows up to an additional $10 million delayed draw, of which $5 million remained available as of May 9, 2024. The first-lien loan matures in 2029, carries monthly interest at SOFR plus 6%, and has monthly amortization. The $30 million second-lien loan also matures in 2029 and carries interest at SOFR plus 6%; the filing says its variable SOFR portion is paid in cash and its fixed-rate portion in kind. These post-quarter borrowings materially change the company’s leverage and interest burden.
- On April 16, SG Broadcasting converted $29.6 million of Series A preferred stock into 20.7 million Class A shares, an important post-quarter change to the capital structure and potential share dilution.
- Management said the transactions and related debt and equity issuances resolved the conditions that had raised substantial doubt about the company’s ability to continue as a going concern in its 2023 Form 10-K. Management believed the company could meet obligations for at least one year from the May 15, 2024 issuance date.
- Management estimated Summer Jam revenue could decline $3.0–$3.6 million from 2023, partly offset by lower costs, with operating profit potentially down $1.5–$2.1 million. This is an event-specific estimate, not formal company-wide guidance. First-quarter revenue and operating income are typically seasonally low.
- Management cited risks from a mature, competitive radio market; audience and advertising shifts to digital and streaming media; concentration in the New York market; FCC and other regulatory requirements; acquisition integration and financing; and potential conflicts related to SG Broadcasting’s control. FCC-license impairment could also be affected by market, audience, revenue and discount-rate assumptions; no interim impairment indicator was identified.
- Nasdaq had granted an extension to September 9, 2024, to regain the $1 minimum bid-price requirement; the company reported that it regained compliance on April 17 and the matter was closed. Management reported disclosure controls were effective as of March 31, 2024, with no material change in internal control over financial reporting during the quarter.
- The filing reports no pending legal proceedings management believes likely to have a material adverse effect. No formal broader revenue or earnings guidance is provided.
Important facts for investors to verify
- Final Estrella acquisition accounting, integration performance, acquired liabilities, and the FCC-dependent broadcast-asset option/put outcome.
- Post-acquisition total debt, borrowing-base availability, cash interest expense, covenant compliance and ability to service the new loans.
- Share dilution and control implications from the Series A conversion, warrant, Series B preferred stock and any exercise of the broadcast-asset option.
- Execution against the Summer Jam estimate and whether advertising recovery can narrow the gap between MediaCo’s performance and New York market growth.
- Liquidity after the acquisition, including the November 2024 Emmis note maturity and the effect of ongoing negative working capital.