Mediaco Holding Inc 10-Q for FY2022 Q1
Mediaco Holding Inc. (MDIA)
About this 10-Q
Mediaco Holding Inc filed this 10-Q on May 12, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $11.54M
- up 18.4% from $9.74M a year earlier
- Net loss
- $4.29M
- compared with a net loss of $3.25M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission File Number
(Exact name of registrant as specified in its charter)
(State of incorporation or organization)
(I.R.S. Employer Identification No.)
(Address of principal executive offices)
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(Registrant’s Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The number of shares outstanding of each of MediaCo Holding Inc.’s classes of common stock, as of May 6, 2022, was:
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Shares of Class A Common Stock, $.01 Par Value |
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Shares of Class B Common Stock, $.01 Par Value |
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Shares of Class C Common Stock, $.01 Par Value |
INDEX
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDIACO HOLDING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share amounts) |
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2022 |
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2021 |
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NET REVENUES |
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$ |
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$ |
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OPERATING EXPENSES: |
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Operating expenses excluding depreciation and amortization expense |
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Corporate expenses |
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Depreciation and amortization |
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Loss (gain) on disposal of assets |
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Total operating expenses |
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OPERATING LOSS |
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( |
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OTHER EXPENSE: |
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Interest expense |
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( |
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( |
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LOSS BEFORE INCOME TAXES |
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( |
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( |
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PROVISION FOR INCOME TAXES |
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CONSOLIDATED NET LOSS |
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( |
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( |
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PREFERRED STOCK DIVIDENDS |
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NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |
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$ |
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$ |
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Basic and diluted loss per share attributable to common shareholders |
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$ |
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$ |
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Basic and diluted weighted average number of common shares outstanding |
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The accompanying notes are an integral part of these unaudited condensed consolidated statements.
- 3 -
MEDIACO HOLDING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, 2022 |
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December 31, 2021 |
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(in thousands, except share data) |
(Unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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PROPERTY AND EQUIPMENT, NET |
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INTANGIBLE ASSETS, NET |
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OTHER ASSETS: |
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Operating lease right of use assets |
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Deposits and other |
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Total other assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND DEFICIT |
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CURRENT LIABILITIES: |
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Accounts payable and accrued expenses |
$ |
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$ |
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Current maturities of long-term debt |
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Accrued salaries and commissions |
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Deferred revenue |
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Operating lease liabilities |
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Other current liabilities |
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Total current liabilities |
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LONG TERM DEBT, NET OF CURRENT |
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OPERATING LEASE LIABILITIES, NET OF CURRENT |
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ASSET RETIREMENT OBLIGATIONS |
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DEFERRED INCOME TAXES |
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OTHER NONCURRENT LIABILITIES |
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Total liabilities |
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COMMITMENTS AND CONTINGENCIES |
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SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK, $ |
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RETAINED DEFICIT: |
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Class A common stock, $ |
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Class B common stock, $ |
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Class C common stock, $ |
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— |
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— |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total deficit |
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Total liabilities and deficit |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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MEDIACO HOLDING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED DEFICIT
(Unaudited)
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Class A Common Stock |
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Class B Common Stock |
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(in thousands, except share data) |
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Shares |
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Amount |
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Shares |
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Amount |
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APIC |
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Accumulated Deficit |
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Total |
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BALANCE, DECEMBER 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Issuance of class A to employees, officers and directors |
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— |
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— |
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— |
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Preferred stock dividends |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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BALANCE, MARCH 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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BALANCE, DECEMBER 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Issuance of class A to employees, officers and directors |
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— |
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— |
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— |
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Preferred stock dividends |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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BALANCE, MARCH 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated statements.
- 5 -
MEDIACO HOLDING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands) |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash provided by operating activities - |
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Depreciation and amortization |
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Amortization of debt discount |
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Noncash interest expense |
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— |
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Noncash lease expense |
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Provision for bad debts |
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Accretion of asset retirement obligation |
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Provision for deferred income taxes |
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Noncash compensation |
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Loss (gain) on sale of property and equipment |
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( |
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Changes in assets and liabilities |
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Accounts receivable |
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Prepaid expenses and other current assets |
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( |
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( |
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Other assets |
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( |
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Accounts payable and accrued liabilities |
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( |
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Deferred revenue |
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Operating lease liabilities |
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( |
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( |
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Other liabilities |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of property and equipment |
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( |
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( |
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Proceeds from the sale of property and equipment |
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— |
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Net cash used in investing activities |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Settlement of tax withholding obligations |
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( |
) |
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( |
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Net cash used in financing activities |
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( |
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( |
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INCREASE IN CASH AND CASH EQUIVALENTS |
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CASH AND CASH EQUIVALENTS: |
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Beginning of period |
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End of period |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURES: |
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Cash paid for interest |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated statements.
- 6 -
MEDIACO HOLDING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Unless Indicated Otherwise)
March 31, 2022
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
MediaCo Holding Inc. (“MediaCo” or the “Company”) is an owned and operated multi-media company formed in Indiana in 2019, focused on radio, outdoor, and digital advertising.
Our assets consist of
Unless the context otherwise requires, references to “we”, “us” and “our” refer to MediaCo and its subsidiaries.
Basis of Presentation and Consolidation
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring adjustments) have been included.
Cash and Cash Equivalents
We consider time deposits, money market fund shares and all highly liquid debt investment instruments with original maturities of three months or less to be cash equivalents. At times, such deposits may be in excess of FDIC insurance limits.
Fair Value Measurements
Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. We have
The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 2, Intangible Assets and Goodwill, and are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 2 for more discussion).
The Company’s long-term debt is not actively traded and is considered a Level 3 measurement. The Company believes the current carrying value of its long-term debt approximates its fair value.
Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates.
Earnings Per Share
Our basic and diluted net loss per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Shares of Series A preferred stock include rights to participate in dividends and distributions to common stockholders on an if-converted basis, and accordingly are considered participating securities. During periods of undistributed losses however, no effect is given to our participating securities since they are not contractually obligated to share in
- 7 -
the losses.
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For the Three Months Ended March 31, |
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2022 |
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2021 |
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Net loss |
$ |
( |
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$ |
( |
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Preferred dividends |
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Net loss attributable to common shareholders |
$ |
( |
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$ |
( |
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Basic and diluted weighted average common shares outstanding |
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Net loss attributable to common shareholders |
$ |
( |
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$ |
( |
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On August 20, 2021, MediaCo Holding Inc. entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. (B. Riley”), pursuant to which the Company may offer and sell, from time to time through or to B. Riley, as agent or principal, shares of the Company’s Class A Common Stock, $
Because we have incurred a net loss for the period where the Company had potentially dilutive securities, diluted net loss per common share is the same as basic net loss per common share.
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For the Three Months Ended March 31, |
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(in thousands) |
2022 |
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2021 |
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Convertible Emmis promissory note |
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Convertible Standard General promissory notes |
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Series A convertible preferred stock |
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Restricted stock awards |
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Total anti-dilutive shares |
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Recent Accounting Pronouncements Not Yet Implemented
In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses, which introduces new guidance for an approach based on using expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities and net investments in leases as well as reinsurance and trade receivables. This standard will be effective for us as of January 1, 2023. We do not expect the adoption of the new standard to have a significant impact on our condensed consolidated financial statements.
2. INTANGIBLE ASSETS AND GOODWILL
As of March 31, 2022 and December 31, 2021, intangible assets consisted of the following:
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March 31, 2022 |
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December 31, 2021 |
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Indefinite-lived intangible assets |
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FCC licenses |
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$ |
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$ |
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Trade name |
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Goodwill |
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Definite-lived intangible assets |
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Customer list |
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Total |
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$ |
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$ |
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Valuation of Indefinite-lived Broadcasting Licenses
In accordance with ASC Topic 350, Intangibles—Goodwill and Other, the Company’s FCC licenses are considered indefinite-lived intangibles; therefore, they are not subject to amortization, but are tested for impairment at least annually as discussed below.
The carrying amounts of the Company’s FCC licenses were $
- 8 -
Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company considers both income and market valuation methods when it performs its impairment tests. Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its market at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in its market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license.
Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. The projections incorporated into our license valuations take into consideration then current economic conditions. Under the market method, the Company uses recent sales of comparable radio stations for which the sales value appeared to be concentrated entirely in the value of the license, to arrive at an indication of fair value. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by ASC Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting.
Valuation of Goodwill
All goodwill on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 is part of the Outdoor Advertising segment. The Company tests goodwill for impairment at least annually. We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test. We perform this assessment annually as of October 1, unless indicators of impairment exist at an interim period.
When performing a quantitative assessment for impairment, the Company uses a market approach to determine the fair value of the reporting unit. Management determines the fair value for the reporting unit by multiplying the cash flows of the reporting unit by an estimated market multiple. Management believes this methodology for valuing outdoor advertising businesses is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons, analyst reports, and market transactions. To corroborate the fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit. If the carrying value of a reporting unit’s goodwill exceeds its fair value, the Company recognizes an impairment charge equal to the difference in the statement of operations.
- 9 -
Valuation of Trade Name
As a result of the purchase of our Outdoor Advertising segment, the Company acquired the trade name “Fairway”. The trade name is well known in the industry and is being retained for continued market use following the acquisition. This trade name favorably factors into customer purchasing decisions. For the purchase price allocation, the trade name was valued using the relief from royalty method. This method is based on what a company would be willing to pay for a royalty in order to exploit the related benefits of the trade name. The value of the trade name is determined by discounting the inherent after-tax royalty savings associated with ownership or possession of the trade name. The valuation assigned to the trade name as a result of the purchase price accounting was $
Definite-lived intangibles
The following table presents the weighted-average useful life at March 31, 2022, and the gross carrying amount and accumulated amortization at March 31, 2022, and December 31, 2021, for our definite-lived intangible asset:
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||
|
|
Weighted Average Remaining Useful Life (in years) |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|||||||
|
Customer list |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The customer list was acquired as part of the purchase of our Outdoor Advertising segment and was valued as part of the purchase price allocation performed at closing. Customer relationships represent a source of repeat business. The information contained in such relationships usually includes the preferences of the customer, the buying patterns of the customer, and the history of purchases that have been made by the customer. In calculating the value of Fairway Outdoors’ customer relationships, we employed the multiperiod excess earnings method of the income approach, which estimates value based on the present value of future economic benefits. This methodology resulted in a valuation of $
Total amortization expense from definite-lived intangible assets for the three-month periods ended March 31, 2022, and 2021 was $
3. REVENUE
The Company generates revenue from the sale of services including, but not limited to: (i) on-air commercial broadcast time, (ii) display advertising on outdoor structures, (iii) non-traditional revenues including event-related revenues and event sponsorship revenues, and (iv) digital advertising. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue. Substantially all deferred revenue is recognized within twelve months of the payment date. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Advertising revenues presented in the condensed consolidated financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of
Radio Advertising
On-air broadcast revenue is recognized when or as performance obligations under the terms of a contract with a customer are satisfied. This typically occurs over the period of time that advertisements are provided, or as an event occurs. Revenues are reported at the amount the Company expects to be entitled to receive under the contract. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the condensed consolidated balance sheets. Substantially all deferred revenue is recognized within twelve months of the payment date.
