Mediaco Holding Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unless otherwise noted, financial amounts below are in U.S. dollars. The company operates two New York City radio stations and approximately 3,600 outdoor advertising displays across parts of the Southeast and Mid-Atlantic.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Net revenue | $14.4 million | $7.0 million | $24.1 million | $18.8 million |
| Operating income (loss) | $3.8 million | $(1.6) million | $3.2 million | $(1.5) million |
| Consolidated net income (loss) | $0.9 million | $(18.4) million | $(2.3) million | $(19.8) million |
| Net income (loss) attributable to common shareholders | $0.3 million | $(18.9) million | $(3.6) million | $(20.9) million |
| Basic earnings (loss) per share | $0.02 | $(2.66) | $(0.51) | $(2.95) |
Q2 operating margin was approximately 26.5% (versus a loss in Q2 2020); the six-month operating margin was approximately 13.2%. Q2 net margin was approximately 6.6% on consolidated net income, or 1.9% after preferred dividends attributable to common shareholders. Interest expense was $2.7 million in Q2 and $5.2 million for the first half. The filing does not report EBITDA.
Q2 revenue rose 105.5% year over year, led by radio advertising, which increased to $8.9 million from $2.6 million. Outdoor advertising revenue was $3.2 million, up 11.3%. For the first half, revenue increased 28.4%; radio was up 42.6% to $17.4 million, while outdoor advertising increased 2.3% to $6.8 million.
Cash, liquidity and debt
- Cash and cash equivalents were $4.3 million at June 30, 2021, versus $4.2 million at year-end 2020. Working capital was $5.7 million, up from $4.4 million.
- First-half operating cash flow was $0.6 million, compared with cash used of $0.4 million in the prior-year period. Investing activities used $1.0 million; financing activities provided $0.5 million. Cash increased by $0.1 million during the period.
- Gross debt principal was approximately $98.9 million: $68.0 million under the senior credit facility, $5.5 million owed to Emmis, and $25.4 million owed to SG Broadcasting. The balance sheet reports $96.8 million of current and long-term debt net of current maturities and unamortized discount. Total liabilities were $136.0 million; the company reported a $13.6 million deficit.
- Series A preferred stock carrying value was $25.6 million and accrues cumulative dividends in kind; the stated annual rate was 11.5% at June 30, 2021. Preferred dividends were $1.3 million in the first half.
Changes, outlook and risks
- Management attributed the revenue recovery to advertising rebounding after pandemic-related disruption. New York radio market revenue rose 37.9% in the first half, while company station revenue reported to Miller Kaplan increased 46.1%.
- Q2 operating results included approximately $0.9 million of employee retention credits. The company recognized a $0.9 million receivable and expected a similar amount of credits in Q3 2021; this is an expectation, not formal earnings guidance.
- Q2 2020 results included a $15.6 million deferred-tax valuation allowance, contributing to the large prior-year loss and making the net-income comparison unusually favorable in 2021. The company said it was calculating its 2021 tax provision on a discrete basis because it could not reasonably estimate full-year pretax income.
- A May 2021 amendment to the senior facility required a $3.0 million principal payment, suspended scheduled quarterly principal payments through Q1 2022, relaxed the fixed-charge coverage covenant temporarily, and increased borrowing-base parameters. The amendment also triggered a 1% paid-in-kind interest increment under specified borrowing-base conditions. SG Broadcasting provided $4.0 million of subordinated note funding by June 30 and agreed to provide up to $3.0 million more through June 2022 if needed and subject to conditions.
- Debt payments shown in the filing include $67.1 million due in 2024 and $25.4 million in 2025. The company identifies financing availability and debt service as key liquidity considerations.
- Emmis’ management agreement expires in November 2021, and Emmis gave notice it would not extend it. MediaCo hired the formerly leased employees effective January 1, 2021 and said it hired personnel ahead of the management transition.
- Key risks include continued or renewed COVID-19 disruption and advertiser credit weakness, competition and audience fragmentation from digital and streaming media, reliance on the New York radio market, refinancing and covenant constraints, related-party relationships, and possible impairment of FCC licenses or outdoor goodwill. FCC licenses represented about 43% of total assets. Management reported no pending legal proceedings it believed likely to have a material adverse effect and stated disclosure controls were effective.
Important facts for investors to verify
- Whether the post-pandemic advertising recovery and radio market-share gains continued after Q2, and how much was attributable to temporary vaccination campaigns.
- Compliance with amended loan covenants, availability of further SG Broadcasting funding, interest accruing in kind, and the company’s ability to address substantial 2024 debt maturities.
- Receipt and timing of the employee retention credits, including the anticipated Q3 amount.
- Operational and cost impacts of replacing Emmis management services after the agreement expires in November 2021.
- Future tax-asset realizability and impairment assumptions for FCC licenses and outdoor goodwill, particularly if market conditions weaken.