What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-04-15 compared with 2024-04-01 · 182 added, 112 removed, 89 unchanged (77% of the section changed)

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and its subsidiaries (collectively, “MediaCo” or the “Company”).

On December 9, 2022, Fairway Outdoor LLC, FMG Kentucky, LLC and FMG Valdosta, LLC (collectively, “Fairway”), all of which are wholly owned direct and indirect subsidiaries of MediaCo, entered into an Asset Purchase Agreement (the “Purchase Agreement”), with The Lamar Company, L.L.C., a Louisiana limited liability company (the “Purchaser”), pursuant to which we sold our Fairway outdoor advertising business to the Purchaser.

The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement.

On December 9, 2022, Fairway Outdoor LLC, FMG Kentucky, LLC and FMG Valdosta, LLC (collectively, “Fairway”), all of which are wholly owned direct and indirect subsidiaries of MediaCo, entered into an asset purchase agreement with The Lamar Company, L.L.C., a Louisiana limited liability company, pursuant to which we sold our Fairway outdoor advertising business to The Lamar Company, L.L.C.

The transactions contemplated by the asset purchase agreement closed as of the date of the agreement.

We have classified the related assets and liabilities associated with our Fairway business as discontinued operations in our consolidated balance sheets and the results of our Fairway business have been presented as discontinued operations in our consolidated statements of income for all periods presented as the sale represented a strategic shift in our business that had a major effect on our operations and financial results.

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See Note 2 — Discontinued Operations in our consolidated financial statements included elsewhere in this report for additional information.

We own and operate two radio stations located in New York City.

We own and operate two radio stations located in New York City, which serve the New York City demographic market area that primarily target Black, Hispanic, and multi-cultural consumers and as a result of the Estrella Acquisition, Estrella’s network, content, digital, and commercial operations, including network affiliation and program supply agreements with Estrella for its 11 radio stations serving Los Angeles, CA, Houston, TX, and Dallas, TX and nine television stations serving Los Angeles, CA, Houston, TX, Denver, CO, New York, NY, Chicago, IL and Miami, FL.

Among the Estrella brands that joined MediaCo are the EstrellaTV network, its influential linear and digital video content business, Estrella’s expansive digital channels, including its eight free ad-supported television (“FAST”) channels - EstrellaTV, Estrella News, Cine EstrellaTV, Estrella Games, EstrellaTV Mexico, Curiosity Explora, Curiosity Motores, and Curiosity Animales.

See Note 4 — Business Combinations in our consolidated financial statements included elsewhere in this report for additional information on the Estrella Acquisition.

We derive our revenues primarily from radio, television and digital advertising sales, but we also generate revenues from events, including sponsorships and ticket sales, licensing, and syndication.

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.

The Nielsen Company generally measures radio station ratings weekly for markets measured by the Portable People Meter™, which includes both of our radio stations.

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.

These rates are in large part based on our stations’ ability to attract audiences in demographic groups targeted by their advertisers.

The Nielsen Company generally measures radio station ratings weekly for markets measured by the Portable People Meter™ as well as providing television programming ratings services for the EstrellaTV network and the Estrella variable interest entity (“VIE”) local television stations.

Because audience ratings in a 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.

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The following table summarizes the sources of our revenues for the years ended December 31, 2024 and 2023.

The category “Other” includes barter revenue, network revenue, talent fee revenue and other revenue .

The category “Other” includes, among other items, revenues related to network revenues and barter .

Year ended December 31,

Net revenues:

Spot Radio Advertising $ 18,650 57.6 % $ 25,790 66.8 %

Spot Radio & TV Advertising $ 61,158 64.0 % $ 18,650 57.6 %

Digital 20,291 21.2 % 3,677 11.4 %

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KNOWN TRENDS AND UNCERTAINTIES

radio industry is a mature industry and its growth rate has stalled.

traditional radio and television broadcasting industries are mature industries and their growth rates have stalled.

Management believes this is principally the result of two factors:

(i) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, have gained advertising share against radio and other traditional media and created a proliferation of advertising inventory and (ii) 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 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 and YouTube channels.