Outdoor Advertising
Our outdoor advertising business has approximately
- 10 -
Nontraditional
Nontraditional revenues principally consist of ticket sales and sponsorship of events our stations conduct in their local market. These revenues are recognized when our performance obligations are fulfilled, which generally coincides with the occurrence of the related event.
Digital
Digital revenue relates to revenue generated from the sale of digital marketing services (including display advertisements and video pre-roll and sponsorships, but excluding digital billboard advertisements) to advertisers on Company-owned websites and applications from revenue generated from content distributed across other digital platforms. Digital revenues are generally recognized as the digital advertising is delivered.
Other
Other revenue includes barter revenue, network revenue, and production revenue. The Company provides advertising broadcast time in exchange for certain products and services, including on-air radio programming. These barter arrangements generally allow the Company to preempt such bartered broadcast time in favor of advertisers who purchase time for cash consideration. These barter arrangements are valued based upon the Company’s estimate of the fair value of the products and services received. Revenue is recognized on barter arrangements when we broadcast the advertisements. Advertisements delivered under barter arrangements are typically aired during the same period in which the products and services are consumed. The Company also sells certain remnant advertising inventory to third-parties for cash, and we refer to this as network revenue. The third-parties aggregate our remnant inventory with other broadcasters' remnant inventory for sale to third parties, generally to large national advertisers. This network revenue is recognized as we broadcast the advertisements. In connection with certain outdoor advertising arrangements, the customer may request that the Company produce the billboard wrap (commonly printed on a vinyl material) displaying the customer’s advertisement on our outdoor structure. This production revenue is recognized as the deliverable is made available to the customer or attached to our outdoor structure. Other revenue also includes the management fee received from Billboards LLC (see Note 10).
Disaggregation of revenue
The following table presents the Company's revenues disaggregated by revenue source:
|
|
|
For the Three Months Ended March 31, |
|
|||||||||||
|
|
|
2022 |
|
% of Total |
|
|
2021 |
|
% of Total |
|
||||
|
Revenue by Source: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Advertising |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|
% |
|
Outdoor Advertising (1) |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
Nontraditional |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
Digital |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
Other |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
Total net revenues |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
(1)
4. LONG-TERM DEBT
Long-term debt was comprised of the following at March 31, 2022, and December 31, 2021:
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
|
Senior credit facility |
|
$ |
|
|
|
$ |
|
|
|
Notes payable to Emmis |
|
|
|
|
|
|
|
|
|
Notes payable to SG Broadcasting |
|
|
|
|
|
|
|
|
|
Less: Current maturities |
|
|
( |
) |
|
|
( |
) |
|
Less: Unamortized original issue discount |
|
|
( |
) |
|
|
( |
) |
|
Total long-term debt, net of current portion and debt discount |
|
$ |
|
|
|
$ |
|
|
- 11 -
Senior secured term loan agreement
The Company has a senior secured term loan agreement (the “Senior Credit Facility”) with GACP Finance Co., LLC, (“GACP”) a Delaware limited liability company, as administrative agent and collateral agent. The Senior Credit Facility bears interest at a rate equal to the London Interbank Offered Rate ("LIBOR"), plus
As of March 31, 2022, a number of amendments had been entered into by the Company and GACP to modify, among other things, certain provisions relating to the repayment of the Term Loan (as defined in the Senior Credit Facility). On May 19, 2021, the Company entered into Amendment No. 4 to its Senior Credit Facility. Under the terms of Amendment No. 4:
|
|
• |
SG Broadcasting agreed to contribute up to $ |
|
|
• |
the Company made a principal payment of $ |
|
|
• |
|
|
|
• |
the Minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) was reduced to from April 1, 2020 through and including December 31, 2022, with it increasing to on and after January 1, 2023; |
|
|
• |
for purposes of calculating compliance with the Minimum Consolidated Fixed Charge Coverage Ratio, Consolidated EBITDA (as defined in the Senior Credit Facility) includes certain amounts contributed by SG Broadcasting in the form of subordinated debt or equity, including those described above; |
|
|
• |
for purposes of calculating the Company’s borrowing base under the Senior Credit Facility, the multiple applied to Billboard Cash Flow (as defined in the Senior Credit Facility) increased from |
|
|
• |
at any time the multiple applied to Billboard Cash Flow exceeds |
|
|
• |
certain specified events of default were waived; and |
|
|
• |
an amendment fee of $ |
For the period May 19, 2021 through March 31, 2022, the multiple applied to billboard cash flow was in excess of
As of March 31, 2022, there was $
Emmis Convertible Promissory Note
The Emmis Convertible Promissory Note carries interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if
- 12 -
Second Amended and Restated SG Broadcasting Promissory Note, Additional SG Broadcasting Promissory Note and May 2021 SG Broadcasting Promissory Note
The Second Amended and Restated SG Broadcasting Promissory Note and Additional SG Broadcasting Promissory Note (“the SG Broadcasting Promissory Notes”) carry interest at a base rate equal to the interest on any senior credit facility, including any applicable paid in kind rate, or if
On May 19, 2021, the Company issued to SG Broadcasting a subordinated convertible promissory note (the “May 2021 SG Broadcasting Promissory Note”), in return for which SG Broadcasting contributed $
On June 1, 2021, SG Broadcasting contributed $
On March 18, 2022, the Company and SG Broadcasting agreed to amend the May 2021 SG Broadcasting Promissory Note to extend the Company’s ability to draw the remaining $
As of March 31, 2022, there was a total of $
Based on amounts outstanding at March 31, 2022, mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Senior Credit Facility |
|
|
Emmis Note |
|
|
SG Broadcasting Notes |
|
|
Total Payments |
|
||||
|
Remainder of 2022 |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
2023 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
2025 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
5. REGULATORY, LEGAL AND OTHER MATTERS
From time to time, our stations are parties to various legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, there are
6. INCOME TAXES
The effective tax rate for the three months ended March 31, 2022, and 2021 was
7. LEASES
We determine if an arrangement is a lease at inception. We have operating leases for office space, sites upon which advertising structures are built, tower space, equipment and automobiles expiring at various dates through October 2049. Some leases have options to extend and some have options to terminate. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities in our condensed consolidated balance sheets.
