Mediaco Holding Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unless noted, dollar amounts below are in millions. MediaCo operates New York radio stations WQHT(FM) and WBLS(FM), with revenue primarily from radio and digital advertising, alongside syndication, events and other sources. The Fairway outdoor advertising business was sold in December 2022 and is reported as discontinued operations.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Continuing-operations revenue | $7.335 | $8.113 |
| Operating expenses | $9.241 | $9.225 |
| Operating loss | $(1.906) | $(1.112) |
| Continuing-operations net loss | $(1.955) | $(3.262) |
| Consolidated net loss | $(2.107) | $(4.293) |
| Net loss attributable to common shareholders | $(2.697) | $(5.131) |
| Cash from continuing operating activities | $0.818 | $4.618 |
Revenue declined 9.6%. Operating margin was approximately negative 26.0%, versus negative 13.7% a year earlier. Interest expense fell to $0.103 million from $2.077 million, chiefly following repayment of the senior credit facility and conversion of SG Broadcasting debt. The continuing-operations loss narrowed despite a larger operating loss, reflecting the lower interest expense. No EBITDA or gross-margin figure is provided.
Revenue mix shifted: spot radio advertising fell to $4.769 million from $6.177 million; digital increased to $0.974 million from $0.730 million; syndication increased to $0.605 million from $0.413 million; events and sponsorships were $0.156 million versus $0.007 million. The prior-year discontinued Fairway business reported $3.422 million of revenue and a $1.031 million net loss; it had no revenue in Q1 2023 and recorded a $0.152 million discontinued-operations loss, principally residual expenses.
Liquidity, debt and capital
- Cash and cash equivalents were $10.605 million; restricted cash was $4.407 million. Combined cash and restricted cash totaled $15.012 million, down from $15.301 million at year-end.
- Working capital was $13.5 million, compared with $15.2 million at December 31, 2022. The company reports the decline was primarily related to collection of receivables from discontinued operations.
- Long-term debt was $5.950 million, consisting of the Emmis convertible promissory note, due November 2024. Management said it had no debt-service requirements over the next 12 months. The note accrues interest in kind.
- Series A preferred stock was carried at $26.929 million, outside permanent equity. It accrues cumulative dividends in kind and is redeemable for cash at SG Broadcasting’s option on or after June 12, 2025.
- Continuing investing cash outflow was $0.549 million, including $0.312 million for internally created software and $0.237 million for property and equipment. Continuing financing outflow was $0.680 million, including $0.571 million of Class A share repurchases.
- A new New York office and radio-operations lease commenced in February 2023, adding a $10.4 million right-of-use asset and lease liability. Total recorded operating lease liabilities were $15.617 million at quarter-end.
Changes, outlook and risks
- Management attributed lower radio revenue to reduced healthcare advertising as COVID-19 awareness campaigns eased and lower online gambling spend, partly offset by stronger tourism and live-event advertising. New York market gross radio revenue declined 5.5%; MediaCo’s reported gross revenue declined 13.1%.
- Operating expenses excluding depreciation and amortization rose 9.3%, partly due to noncash lease expense from the new office lease and professional fees. Corporate expenses fell 24.2%, mainly because of lower stock-based compensation.
- Management says revenue and operating income are typically lowest in the first quarter. It identifies competition from digital media, streaming and podcasts; dependence on the New York radio market; economic and advertising-spend uncertainty; FCC licensing and regulatory risks; financing and acquisition risks; and potential conflicts related to SG Broadcasting and controlled-company status.
- The filing provides no specific financial guidance. Management expects economic disruption, inflation and interest-rate volatility may continue to affect results, but says the extent is difficult to estimate. It does not anticipate interest rates to decline; current borrowings are fixed-rate.
- In April 2023, the company paid $3.0 million of federal income taxes payable. Management reported no legal proceedings it believes are likely to have a material adverse effect and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether radio and digital revenue trends improve, especially given MediaCo’s decline relative to the New York market and its reliance on two stations.
- Cash generation and liquidity after the April $3.0 million tax payment, including the availability and restrictions on the $4.407 million of restricted cash.
- Repayment, conversion or refinancing plans for the $5.950 million Emmis note due in 2024 and the potential dilution from convertible securities.
- The cumulative preferred-stock balance, dividend accruals and potential cash redemption beginning in June 2025.
- The financial and operating impact of the new long-term lease, and whether ongoing operating cash flows can support lease commitments and investment needs.