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 down 3.3% for the year ended December 31, 2023, and up 1.6% for the year ended December 31, 2022, as compared to the same periods of the prior year.

During these periods, revenues for our New York cluster were down 18.3% and down 8.5%, respectively.

The decreases for our New York cluster were largely driven by lower healthcare spend, which our stations benefited from more than those serving the general population in the prior year due to the targeted nature of the awareness campaigns and lower casino/gambling spend as the regulatory environment in New York as made it less attractive in the state.

(i) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, have gained advertising share against radio, television and other traditional media and created a proliferation of advertising inventory and (ii) the fragmentation of the radio and television audiences and time spent listening and viewing caused by satellite radio, audio and video streaming services, and podcasts has led some investors and advertisers to conclude that the effectiveness of broadcast advertising has diminished.

Our network and stations have aggressively worked to harness the power of broadband and mobile media distribution in the development of emerging business opportunities by capitalizing on the rapidly growing FAST marketplace through several operated channels, creating highly interactive direct-to-consumer (“D2C”) apps and websites with content that engages our audience and harnessing the power of digital video on our D2C platforms, YouTube, and connected TV publishers, vMVPDs and OEMs.

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.

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.

MediaCo has been impacted by the rising interest rate environment in the financial markets.

While no longer impacting our current borrowings, which are fixed rate, the cost of any potential future borrowings has been increasing.

At this time, we do not anticipate interest rates to decline.

As part of the Estrella Acquisition integration, in the twelve months ended December 31, 2024, we developed a plan to close and relocate certain studio and marketing operations.

In fulfilling this plan, we incurred involuntary termination costs of $1.4 million in the twelve months ended December 31, 2024, included in operating expenses excluding depreciation and amortization on our consolidated statements of operations included elsewhere in this report.

MediaCo has been impacted by the rising interest rate environment in the financial markets, driving the interest accrued and paid on the Emmis Convertible Promissory Note to increase prior to its maturity in November 2024 as well as providing uncertainty on our First Lien Term Loan and Second Lien Term Loan, which have variable interest rates.

Although the Federal Reserve has cut its benchmark rate several times in 2024 it has indicated a slower pace of rate reductions in 2025 due to persistent inflationary pressures.

While the Federal Reserve has signaled a bias toward eventually lowering rates further it has also indicated that additional rate increases in the future may be necessary if inflation remains elevated, and there can be no assurance that the Federal Reserve will not make upwards adjustments to the federal funds rate, or that it will reduce the current rate, in the future.

CRITICAL ACCOUNTING ESTIMATES

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As of December 31, 2024, we have recorded approximately $166.0 million for FCC licenses, which represents approximately 51% of our total assets.

We would not be able to operate our radio stations without the related FCC license for each property.

We would not be able to operate our TV and radio stations without the related FCC license for each property.

FCC broadcast licenses are renewed every eight years;

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We do not amortize indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired.

When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by Accounting Standards Codification (“ASC”) Topic 350-30-35.

In our case, radio stations in a geographic market cluster are considered a single unit of accounting if they are not being operated under a Local Marketing Agreement by another broadcaster.

Consequently, our two radio stations in New York are considered a single unit of accounting.

However, the Company has applied the provisions of Accounting Standards Codification (“ASC”) 350-30 to certain of its broadcast licenses, which states that separately recorded indefinite-lived intangible assets should be combined into a single unit of account for purposes of testing impairment if they are operated as a single asset and, as such, are essentially inseparable from one another.

The Company aggregates broadcast licenses for impairment testing if their signals are simulcast and/or are operating as one revenue-producing asset.

For the years ended December 31, 2024 and 2023, we completed our annual impairment tests on October 1 of each year and will continue to perform our assessments on this date in future years.

Valuation of Indefinite-lived Broadcasting Licenses

Fair value of our FCC licenses is estimated to be the stick value 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.

Fair value of our FCC licenses is estimated to be the value 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 uses the income approach 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 respective market at the beginning of the valuation period.

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The projections incorporated into our license valuations take then current economic conditions into consideration.

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.

The Company performed a qualitative assessment of impairment as of October 1, 2024 for the FCC licenses associated with the Estrella Acquisition and determined that there were no material changes to any of the factors considered in the April 2024 valuation that would trigger an impairment charge.