- 13 -
Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. Our lease terms may include options to extend or terminate the lease, which we treat as exercised when it is reasonably certain and there is a significant economic incentive to exercise that option. Our Outdoor Advertising segment treats evergreen leases as though they will be automatically renewed at the end of each term.
Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. Variable lease expense for the three months ended March 31, 2022, and 2021 was $
We elected not to apply the recognition requirements of ASC 842, “Leases”, to short-term leases, which are deemed to be leases with a lease term of twelve months or less. Instead, we recognized lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. We elected this policy for all classes of underlying assets. Short-term lease expense recognized in the three months ended March 31, 2022, and 2021 was not material.
The impact of operating leases to our condensed consolidated financial statements was as follows:
|
|
|
Three Months Ended March 31, |
|
|
Three Months Ended March 31, |
|
||
|
|
|
2022 |
|
|
2021 |
|
||
|
Operating lease cost |
|
$ |
|
|
|
$ |
|
|
|
Operating cash flows from operating leases |
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
|
— |
|
|
|
As of March 31, |
|
|
As of December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
Weighted average remaining lease term - operating leases (in years) |
|
|
|
|
|
|
|
|
Weighted average discount rate - operating leases |
|
|
% |
|
|
|
% |
As of March 31, 2022, the annual minimum lease payments of our operating lease liabilities were as follows:
|
Year ending December 31, |
|
|
|
|
|
Remainder of 2022 |
|
$ |
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
After 2026 |
|
|
|
|
|
Total lease payments |
|
|
|
|
|
Less imputed interest |
|
|
( |
) |
|
Total recorded lease liabilities |
|
$ |
|
|
Our outdoor advertising business generates lessor revenue derived from operating leases accounted for under ASC 842, “Leases.” Minimum fixed lease consideration under non-cancelable operating leases for each of the next five years and thereafter, excluding variable lease consideration, as of March 31, 2022, is as follows:
|
Year ending December 31, |
|
|
|
|
Remainder of 2022 |
$ |
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
After 2026 |
|
— |
|
- 14 -
8. ASSET RETIREMENT OBLIGATIONS
The Company’s asset retirement obligations include the costs associated with the removal of its structures, resurfacing of the land, and retirement cost, if applicable, related to the Company’s outdoor advertising portfolio.
|
Balance at December 31, 2021 |
|
|
$ |
|
|
|
Additions to asset retirement obligations |
|
|
|
|
|
|
Accretion expense |
|
|
|
|
|
|
Liabilities settled |
|
|
|
( |
) |
|
Balance at March 31, 2022 |
|
|
$ |
|
|
9. SEGMENT INFORMATION
The Company’s operations are aligned into
These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate expenses, including transaction costs, are not allocated to reportable segments. The Company’s segments operate exclusively in the United States.
The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2021, and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.
|
Three Months Ended March 31, 2022 |
|
Radio |
|
|
Outdoor Advertising |
|
|
All Other |
|
|
Consolidated |
|
||||
|
Net revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Operating expenses excluding depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Corporate expenses |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Loss on disposal of assets |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Operating income (loss) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Three Months Ended March 31, 2021 |
|
Radio |
|
|
Outdoor Advertising |
|
|
All Other |
|
|
Consolidated |
|
||||
|
Net revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Operating expenses excluding depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Corporate expenses |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Gain on disposal of assets |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Operating income (loss) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Total Assets |
|
Radio |
|
|
Outdoor Advertising |
|
|
Consolidated |
|
|||
|
March 31, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
- 15 -
10. RELATED PARTY TRANSACTIONS
Transaction Agreement with Emmis and SG Broadcasting
On
The sale closed on November 25, 2019, at which time MediaCo and Emmis also entered into a management agreement (the “Management Agreement”), an employee leasing agreement (the “Employee Leasing Agreement”) and certain other ancillary agreements. The Management Agreement with Emmis Operating Company was for an initial term of
Convertible Promissory Notes
As a result of the transaction described above, on November 25, 2019, we issued convertible promissory notes to both Emmis and SG Broadcasting in the amounts of $
On March 27, 2020, the Company and SG Broadcasting further amended and restated the SG Broadcasting Promissory Note such that the maximum aggregate principal amount issuable under the note was increased from $
On August 28, 2020, SG Broadcasting loaned an additional $
On September 30, 2020, SG Broadcasting loaned an additional $
On November 25, 2020, annual interest of $
On May 19, 2021, the Company issued to SG Broadcasting the May 2021 SG Broadcasting Promissory Note, in return for which SG Broadcasting loaned $
On June 1, 2021, SG Broadcasting loaned $
On September 30, 2021, annual interest of $
On November 25, 2021, annual interest of $
The Company recognized interest expense of $
The terms of these notes are described in Note 4.
