MediaCo Holding Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; unaudited. Unless noted, amounts are in millions of dollars. MediaCo operates New York radio stations WQHT(FM) and WBLS(FM), generating revenue mainly from radio and digital advertising, events, sponsorships, licensing and syndication. The Fairway outdoor advertising business was sold in December 2022 and is presented as discontinued operations.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Net revenue | $12.080 | $12.531 | $19.415 | $20.644 |
| Operating loss | $(0.116) | $(0.232) | $(2.022) | $(1.344) |
| Operating margin | -1.0% | -1.9% | -10.4% | -6.5% |
| Continuing-operations net loss | $(0.430) | $(2.237) | $(2.385) | $(5.499) |
| Consolidated net loss | $(0.421) | $(2.903) | $(2.528) | $(7.196) |
| Net loss attributable to common shareholders | $(1.017) | $(3.683) | $(3.714) | $(8.814) |
For the first half, continuing operating cash flow was a use of $3.671 million, versus a source of $3.290 million in 2022. Continuing investing activities used $0.920 million and financing activities used $0.968 million. Cash, cash equivalents and restricted cash totaled $10.094 million at June 30, 2023, including $6.890 million unrestricted cash and $3.204 million restricted cash. Net working capital was $13.8 million, down from $15.2 million at year-end 2022.
Long-term debt was $5.950 million, consisting of the Emmis convertible note, with no debt-service requirements over the next 12 months and maturity in November 2024. Operating lease liabilities totaled $15.349 million, including current liabilities. The balance sheet also reported $27.525 million of Series A preferred stock outside permanent equity; preferred dividends were $1.186 million for the first half.
Changes versus the prior comparable period
- Revenue fell 3.6% in Q2 and 6.0% in the first half. Spot radio advertising declined 17.9% in Q2 and 20.4% in the first half; events and sponsorships rose 47.3% in Q2 and 52.1% in the first half, partly offsetting the declines.
- Management attributed weaker revenue mainly to reduced healthcare spending as COVID-19 vaccination campaigns slowed, along with lower online gambling, automotive and wireless spending. Stronger Summer Jam ticket sales and sponsorships, tourism and live-event advertising provided offsets.
- Management reported New York radio-market gross revenue down 6.1% for the first half, while MediaCo’s gross revenue reported to Miller Kaplan was down 12.3%.
- Q2 operating loss narrowed to $0.116 million from $0.232 million, while the first-half operating loss widened to $2.022 million from $1.344 million. Corporate expenses fell, but first-half revenue weakness and higher depreciation and amortization contributed to the deterioration.
- Net interest expense fell substantially after repayment of the senior credit facility and conversion of SG Broadcasting notes into equity. First-half continuing net loss improved, but operating cash flow turned negative, largely reflecting income-tax payments related to the Fairway sale and working-capital timing.
Outlook, risks and notable items
- The filing provides no quantified revenue, earnings or cash-flow guidance. Management describes the U.S. radio sector as mature and subject to competition from digital media, streaming and podcasts; results depend heavily on audience ratings and advertising demand in the New York market.
- Management identifies risks including competition and audience fragmentation, maintaining FCC licenses, financing operations, potential conflicts with controlling shareholder SG Broadcasting, and the ability to adapt to new media channels. It notes that higher interest rates could increase the cost of future borrowing, though current borrowings are fixed-rate.
- The $78.6 million Fairway sale closed in December 2022 and generated a $46.9 million pretax gain in 2022. The sale proceeds and gain are not current-period operating results; the first-half 2023 cash outflow included $3.021 million of income-tax payments.
- A new New York office and radio-operations lease began in February 2023, adding approximately $10.4 million each to right-of-use assets and lease liabilities at commencement. The lease runs through August 2039.
- MediaCo repurchased 451,844 Class A shares for approximately $0.6 million during the first half and 15,542 additional shares for $17,000 through August 3. Subsequent to quarter-end, the COO resigned and a new COO was appointed.
- Management reported no pending legal proceedings it believes are likely to have a material adverse effect, and concluded disclosure controls were effective as of June 30, 2023.
Important facts for investors to verify
- Whether the advertising weakness—and the gap between MediaCo’s reported market performance and the New York market—continues in subsequent quarters.
- Cash generation and liquidity, including the effect of restricted cash, tax payments and ongoing lease commitments.
- The terms, accrued interest and November 2024 maturity of the Emmis note, as well as the preferred stock’s cumulative dividends and redemption rights beginning in June 2025.
- Whether FCC-license impairment indicators arise; the licenses’ $63.3 million carrying value is subject to impairment testing.
- How management executes its digital and event strategy and responds to competition, without quantified forward guidance in this filing.