Below are some of the key assumptions used in our income method annual impairment assessments.

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Operating Profit Margin 23.2-29.2% 22.9-29.0%

Acquisitions and Fair Value

We account for the assets acquired and liabilities assumed in an acquisition based on their respective fair values as of the acquisition date.

The excess of the fair value of the consideration transferred over the fair value of the acquired net assets, when applicable, is recorded as goodwill.

The judgments made in determining estimated fair values assigned to assets acquired, liabilities assumed, and consideration transferred in a business combination, as well as estimated asset lives, can materially affect our consolidated financial statements.

The fair values of intangible assets are determined using information available at the acquisition date based on expectations and assumptions that are deemed reasonable by management.

These fair value estimates require significant judgment with respect to expected future revenue and cash flows, expected future growth rates, and estimated discount rates.

Such estimates and assumptions are determined based upon our business plans, general economic conditions, audience behavior, and numerous other variables.

Depending on the facts and circumstances, we may deem it necessary to engage an independent valuation expert to assist in valuing significant assets and liabilities.

Impairment of Indefinite-lived and Long-lived Assets

We review the carrying value of long-lived assets (both intangible and tangible) for potential impairment on a periodic basis and whenever events or changes in circumstances indicate the carrying value of an asset (or asset group) may not be recoverable.

We identify impairment for goodwill by comparing the fair value to its carrying value using both a market approach and income approach.

The fair value under the market approach is determined by multiplying the cash flows of the reporting unit by an estimated market multiple.

The income approach is performed using a discounted cash flow method to determine the fair value of each reporting unit.

If the carrying value of a reporting unit’s goodwill exceeds its fair value, the Company will recognize an impairment charge equal to the difference in the statement of operations.

We identify impairment for long-lived assets by comparing the projected undiscounted cash flows to be generated by the asset (or asset group) to its carrying value.

If an impairment is identified, a loss is recorded that is equal to the excess of the asset's carrying value over its fair value generally utilizing a discounted cash flow analysis, and the cost basis is adjusted.

Goodwill and indefinite-lived intangible assets are reviewed for impairment at least annually and when certain impairment indicators are present.

We have historically performed our annual goodwill impairment assessment as of October 1 each year and will continue to perform our goodwill and indefinite-lived intangible asset assessments on this date in future years.

Significant management judgment is required in estimating fair values in our impairment reviews and in the creation of forecasts of future operating results that are used in the discounted cash flow method of valuation.

These include, but are not limited to, estimates and assumptions regarding (1) our future cash flows, revenue, and other profitability measures such as EBITDA, (2) the long-term growth rate of our business, and (3) the determination of our weighted-average cost of capital, which is a factor in determining the discount rate.

We make these judgments based on our historical experience, relevant market size, and expected industry trends.

These assumptions are subject to change in future periods because of, among other things, additional information, financial information based on further historical experience, changes in competition, our investment decisions, and changes in macroeconomic conditions, including rising interest rates and inflation.

A change in these assumptions or the use of alternative estimates and assumptions could have a significant impact on the estimated fair value and may expose us to impairment losses.

Deferred Taxes

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RESULTS OF OPERATIONS

Executive Summary

The following discussion and analysis of the financial condition and results of operations of MediaCo Holding Inc.

and its consolidated subsidiaries should be read in conjunction with our audited consolidated financial statements and notes thereto included elsewhere herein.

The key developments in our business for the year ended December 31, 2024 are summarized below:

• On April 17, 2024, MediaCo consummated the Estrella Acquisition, pursuant to which it purchased substantially all of the assets of Estrella, other than the Estrella Broadcast Assets, and assumed substantially all of the liabilities of Estrella and its subsidiaries.

• The Company determined that the Estrella entities holding the Estrella Broadcast Assets (the “Estrella VIE”) are a VIE in which the Company holds a controlling financial interest.

The Estrella VIE is consolidated in the Company’s consolidated financial statements from April 17, 2024 onwards.