Convertible Preferred Stock
On December 13, 2019, in connection with the purchase of our Outdoor Advertising segment, the Company issued to SG Broadcasting
- 16 -
MediaCo Series A Preferred Shares rank senior in preference to the MediaCo Class A common stock, MediaCo Class B common stock, and the MediaCo Class C common stock. Pursuant to the Articles of Amendment, the ability of the Company to make distributions with respect to, or make a liquidation payment on, any other class of capital stock in the Company designated to be junior to, or on parity with, the MediaCo Series A Preferred Shares, will be subject to certain restrictions, including that (i) the MediaCo Series A Preferred Shares shall be entitled to receive the amount of dividends per share that would be payable on the number of whole common shares of the Company into which each share of MediaCo Series A Preferred Share could be converted, and (ii) the MediaCo Series A Preferred Shares, upon any liquidation, dissolution or winding up of the Company, shall be entitled to a preference on the assets of the Company. Issued and outstanding shares of MediaCo Series A Preferred Shares shall accrue cumulative dividends, payable in kind, at an annual rate equal to the interest rate on any senior debt of the Company (see Note 4), or if
MediaCo Series A Preferred Shares are redeemable for cash at the option of SG Broadcasting at any time on or after
Dividends on Series A Convertible Preferred Stock held by SG Broadcasting were $
Loan Proceeds Participation Agreement
On April 22, 2020, MediaCo and Emmis entered into a certain Loan Proceeds Participation Agreement (the “LPPA”) pursuant to which (i) Emmis agreed to use certain of the proceeds of the loan Emmis received pursuant to the Paycheck Protection Program (“PPP”) under Division A, Title I of the CARES Act to pay certain wages of employees leased to MediaCo pursuant to the Employee Leasing Agreement, between Emmis and MediaCo, (ii) Emmis agreed to waive up to $
Management Agreement for Billboards LLC
On August 11, 2020, the board of directors of the Company unanimously authorized the entry into a certain Management Agreement (the “Billboard Agreement”) between Fairway Outdoor LLC (a subsidiary of the Company, “Fairway”) and Billboards LLC (an affiliate of Standard General, “Billboards”). Under the Billboard Agreement, Fairway will manage the billboard business of Billboards in exchange for payments of $
11. SUBSEQENT EVENTS
On April 1, 2022, MediaCo Holding Inc. (the “Company”) received a deficiency letter (the “Nasdaq Letter”) from the Nasdaq Listing Qualifications Department, notifying the Company that the Company is not in compliance with Nasdaq Listing Rule 5550(b)(3), which requires the Company to maintain net income from continuing operations of $
The Company intends to take all reasonable measures available to regain compliance under the Nasdaq Listing Rules and remain listed on Nasdaq.
- 17 -
Neither the Nasdaq Letter nor the Company’s noncompliance have an immediate effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “MDIA.”
- 18 -
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note: Certain statements included in this report or in the financial statements contained herein which are not statements of historical fact, including but not limited to those identified with the words “expect,” “should,” “will” or “look” are intended to be, and are, by this Note, identified as “forward-looking statements,” as defined in the Securities and Exchange Act of 1934, as amended. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future result, performance or achievement expressed or implied by such forward-looking statement. Such factors include, among others:
|
|
• |
Potential conflicts of interest with SG Broadcasting and our status as a “controlled company”; |
|
|
• |
Our ability to operate as a standalone public company and to execute on our business strategy; |
|
|
• |
Our ability to compete with, and integrate into our operations, new media channels, such as digital video, live video streaming, YouTube, and other real-time media delivery; |
|
|
• |
Our ability to continue to exchange advertising time for goods or services; |
|
|
• |
Our ability to use market research, advertising and promotions to attract and retain audiences; |
|
|
• |
U.S. regulatory requirements for owning and operating media broadcasting channels and our ability to maintain regulatory licenses granted by the FCC; |
|
|
• |
Pending U.S. regulatory requirements for paying royalties to performing artists; |
|
|
• |
Industry and economic trends within the U.S. radio industry, generally, and the New York City radio industry, in particular; |
|
|
• |
Our ability to finance our operations or to obtain financing on terms that are favorable to MediaCo; |
|
|
• |
Our ability to successfully complete and integrate any future acquisitions; |
|
|
• |
The impact of COVID-19 and other pandemics; |
|
|
• |
The accuracy of management’s estimates and assumptions on which the Company’s financial projections are based; and |
|
|
• |
Other factors mentioned in documents filed by the Company with the Securities and Exchange Commission. |
For a more detailed discussion of these and other risk factors, see the Risk Factors section of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 24, 2022. MediaCo does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.
GENERAL
We own and operate two radio stations located in New York City and outdoor advertising businesses geographically focused in the Southeast (Georgia, Alabama, South Carolina and Florida) and the Mid-Atlantic (Kentucky, West Virginia and Ohio) regions. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales are the primary component of our consolidated revenues. These rates are in large part based on our radio stations’ ability to attract audiences in demographic groups targeted by their advertisers and the number of persons exposed to our billboards. The Nielsen Company generally measures radio station ratings weekly for markets measured by the Portable People Meter™, which includes both of our radio stations, while Geopath Insight Suite is the annual audience location measurement used for our billboards. Because audience ratings in a radio station’s local market are critical to the station’s financial success, our strategy is to use market research, advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.
Our revenues vary throughout the year. Revenue and operating income are usually lowest in the first calendar quarter for both our radio and outdoor advertising segments, partly because retailers cut back their advertising spending immediately following the holiday shopping season.
In addition to the sale of advertising time for cash, stations typically exchange advertising time for goods or services, which can be used by the station in its business operations. These barter transactions are recorded at the estimated fair value of the product or service received. We generally confine the use of such trade transactions to promotional items or services for which we would otherwise have paid cash. In addition, it is our general policy not to preempt advertising spots paid for in cash with advertising spots paid for in trade.
