MediaCo Holding Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparable period is Q1 2020. Unless stated otherwise, financial figures below are in millions of dollars. MediaCo operates New York radio stations WQHT-FM and WBLS-FM and approximately 3,500 outdoor advertising displays in Georgia and Kentucky.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2021 |
|---|---|---|
| Net revenue | $11.785 | $9.743 |
| Operating income (loss) | $0.136 | $(0.634) |
| Interest expense | $2.238 | $2.538 |
| Consolidated net loss | $(1.485) | $(3.253) |
| Net loss attributable to common shareholders, after preferred dividends | $(2.014) | $(3.887) |
| Basic and diluted loss per share | $(0.28) | $(0.55) |
| Cash provided by (used in) operating activities | $(1.563) | $0.578 |
Q1 2021 operating expenses excluding depreciation and amortization were $7.761 million; depreciation and amortization were $0.981 million. The filing does not report an EBITDA figure or a consolidated operating margin.
- Revenue mix: Radio advertising was $4.955 million, outdoor advertising $2.972 million, nontraditional $0.137 million, digital $0.485 million and other $1.194 million.
- Cash flows: Investing activities used $0.095 million, including $0.206 million of capital expenditures and $0.111 million of asset-sale proceeds. Financing activities used $0.164 million, for tax-withholding obligations. Cash increased $0.319 million to $4.490 million.
- Balance sheet at March 31: Current assets were $14.461 million and current liabilities $12.601 million; management reported working capital of $1.9 million. Total assets were $143.918 million and total liabilities $133.451 million; total deficit was $14.425 million.
- Debt: Principal outstanding was $97.907 million: $70.972 million under the senior credit facility, $5.535 million owed to Emmis and $21.400 million owed to SG Broadcasting. Balance-sheet debt was reported net of current maturities and unamortized discount. Operating lease liabilities totaled $22.808 million.
- The senior facility’s minimum liquidity requirement was $2.5 million through November 25, 2021, then $3.0 million. Cash on hand was $4.490 million at quarter-end. The filing does not provide a clear calculation of covenant headroom.
Changes versus Q1 2020
- Revenue fell $2.042 million, or 17.3%. Radio segment revenue declined 22.0% to $6.502 million; outdoor segment revenue declined 5.9% to $3.241 million.
- Management attributed revenue declines to COVID-19’s effects on advertising. New York radio market gross revenue was down 8.7%, while MediaCo’s gross radio revenue reported to Miller Kaplan was down 21%; the company said it underperformed the market in digital revenue.
- Operating expenses excluding depreciation and amortization decreased 17.9% to $7.761 million, reflecting cost reductions. Corporate expenses rose 40.9% to $1.641 million, mainly due to restricted-stock compensation and higher professional fees.
- Operating results shifted from $0.136 million of income to a $0.634 million loss. Interest expense increased 13.4%, which management attributed to additional borrowing and interest paid in kind.
- Operating cash flow improved from a $1.563 million use to $0.578 million provided, primarily due to more efficient working-capital management.
Outlook, risks and unusual items
- The company gave no numerical revenue or earnings guidance. Management said the pandemic and its effects on advertising, advertiser payment capacity and economic activity continued to make future impacts difficult to estimate. Q1 2020 was less affected by the pandemic than Q1 2021.
- On May 19, 2021, after quarter-end, SG Broadcasting agreed to provide up to $7.0 million of subordinated debt, with $3.0 million funded at closing and $1.0 million due by June 1, 2021; up to another $3.0 million may be provided through June 2022 subject to conditions. MediaCo used $3.0 million for a senior-debt prepayment. The amendment suspended scheduled quarterly principal payments through Q1 2022 and revised covenant and borrowing-base terms. It also included a $0.4 million cash amendment fee and additional interest payable in kind in specified circumstances.
- Management identified risks including ongoing COVID-19 impacts, competition from digital and other media, reliance on the New York radio market, financing needs, FCC licensing and its relationship with Emmis and SG Broadcasting. FCC licenses represented approximately 44% of total assets; management reported no interim impairment indicators for FCC licenses and did not believe outdoor goodwill was impaired as of March 31.
- Emmis informed MediaCo it did not intend to extend the management agreement beyond its initial term, expiring in November 2021, though formal notice had not been given. The employee leasing agreement ended January 1, 2021, when MediaCo hired the affected employees.
- MediaCo issued 651,670 Class A shares to employees, officers and directors during the quarter and recorded $0.634 million of noncash share-based compensation. It had $2.2 million of unrecognized compensation cost at March 31.
- The company reported no pending legal proceedings it believed likely to have a material adverse effect. Management concluded disclosure controls were effective as of March 31, 2021.
Key facts for investors to verify
- Whether revenue and radio-market performance recover, particularly in digital advertising, and how advertiser collections develop.
- Compliance with the senior facility’s minimum liquidity and other covenants, including the effects and conditions of the May 2021 amendments and SG Broadcasting funding.
- Debt service and refinancing risk: the filing lists $66.409 million of scheduled principal payments in 2024 before subsequent amendments.
- Plans for management of the radio stations after the Emmis management agreement’s expected November 2021 expiration.
- Potential dilution from convertible debt, preferred stock and outstanding restricted stock awards; the filing identifies 20.079 million potentially dilutive shares excluded from Q1 2021 diluted loss per share as anti-dilutive.
- Future impairment assessments for FCC licenses, goodwill and other long-lived assets, and the company’s ability to realize deferred tax assets after recording an $18.8 million valuation allowance in 2020.