• The Estrella Acquisition significantly expanded MediaCo’s national footprint and diversified its content portfolio, establishing the Company as a leading multi-platform media network serving U.S.

Hispanic audiences.

• Net Revenue of $95.6 million increased $63.2 million, or 195%, during 2024 compared to Net Revenue of $32.4 million in 2023.

• Digital and streaming initiatives saw meaningful growth, with revenue from digital platforms increasing 452% year-over-year, supported by expanded over-the-top distribution and social monetization.

• Operating loss of $28.2 million increased $21.4 million, or 316%, during 2024 compared to Operating loss of $6.8 million in 2023.

• Net loss of $1.3 million decreased $6.1 million, or 82%, during 2024 compared to Net loss of $7.4 million in 2023.

• Cash flows used in operating activities of $19.9 million increased $14.3 million, or 257%, during 2024 compared to 2023.

• Adjusted EBITDA for 2024 was $(2.2) million, remaining relatively consistent with Adjusted EBITDA of $(2.2) million in 2023.

• Integration of Estrella operations progressed in line with expectations, with initial cost synergies realized in the second half of 2024 and further efficiencies anticipated in 2025.

Consolidated Operating Data

The following table sets forth a summary of the Company’s continuing operations for the years ended December 31, and each component of operating expense as a percentage of net revenue:

(Dollars in thousands) Amount % Amount %

NET REVENUES $ 95,571 100 $ 32,391 100

OPERATING EXPENSES:

Operating expenses excluding depreciation and amortization expense 106,650 112 32,633 101

Corporate expenses 11,859 12 5,451 17

Depreciation and amortization 5,258 6 568 2

Loss on disposal of assets 10 — 526 2

Total operating expenses 123,777 39,178

OPERATING LOSS $ (28,206) $ (6,787)

Year ended December 31, 2024 compared to year ended December 31, 2023

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See Note 2 — Discontinued Operations in our consolidated financial statements included elsewhere in this report for additional information.

Net revenues:

Year ended December 31, Change

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NET REVENUES $ 95,571 $ 32,391 63,180 195

Net radio revenues decreased due to a substantial declines in healthcare spend as COVID-19 vaccination awareness campaigns slowed as well as online gambling, automotive and wireless advertising spend.

These decreases were partially offset by stronger ticket sales and broadcast sponsorships of our annual Summer Jam concert, as well as stronger tourism and live event advertising spend as the restrictions on travel, social gatherings, and business activities have continued to ease.

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 decreased 3.3% for the year ended December 31, 2023, as compared to the prior year.

Our gross revenues reported to Miller Kaplan were down 18.3% for the year ended December 31, 2023, as compared to the prior year.

OPERATING EXPENSES:

Operating expenses excluding depreciation and amortization expense 106,650 32,633 74,017 227

Year ended December 31, Change

(Dollars in thousands) 2023 2022 $ %

Operating expenses excluding depreciation and amortization expenses:

$ 32,633 $ 32,847 $ (214) (0.7) %

Radio operating expenses excluding depreciation and amortization expense decreased during the year ended December 31, 2023 as lower Summer Jam production costs, ratings costs, and music license fees were partially offset by higher noncash lease expense related to the new office lease that commenced in February 2023 and professional service fees, which were mainly incurred during the first quarter.

Corporate expenses 11,859 5,451 6,408 118

Year ended December 31, Change

(Dollars in thousands) 2023 2022 $ %

Corporate expenses $ 5,451 $ 6,463 $ (1,012) (15.7) %

The decrease in corporate expenses for the year ended December 31, 2023 was primarily due lower stock based compensation expense driven by higher stock based bonuses awarded in the prior year, partially offset by higher professional service fees.

Depreciation and amortization 5,258 568 4,690 826

Year ended December 31, Change

(Dollars in thousands) 2023 2022 $ %

Depreciation and amortization $ 568 $ 666 $ (98) (14.7) %

Radio depreciation and amortization expense decreased compared to the prior year due to certain assets becoming fully depreciated in the prior year, partially offset by intangible software costs related to our updated websites and mobile applications placed in service in the third quarter of 2022.