- 19 -
The following table summarizes the sources of our revenues for the three months ended March 31, 2022 and 2021. The category “Nontraditional” principally consists of ticket sales and sponsorships of events our stations conduct in their local market. The category “Other” includes, among other items, revenues related to network revenues, production of billboard advertisements and barter.
|
|
For the Three Months Ended March 31, |
|
|||||||||||
|
(dollars in thousands) |
2022 |
|
% of Total |
|
|
2021 |
|
% of Total |
|
||||
|
Net revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Advertising |
$ |
6,177 |
|
|
53.6 |
% |
|
$ |
4,955 |
|
|
50.9 |
% |
|
Outdoor Advertising (1) |
|
3,124 |
|
|
27.1 |
% |
|
|
2,972 |
|
|
30.5 |
% |
|
Nontraditional |
|
168 |
|
|
1.5 |
% |
|
|
137 |
|
|
1.4 |
% |
|
Digital |
|
730 |
|
|
6.3 |
% |
|
|
485 |
|
|
5.0 |
% |
|
Other |
|
1,336 |
|
|
11.5 |
% |
|
|
1,194 |
|
|
12.2 |
% |
|
Total net revenues |
$ |
11,535 |
|
|
|
|
|
$ |
9,743 |
|
|
|
|
(1) A substantial portion of this revenue is from lessor revenue derived from operating leases accounted for under ASC 842, “Leases.”
Roughly 20% of our expenses varies in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions and bad debt. Our costs that do not vary as much in relation to revenue are mostly in our programming and administrative departments, such as talent costs, ratings fees, rent, utilities and salaries. Lastly, our costs that are highly discretionary are costs in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience and market share.
KNOWN TRENDS AND UNCERTAINTIES
The U.S. radio industry is a mature industry and its growth rate has slowed considerably. Management believes this is principally the result of two factors: (1) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, which have gained advertising share against radio and other traditional media and created a proliferation of advertising inventory and (2) the fragmentation of the radio audience and time spent listening caused by satellite radio, audio streaming services and podcasts has led some investors and advertisers to conclude that the effectiveness of radio advertising has diminished.
Along with the rest of the radio industry, our stations have deployed HD Radio®. HD Radio offers listeners advantages over standard analog broadcasts, including improved sound quality and additional digital channels. In addition to offering secondary channels, the HD Radio spectrum allows broadcasters to transmit other forms of data. We are participating in a joint venture with other broadcasters to provide the bandwidth that a third party uses to transmit location-based data to hand-held and in-car navigation devices. The number of radio receivers incorporating HD Radio has increased in the past year, particularly in new automobiles. It is unclear what impact HD Radio will have on the markets in which we operate.
Our stations have also aggressively worked to harness the power of broadband and mobile media distribution in the development of emerging business opportunities by developing highly interactive websites with content that engages our listeners, deploying mobile applications and streaming our content, and harnessing the power of digital video on our websites, YouTube channels and other third-party social media outlets.
The results of our broadcast radio operations are solely dependent on the results of our stations in the New York market. Some of our competitors that operate larger station clusters in the New York market are able to leverage their market share to extract a greater percentage of available advertising revenue through packaging a variety of advertising inventory at discounted unit rates. Market revenues in New York as measured by Miller Kaplan Arase LLP (“Miller Kaplan”), an independent public accounting firm used by the radio industry to compile revenue information, were up 25.4% for the three months ended March 31, 2022, but down 8.7% for the three months ended March 31, 2021, as compared to the same periods of the prior year. During these periods, revenues for our New York cluster were up 24.1% and down 21.0%, respectively. The increases in the three months ended March 31, 2022, as compared to the prior year were largely driven by overall advertising revenues rebounding from the COVID-19 pandemic, in particular sports betting and various state and local departments vaccination education and awareness campaigns. Our stations benefited more than stations serving the general population due to the targeted nature of the awareness campaigns.
As part of our business strategy, we continually evaluate potential acquisitions of businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. However, MediaCo’s long-term debt agreements substantially limit our ability to make acquisitions. We also regularly review our portfolio of assets and may opportunistically dispose of or otherwise monetize assets when we believe it is appropriate to do so.
Throughout 2021 and into 2022, with the increased availability of vaccines, the U.S. experienced an easing of restrictions on travel as well as social gatherings and business activities. However, the broad economic impact of the COVID-19 pandemic remains across multiple sectors, specifically disrupting logistics and global supply chains. If the spread of COVID-19 reaccelerates, or if supply chain disruptions persist, causing certain advertising categories (e.g., automotive dealers) to advertise less, we expect that our results of operations, financial condition and cash flows will continue to be negatively affected, the extent to which is difficult to estimate at this time.
- 20 -
CRITICAL ACCOUNTING ESTIMATES
Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is uncertainty about the length and severity of the consequences caused by the pandemic. We have considered information available to us as of the date of issuance of these financial statements and are not aware of any specific events or circumstances that would require an update to our estimates or judgments, or a revision to the carrying value of our assets or liabilities. Our estimates may change as new events occur and additional information becomes available. Our actual results may differ materially from these estimates.
A complete description of our critical accounting estimates is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on March 24, 2022.
RESULTS OF OPERATIONS
Three-Month Periods Ended March 31, 2022 compared to March 31, 2021
Net revenues:
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Net revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
|
$ |
8,113 |
|
|
$ |
6,502 |
|
|
$ |
1,611 |
|
|
|
24.8 |
% |
|
Outdoor Advertising |
|
|
3,422 |
|
|
|
3,241 |
|
|
|
181 |
|
|
|
5.6 |
% |
|
Total net revenues |
|
$ |
11,535 |
|
|
$ |
9,743 |
|
|
$ |
1,792 |
|
|
|
18.4 |
% |
Net radio revenues increased for the three-month period ended March 31, 2022, as a result of overall advertising revenues rebounding from the COVID-19 pandemic, in particular various state and local departments vaccination education and awareness campaigns and sports betting.
