MediaCo Holding Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Amounts below are in millions of dollars unless stated otherwise. MediaCo operates two New York radio stations and approximately 3,600 outdoor advertising displays in the Southeast and Mid-Atlantic.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net revenue | $17.82 | $9.36 | $41.94 | $28.14 |
| Operating income (loss) | $1.79 | ($0.61) | $4.96 | ($2.06) |
| Operating margin | 10.0% | (6.5%) | 11.8% | (7.3%) |
| Interest expense | $2.90 | $2.41 | $8.13 | $6.93 |
| Consolidated net loss | ($1.19) | ($2.99) | ($3.50) | ($22.84) |
| Net loss attributable to common shareholders | ($1.90) | ($3.53) | ($5.51) | ($24.43) |
| Basic and diluted loss per common share | ($0.26) | ($0.50) | ($0.77) | ($3.44) |
Radio revenue rose 131.6% in Q3 and 72.7% year to date; outdoor revenue rose 9.5% and 4.6%, respectively. Q3 nontraditional revenue was $4.21 million versus $0.20 million, principally reflecting the return of Summer Jam, which was cancelled in 2020. Radio-market gross revenue in New York rose 44.1% year to date, while MediaCo’s reported station gross revenue rose 73.1%.
For the nine months, operating cash flow was $4.18 million, compared with cash used of $7.21 million a year earlier. Investing activities used $1.28 million and financing activities provided $0.33 million. Cash increased to $7.40 million from $4.17 million at year-end 2020. No EBITDA or gross-margin figure is provided in the filing.
Liquidity, debt and capital structure
- At September 30, current assets were $23.84 million and current liabilities were $17.97 million, yielding working capital of approximately $5.88 million.
- Debt principal was approximately $99.13 million: $68.17 million under the senior credit facility, $5.54 million owed to Emmis and $25.43 million owed to SG Broadcasting. Reported debt carrying value, including current maturities and net of discount, was approximately $97.18 million.
- The senior facility bears interest at LIBOR plus 7.5%, subject to a 2% LIBOR floor. Amendment No. 4 suspended scheduled quarterly principal payments through Q1 2022, reduced the minimum fixed-charge coverage threshold temporarily, and permitted a higher borrowing base. The increased advance levels triggered an additional 1% annual paid-in-kind interest rate; related PIK interest was added to debt.
- Scheduled principal payments shown in the filing include $2.75 million in 2022, $3.67 million in 2023, $67.28 million in 2024 and $25.43 million in 2025. The 2024 amount includes the senior facility and Emmis note maturities.
- Series A preferred stock was carried at $26.27 million and accrues cumulative dividends in kind; the stated rate was 11.5% at September 30. SG Broadcasting may redeem the preferred shares for cash beginning in June 2025, subject to the governing terms.
Changes, outlook and risks
- Management attributed the recovery in advertising revenue and operating income to the rebound from pandemic-related disruption. Summer Jam materially boosted radio results versus the prior-year quarter.
- Expenses increased alongside activity: Q3 operating expenses excluding depreciation and amortization rose 61.8%, and corporate expenses approximately doubled, partly due to personnel hired ahead of the end of Emmis’s management agreement and increased stock compensation. Nine-month interest expense increased 17.4%.
- MediaCo recorded approximately $1.9 million of employee retention credits for the first nine months of 2021, reducing operating expenses; collection timing and amounts should be monitored.
- No quantified revenue, earnings or cash-flow guidance is provided. Management noted continuing uncertainty from COVID-19, possible renewed restrictions and supply-chain disruption, which could weaken advertising demand. Other cited risks include competition from digital and streaming media, dependence on the New York radio market, financing needs, debt restrictions, FCC license renewals and potential impairment of intangible assets.
- FCC licenses were $63.3 million, approximately 42% of total assets. Management reported no interim impairment indicators for the licenses and stated that it did not believe outdoor goodwill was impaired as of September 30; annual impairment testing was scheduled for October 1.
- Emmis’s management agreement was due to expire in November 2021 and Emmis had notified MediaCo it would not extend it. The employee leasing agreement ended January 1, 2021, with MediaCo hiring the leased employees. A CEO employment agreement signed November 10, 2021, effective July 1, appointed Rahsan-Rahsan Lindsay through June 2023, with a $550,000 base salary and incentive target of 60%.
- MediaCo entered an at-the-market sales agreement allowing up to $12.5 million of Class A shares; $0.2 million was sold in Q3. Class A shares outstanding increased during the year, including substantial restricted-stock grants, creating potential dilution.
- Management stated that no pending legal proceedings were likely to have a material adverse effect. Management concluded disclosure controls were effective and reported no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the advertising recovery and event-driven Q3 revenue can be sustained, particularly given the unusually large Summer Jam comparison.
- Senior-credit-facility covenant compliance, borrowing-base availability, PIK interest accumulation and the ability to refinance or meet the 2024 maturity concentration.
- Cash conversion and receivables collection: accounts receivable rose to $14.50 million from $8.51 million at year-end, and the nine-month cash-flow improvement included working-capital movements.
- The operational and cost impact of replacing Emmis management services, and the execution and compensation terms associated with the CEO agreement.
- Potential dilution from the ATM program, restricted stock, convertible related-party notes and preferred stock; confirm current share counts and conversion terms.
- Assumptions and outcomes of annual impairment testing for FCC licenses, goodwill and other intangible assets, as well as the status of FCC license renewals.