Loss on disposal of assets 10 526 (516) (98)

Year ended December 31, Change

(Dollars in thousands) 2023 2022 $ %

Total operating expenses 123,777 39,178 84,599 216

OPERATING LOSS (28,206) (6,787) (21,419) 316

OTHER INCOME (EXPENSE):

Interest expense, net (11,137) (426) (10,711) 2,514

Change in fair value of warrant shares liability 38,360 — 38,360 N/A

Other income 2 100 (98) (98)

Total other (income) expense 27,225 (326) 27,551 (8,451)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (982) (7,113) 6,131 (86)

PROVISION FOR INCOME TAXES 320 308 12 4

NET LOSS FROM CONTINUING OPERATIONS $ (1,302) $ (7,421) 6,119 (82)

Net revenues:

Net revenues increased during the year ended December 31, 2024 primarily due to the Estrella Acquisition in April 2024, and to a lesser extent stronger political and telecommunications spend.

This increase was partially offset by weaker sales for our annual Summer Jam concert as well as lower spend in the media, retail and beverages categories.

Operating expenses excluding depreciation and amortization expense:

Operating expenses excluding depreciation and amortization expense increased during the year ended December 31, 2024 primarily due to the Estrella Acquisition and to a lesser degree to increased information technology costs.

These increases were partially offset by lower production costs for our annual Summer Jam concert, lower lease costs as our new office lease commenced in February 2023 and the prior office lease did not terminate until the third quarter of 2023, lower employee costs and lower professional service fees.

Corporate expenses:

The increase in corporate expenses for the year ended December 31, 2024 was primarily due to higher professional service fees driven by work related to the Estrella Acquisition, the debt amendment and other corporate matters, partially offset by lower salary and stock based compensation expenses.

Depreciation and amortization:

Depreciation and amortization expense increased during the year ended December 31, 2024 primarily related to the Estrella Acquisition.

Depreciation and amortization expenses, excluding those related to the Estrella Acquisition, remained relatively flat due to certain assets becoming fully depreciated in the prior year offset by new assets placed into service in 2024.

Loss on disposal of assets:

Loss on disposal of assets increased compared to the prior year primarily due to the disposal of certain intangible assets related to our websites and a generator at our prior location upon the move to our new location for our radio operations and corporate offices in the current year.

Operating (loss) income:

Year ended December 31, Change

(Dollars in thousands) 2023 2022 $ %

Operating (loss) income $ (6,787) $ (1,386) $ (5,401) 389.7 %

The decrease in loss on disposal of assets for year ended December 31, 2024 was primarily due to the disposal of certain intangible assets in 2023 related to our websites and a generator at our prior location upon the move to our new location for our radio operations and corporate offices in the current year, while there were minimal disposals in 2024.

Operating loss:

See “Net revenues,” “Operating expenses excluding depreciation and amortization,” “Corporate expenses,” “Depreciation and amortization,” and “Loss on disposal of assets” above.

Interest expense:

Year ended December 31, Change

(Dollars in thousands) 2023 2022 $ %

Interest expense $ (426) $ (6,980) $ 6,554 (93.9) %

Interest expense decreased due to the pay down in December 2022 of the senior credit facility, the conversion in July 2022 of the outstanding principal and accrued but unpaid interest of the SG Broadcasting promissory notes into the Company’s Class A common stock, and the partial conversions in August and December 2022 of $0.9 million of the outstanding principal of the Emmis convertible promissory notes into shares of the Company’s Class A common stock, as well as a lower interest rate on the outstanding balance of the Emmis convertible promissory note after the pay down of the senior credit facility.

This was partially offset by accrued interest on the Emmis convertible promissory note being paid in kind in the fourth quarter of 2022, which increased the principal balance for the current year.

Interest expense, net:

Interest expense increased during the year ended December 31, 2024 due to the additional long-term debt related to the Estrella Acquisition.

Change in fair value of warrant shares liability:

The change in fair value of warrant shares liability primarily relates to the decrease in MediaCo’s share prices from $2.50 at the initial recognition of the warrant shares liability to $1.14 as of December 31, 2024.