We typically monitor the performance of our stations against the aggregate performance of the market in which we operate based on reports for the period prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter and syndication arrangements. Miller Kaplan reported gross revenues for the New York radio market increased 25.4% for the three-month period ended March 31, 2022, as compared to the same period of the prior year. Our gross revenues reported to Miller Kaplan were up 24.1% for the three-month period ended March 31, 2022, as compared to the same period of the prior year.
Outdoor advertising revenues increased for the three-month period ended March 31, 2022, attributable to overall advertising revenues rebounding from the COVID-19 pandemic. Revenues in our outdoor advertising business have been less volatile than our radio business due to greater geographic diversification and longer duration advertising contracts with customers.
Operating expenses excluding depreciation and amortization expense:
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Operating expenses excluding depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
$ |
6,623 |
|
|
$ |
5,291 |
|
|
$ |
1,332 |
|
|
|
25.2 |
% |
|
Outdoor Advertising |
|
2,709 |
|
|
|
2,470 |
|
|
|
239 |
|
|
|
9.7 |
% |
|
Total operating expenses excluding depreciation and amortization expense |
$ |
9,332 |
|
|
$ |
7,761 |
|
|
$ |
1,571 |
|
|
|
20.2 |
% |
Radio operating expenses excluding depreciation and amortization expense increased during the three-month period ended March 31, 2022 due to investment in our labor force with a higher focus on sales and digital as well as increases in costs that are commensurate with revenue.
Outdoor advertising operating expenses excluding depreciation and amortization are largely fixed in nature; however, the increase in expenses primarily relates to two small acquisitions in the second quarter of 2021.
- 21 -
Corporate expenses
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Corporate expenses |
|
$ |
2,487 |
|
|
$ |
1,641 |
|
|
$ |
846 |
|
|
|
51.6 |
% |
The increase in corporate expenses for the three-month period ended March 31, 2022 relates primarily to personnel costs associated with the build out of the corporate functions that were previously part of the management agreement between the Company and Emmis which ended in November 2021.
Depreciation and amortization:
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
|
$ |
101 |
|
|
$ |
191 |
|
|
$ |
(90 |
) |
|
|
(47.1 |
)% |
|
Outdoor Advertising |
|
|
829 |
|
|
|
790 |
|
|
|
39 |
|
|
|
4.9 |
% |
|
Total depreciation and amortization |
|
$ |
930 |
|
|
$ |
981 |
|
|
$ |
(51 |
) |
|
|
(5.2 |
)% |
Radio depreciation and amortization expense decreased due to certain assets becoming fully depreciated in the prior year. Outdoor advertising depreciation and amortization increased due to depreciation expense associated with two small asset acquisitions that closed in the second quarter of the prior year.
Loss (gain) on sale of assets:
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Loss (gain) on sale of assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outdoor Advertising |
|
$ |
18 |
|
|
$ |
(6 |
) |
|
$ |
24 |
|
|
|
(400.0 |
)% |
|
Total loss (gain) on sale of assets |
|
$ |
18 |
|
|
$ |
(6 |
) |
|
$ |
24 |
|
|
|
(400.0 |
)% |
The loss (gain) on sale of assets relates to the disposal of certain outdoor advertising structures in the normal course of business.
Operating (loss) income:
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Operating (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio |
|
$ |
1,389 |
|
|
$ |
1,020 |
|
|
$ |
369 |
|
|
|
36.2 |
% |
|
Outdoor Advertising |
|
|
(134 |
) |
|
|
(13 |
) |
|
|
(121 |
) |
|
|
930.8 |
% |
|
All other |
|
$ |
(2,487 |
) |
|
$ |
(1,641 |
) |
|
$ |
(846 |
) |
|
|
(51.6 |
)% |
|
Total operating (loss) income |
|
$ |
(1,232 |
) |
|
$ |
(634 |
) |
|
$ |
(598 |
) |
|
|
(94.3 |
)% |
See “Net revenues,” “Operating expenses excluding depreciation and amortization,” and “Corporate expenses” above.
Interest expense
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Interest expense |
|
$ |
(2,998 |
) |
|
$ |
(2,538 |
) |
|
$ |
(460 |
) |
|
|
18.1 |
% |
Interest expense increased due to (i) the additional funding from SG Broadcasting during 2021, which took the form of additional loans, (ii) accrued interest on the Emmis Promissory Note and SG Broadcasting Promissory Notes being paid in kind in the fourth quarter of 2021, and (iii) an additional 1% paid in kind interest rate applicable beginning May 19, 2021 as a result of Amendment No. 4 to the senior credit facility.
- 22 -
Provision for income taxes:
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Provision for income taxes |
|
$ |
63 |
|
|
$ |
81 |
|
|
$ |
(18 |
) |
|
|
100.0 |
% |
Our provision for income taxes tax is primarily due to the recognition of additional valuation allowance.
Consolidated net loss:
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
||||
|
Consolidated net loss |
|
$ |
(4,293 |
) |
|
$ |
(3,253 |
) |
|
$ |
(1,040 |
) |
|
|
32.0 |
% |
See “Net revenues,” “Operating expenses excluding depreciation and amortization,”, “Corporate expenses,” and “Interest expense” above.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash provided by operations, cash available through borrowings under the SG Broadcasting Promissory Note, and our At Market Issuance Sales Agreement. Our primary uses of capital have been, and are expected to continue to be, capital expenditures, working capital, debt service requirements and acquisitions
At March 31, 2022, we had cash and cash equivalents of $8.8 million and net working capital of $3.5 million. At December 31, 2021, we had cash and cash equivalents of $6.1 million and net working capital of $7.7 million. The decrease in net working capital is primarily due to an increase in accrued interest due to the timing of annual interest paid in kind on the Emmis Convertible Promissory Note and the promissory notes due to SG Broadcasting, an increase in the current portion of long-term debt, cash paid for capital expenditures, and cash paid for the settlement of tax withholding obligations.
At March 31, 2022, we had $68.5 million of borrowings outstanding under the Senior Credit Facility, of which $3.7 million is current. The borrowing rate under our Senior Credit Facility was 9.5% at March 31, 2022. Additionally, at March 31, 2022, we had $6.2 million and $27.6 million of promissory notes outstanding to Emmis and SG Broadcasting, respectively, all of which is classified as long-term.
The debt service requirements of MediaCo over the next twelve-month period are expected to be $10.4 million related to our Senior Credit Facility ($3.7 million of principal repayments and $6.7 million of interest payments). The Senior Credit Facility bears interest at a variable rate. The Company estimates interest payments by using the amounts outstanding as of March 31, 2022 and then-current interest rates. There are no debt service requirements over the next twelve months for either the Emmis Convertible Promissory Note or the SG Broadcasting Promissory Note.
As part of our business strategy, we continually evaluate potential acquisitions of businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. However, our Senior Credit Facility substantially limits our ability to make acquisitions.
Cash flows provided by operating activities were $4.7 million and $0.6 million for the three months ended March 31, 2022, and 2021, respectively. The increase was mainly attributable to significant collections in accounts receivable and increased revenues as we recover from the COVID-19 pandemic.
Cash flows used in investing activities were $0.8 million for the three months ended March 31, 2022, attributable to capital expenditures related to a new digital platform project. Cash flows used in investing activities were $0.1 million for the three months ended March 31, 2021, attributable to capital expenditures, net of proceeds from the sale of property and equipment.
Cash flows used in financing activities were $1.2 million for the three months ended March 31, 2022, attributable to settlement of tax withholding obligations. Cash flows used in financing activities were $0.2 million for the three months ended March 31, 2021, attributable to settlement of tax withholding obligations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As an emerging growth company, we are not required to provide this information.
- 23 -
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company evaluated the effectiveness of the design and operation of its “disclosure controls and procedures” (“Disclosure Controls”). This evaluation (the “Controls Evaluation”) was performed under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).
Based upon the Controls Evaluation, our CEO and CFO concluded that as of March 31, 2022, our Disclosure Controls are effective to ensure that information relating to MediaCo Holding Inc. and Subsidiaries that is required to be disclosed by us in the reports that we file or submit is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the opinion of management of the Company there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.
- 24 -
ITEM 6. EXHIBITS
|
|
(a) |
Exhibits. |
The following exhibits are filed or incorporated by reference as a part of this report:
|
|
|
|
||||||||||||
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|
||||||||||||
|
|
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|
|
|
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|
|
|
|
|
||
|
Exhibit |
|
|
|
|
|
Incorporated by Reference |
||||||||
|
Number |
|
Exhibit Description |
|
Filed Herewith |
|
Form |
|
Period Ending |
|
Exhibit |
|
Filing Date |
||
|
3.1 |
|
|
|
|
10-K |
|
12/31/2021 |
|
3.2 |
|
3/24/2022 |
|||
|
10.1 † |
|
Employment Agreement between MediaCo Holding Inc. and Ann Beemish, dated February 9, 2022 |
|
|
|
8-K |
|
N/A |
|
99.1 |
|
2/11/2022 |
||
|
10.2 † |
|
Employment Agreement between MediaCo Holding Inc. and Brad Tobin, dated February 9, 2022 |
|
|
|
8-K |
|
N/A |
|
99.2 |
|
2/11/2022 |
||
|
10.3 |
|
|
|
|
10-K |
|
12/31/2021 |
|
10.12 |
|
3/24/2022 |
|||
|
31.1 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
31.2 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
32.1 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
32.2 |
|
|
X |
|
|
|
|
|
|
|
|
|||
|
101.INS |
|
Inline XBRL Instance Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.LAB |
|
Inline XBRL Taxonomy Extension Labels Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
X |
|
|
|
|
|
|
|
|
||
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
X |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
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|
|
|
|
|
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|
||
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||
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|
||
† Constitutes a management contract or compensatory plan or arrangement.
- 25 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
MEDIACO HOLDING INC. |
|
|
|
|
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Date: May 12, 2022 |
By: |
/s/ Ann C. Beemish |
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Ann C. Beemish |
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Executive Vice President, Chief Financial Officer and |
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Treasurer |
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Rahsan-Rahsan Lindsay, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of MediaCo Holding Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: May 12, 2022 |
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/s/ Rahsan-Rahsan Lindsay |
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Rahsan-Rahsan Lindsay |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Ann C. Beemish, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of MediaCo Holding Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: May 12, 2022 |
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/s/ Ann C. Beemish |
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Ann C. Beemish |
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Executive Vice President, Chief Financial Officer and |
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Treasurer |
Exhibit 32.1
SECTION 1350 CERTIFICATION
The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of MediaCo Holding Inc. (the “Company”), that, to his knowledge:
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(1) |
the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2022, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: May 12, 2022 |
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/s/ Rahsan-Rahsan Lindsay |
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Rahsan-Rahsan Lindsay |
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Chief Executive Officer |
Exhibit 32.2
SECTION 1350 CERTIFICATION
The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of MediaCo Holding Inc. (the “Company”), that, to his knowledge:
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(1) |
the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2022, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: May 12, 2022 |
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/s/ Ann C. Beemish |
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Ann C. Beemish |
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Executive Vice President, Chief Financial Officer and |
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Treasurer |