Other income:

Year ended December 31, Change

Other income decreased during the year ended December 31, 2024 compared to the prior year as income from the transaction services agreement (“TSA”) related to the Fairway sale recorded in the prior year was more than offset by additional costs incurred to fulfill the TSA and various other expenses.

Provision for income taxes:

Provision for income taxes increased slightly during the year ended December 31, 2024 compared to the prior year due to tax amortization of the Company’s historical and newly acquired indefinite-lived intangibles, along with the impact of filing in additional state jurisdictions as a result of the Estrella Acquisition.

See Note 12 — Income Taxes in our consolidated financial statements included elsewhere in this report for additional details.

Consolidated net loss:

The decrease in consolidated net loss was primarily due to Estrella Acquisition.

See “Net revenues,” “Operating expenses excluding depreciation and amortization,”, “Corporate expenses,” “Depreciation and amortization,” “Loss on disposal of assets,” “Interest expense, net,” “Change in fair value of warrant shares liability,” “ Provision for income taxes,” and “Other income” above for additional details.

Performance by Business Segment

Audio Segment

The Company’s Audio Segment (combines the former “EM-ADE:

and “NY-ADE” segments) includes the Estrella MediaCo radio, digital and events operations as well as two New York radio stations that predate the Estrella Acquisition.

Revenue, Operating expenses and Segment Operating Loss for our Audio Segment were as follows:

Audio Segment

(Dollars in thousands) 2024 2023

Other income $ 100 $ 125 $ (25) (20.0) %

Other income decreased slightly compared to the prior year as income from the transaction services agreement (“TSA”) related to the Fairway sale recorded in the current year were more than offset by additional costs incurred to fulfill the TSA and various other expenses.

Loss on debt extinguishment:

Year ended December 31, Change

Net Revenues $ 57,534 $ 32,391

Operating Expenses 59,009 33,727

Segment Operating Loss $ (1,475) $ (1,336)

Revenue from our Audio Segment increased $25.1 million compared to 2023, primarily as a result of the Estrella Acquisition.

Operating expenses from our Audio Segment increased $25.3 million compared to the prior year, driven primarily by the Estrella Acquisition.

Video Segment

The Company’s Video Segment (formerly “EM-VD”) includes the results of EstrellaTV network and all of the Estrella MediaCo television operations, including digital.

Revenue, Operating expenses and Segment Operating Loss for our Video Segment were as follows:

Video Segment

(Dollars in thousands) 2024 2023

Loss on debt extinguishment $ — $ (1,218) $ 1,218 (100.0) %

Loss on debt extinguishment in the prior year related to the pay down in December 2022 of the senior credit facility.

There were no such transactions in the current year.

Provision for income taxes:

Year ended December 31, Change

Net Revenues $ 38,037 $ —

Operating Expenses 52,910 —

Segment Operating Loss $ (14,873) $ —

All Revenue and Operating expenses from our Video Segment in 2024 were due to the Estrella Acquisition.

Corporate and other

Operating expenses related to Corporate and other increased to $11.9 million for the year ended December 31, 2024 compared to $5.5 million for the year ended December 31, 2023 primarily due to the Estrella Acquisition.

Non-GAAP Financial Measures

Reconciliations of Net Loss to EBITDA and Adjusted EBITDA (1)

Year ended December 31,

(Dollars in thousands) 2024 2023

Net Loss from Continuing Operations $ (1,302) $ (7,421)

Provision for income taxes (320) (308)

See Note 12 — Income Taxes in our consolidated financial statements included elsewhere in this report.

Consolidated net (loss) income:

Year ended December 31, Change

(Dollars in thousands) 2023 2022 $ %

Consolidated net (loss) income $ (7,631) $ 30,914 $ (38,545) (124.7) %

The decrease in consolidated net (loss) income was due to the gain on sale of Fairway in the prior year and increased operating loss from continuing operations.

See “Net revenues,” “Operating expenses excluding depreciation and amortization,”, “Corporate expenses,” “Interest expense,” “Loss on debt extinguishment,” and “Provision for income taxes” above and Note 2 — Discontinued Operations in our consolidated financial statements included elsewhere in this report.

Interest expense, net 11,137 426

Depreciation and amortization 5,258 568

EBITDA $ 14,774 $ (6,735)

Loss on disposal of assets 10 526

Change in fair value of warrant shares liability (38,360) —

Other Income (2) (100)

Other adjustments 21,350 4,075

Adjusted EBITDA (1)

$ (2,228) $ (2,234)

(1) We define Adjusted EBITDA as consolidated Operating loss adjusted to exclude restructuring expenses, business combination transaction costs, unusual and non-recurring expenditures and non-cash compensation included within operating expenses, as well as the following line items presented in our Statements of Operations:

Depreciation and amortization, Loss on disposal of assets, change in fair value of warrant shares liability and Other income.

Alternatively, Adjusted EBITDA is calculated as Net loss, adjusted to exclude Provision for income taxes, Interest expense, net, Depreciation and amortization, Loss on disposal of assets, Change in fair value of warrant shares liability, Other income, and Other adjustments.

We use Adjusted EBITDA, among other measures, to evaluate the Company’s operating performance.

This measure is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management.

We believe this measure is an important indicator of our operational strength and performance of our business because it provides a link between operational performance and operating income.

It is also a primary measure used by management in evaluating companies as potential acquisition targets.

We believe the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management.

We believe it helps improve investors’ ability to understand our operating performance and makes it easier to compare our results with other companies that have different capital structures or tax rates.

In addition, we believe this measure is also among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing our operating performance to other companies in our industry.

Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating loss or net loss as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies.

Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs.

Because it excludes certain financial information compared with operating loss and compared with consolidated net loss, the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash provided by operations and our At Market Issuance Sales Agreement.

Our primary sources of liquidity are cash provided by operations and our At Market Issuance Sales Agreements.

Our primary uses of capital have been, and are expected to continue to be, capital expenditures, working capital, and acquisitions.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Pursuant to ASC Topic 205-40, “Going Concern,” the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern within one year of the date of the filing of these financial statements (April 1, 2024).

Management considered the Company’s ability to forecast future cash flows, current financial condition, sources of liquidity and debt service obligations due on or before April 1, 2025.

The Company has experienced downturns in revenues and profitability and expects these to continue for an undetermined period of time.

Management has considered these circumstances in assessing the Company’s liquidity over the next year.

Liquidity is a measure of an entity’s ability to meet potential cash requirements, maintain its assets, fund its operations, and meet the other general cash needs of its business.

The Company’s liquidity is impacted by general economic, financial, competitive, and other factors beyond its control.

The Company’s liquidity requirements consist primarily of funds necessary to pay its expenses, principally debt service and operational expenses, such as labor costs, and other related expenditures.

The Company generally satisfies its liquidity needs through cash provided by operations.

In addition, the Company has taken steps to enhance its ability to fund its operational expenses by reducing various costs and is prepared to take additional steps as necessary.

At December 31, 2023, we had $6.5 million outstanding to Emmis under the Emmis Convertible Promissory Note (as defined in Note 13), all of which is classified as current and has debt service obligations of approximately $7.1 million due under its Emmis Convertible Promissory Note from April 1, 2024 (the date of issuance of these financial statements) through April 1, 2025.

As a result of this debt service obligation to Emmis, management anticipates the Company will be unable to meet its liquidity needs for the next twelve months with cash and cash equivalents on hand and projected cash flows from operations.

As a result, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Management is prepared to implement additional cost cutting measures, as necessary, and intends to seek additional borrowings to meet its debt service obligations, if needed.

While the Company has been successful in obtaining additional liquidity in the past, no assurances can be made that the Company will receive such liquidity in the future.

At December 31, 2023 we had cash, cash equivalents and restricted cash of $7.1 million and net working capital of $2.2 million.

At December 31, 2022, we had cash, cash equivalents and restricted cash of $15.3 million and net working capital of $13.3 million.

The decrease in net working capital was driven by payment of income taxes related to the gain on sale of Fairway and lower accounts receivable as sales declined in the current year.

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.

Management anticipates the Company will be able to meet its liquidity needs for the next twelve months with cash and cash equivalents on hand, additional draws on its First Lien Term Loan, and projected cash flows from operations.

As part of its business strategy, the Company continually evaluates potential acquisitions of businesses that it believes hold promise for long-term appreciation in value and leverage our strengths.

Operating Activities

Cash used in continuing operating activities was $19.9 million for the year ended December 31, 2024 compared to cash provided by continuing operating activities of $5.6 million for the year ended December 31, 2023.

The decrease was mainly attributable to payments of income taxes, lower collections of accounts receivable compared to the prior year, and lower accounts payable in the current year due to timing of payments.

The increase in use of cash in continuing operating activities was mainly attributable to lower operating income as well as increased working capital requirements driven by the Estrella Acquisition.

Investing Activities

Cash used in continuing investing activities was $1.7 million for the year ended December 31, 2023, primarily attributable to capital expenditures related to a new digital platform project and the build out of our new space for radio operations and corporate offices.

Cash provided by investing activities of $77.6 million for the year ended December 31, 2022 was primarily attributable to the proceeds from the sale of Fairway, partially offset by capital expenditures.

Cash used in continuing investing activities was $14.2 million for the year ended December 31, 2024, primarily attributable to cash paid, net of cash received, for the Estrella Acquisition, as well as capital expenditures related to a digital platform project and our build out of our new space for corporate offices.

Cash used in investing activities of $1.7 million for the year ended December 31, 2023 was primarily attributable to capital expenditures related to a new digital platform project and the build out of our new space for corporate offices.

Financing Activities

Cash provided by continuing financing activities was $33.9 million for the year ended December 31, 2024, primarily attributable to $43.7 million in proceeds from the First Lien Term Loan, partially offset by $7.3 million related to repayment in full of the Emmis Promissory Note, $1.9 million in payments of debt issuance costs, and $0.4 million related to settlement of tax withholding obligations.

Cash used in continuing financing activities was $1.2 million for the year ended December 31, 2023, primarily attributable to repurchases of our Class A common stock of $0.8 million and settlement of tax withholding obligations of $0.4 million.

Cash used in continuing financing activities was $70.1 million for the year ended December 31, 2022, primarily attributable to the pay down of outstanding long-term debt of $68.6 million and settlement of tax withholding obligations of $1.3 million.

Our results of operations are usually subject to seasonal fluctuations, which result in higher second quarter revenues and operating income.

For our radio operations, this seasonality is largely due to the timing of our largest concert in June of each year.

Results are typically lowest in the first calendar quarter.

The impact of inflation on operations has not been significant to date.

Our results of operations are usually subject to seasonal fluctuations primarily from fluctuations in advertising expenditures by local and national advisers, which result in higher second quarter revenues and operating income.

For our Audio Segment, this seasonality is largely due to the timing of our largest concert in June of each year.

Results are typically lowest in the first calendar quarter for both our audio and video business segments.

We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates and inflation.

Interest Rate Risk

On April 17, 2024, MediaCo entered into a First Lien Term Loan and a Second Lien Term Loan.

Monthly interest payments in accordance with the First and Second Lien Term Loans are based upon the SOFR rate plus a SOFR adjustment as specified in the credit agreements.

A significant amount of our long-term debt bears interest at variable rates.

Additionally, certain assumptions used within management's estimates are impacted by changes in interest rates.

Accordingly, our earnings will be affected by changes in interest rates.

As of December 31, 2024, approximately 56% of our aggregate principal amount of long-term debt bore interest at floating rates.

Assuming the current level of borrowings and assuming a 100 bps change in floating interest rates, it is estimated that our interest expense for the year ended December 31, 2024 would have changed by $0.5 million.

In the event of an adverse change in interest rates, management may take actions to mitigate our exposure.

However, due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis assumes no such actions.

Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.

Inflation is a factor in our business and we continue to seek ways to mitigate its effect.

Inflation has affected our performance in terms of higher costs for employee compensation, equipment, and third party services.

Although we are unable to determine the exact impact of inflation, we believe the impact will continue to be mitigated through the actions we have taken and may continue to take in response to these higher costs that may arise as a result of inflation.

However, there can be no assurance that a high rate of inflation in the future would not have an adverse effect on operating results.

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What changed 10-K

Item 7. Management’s Discussion and Analysis