Mediaco Holding Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Special Note on Forward-Looking Information: You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. Certain statements included in this Quarterly Report or in the financial statements contained herein that are not statements of historical fact, including but not limited to those identified with the words “expect,” “believes,” “should,” “will” or “look” are intended to be, and are, by this Note, identified as “forward-looking statements,” as defined in the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that 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: • Our ability to continue as a going concern. • Potential conflicts of interest with SG Broadcasting LLC (“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 sell advertising time or 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; • Inflation and interest rate risk; • A potential recession, economic downturn, and stagflation; • The impact of a potential temporary federal government shutdown and other political developments, including immigration, political protests or unrest, boycotts, or other social and political developments; • Increased technology costs and supply chain issues; • Industry and economic trends within the U.S. radio and television industry, generally, and in the markets in which we operate, in particular; • Changes in U.S. and global economies and financial markets, including economic activity, employment levels, global trade relations, new or increased tariffs imposed by the U.S. and foreign governments and other factors driving trade uncertainty; • The effect of such economic conditions on advertising activity; • Our ability to successfully attract and retain on-air talent; • Our ability to successfully produce and distribute on-air programming; • Our ability to maintain and expand distribution platforms and station affiliations; • Our ability to finance our operations or to obtain financing on terms that are favorable to MediaCo; • Our ability to successfully complete and integrate acquisitions, including the recent transactions with Estrella Broadcasting, Inc. and any future acquisitions; • 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 for the fiscal year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2026 . MediaCo does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise. -19- Table of Contents GENERAL The following discussion pertains to MediaCo Holding Inc. and its subsidiaries (collectively, “MediaCo” or the “Company”). MediaCo is a multimedia company focused on radio, television, digital advertising, premium programming, and events. Our portfolio includes a national network, as well as digital and commercial operations. Our broadcasting assets consist of thirteen radio stations, including two located in New York City, WQHT(FM) and WBLS(FM) (the “Stations”), which serve the New York City demographic market area and primarily target Black, Hispanic, and multicultural consumers. The remaining eleven radio stations serve Los Angeles, CA, Houston, TX, and Dallas, TX. Our assets also include nine television stations serving Los Angeles, CA, Houston, TX, Denver, CO, New York, NY, Chicago, IL, and Miami, FL. Our portfolio includes the Estrella brands, including the EstrellaTV network, its linear and digital video content business, and its digital channels, including eight free ad-supported television (“FAST”) channels: EstrellaTV, Estrella News, Cine EstrellaTV, Estrella Games, EstrellaTV Mexico, Curiosity Explora, Curiosity Motores, and Curiosity Animales. We derive our revenues primarily from radio, television, and digital advertising sales. We also generate revenues from events, including sponsorships and ticket sales, as well as from licensing and syndication. Advertising sales represent the primary component of our consolidated revenues, and our results are largely influenced by the advertising rates we are able to charge. These rates depend significantly on our ability to attract audiences within demographic groups targeted by advertisers. Audience measurement services, such as those provided by Nielsen, supply radio and television ratings that are critical to our performance. Accordingly, our strategy emphasizes market research, programming, promotion, and branding initiatives designed to attract and retain audiences in our target demographics. Our revenues fluctuate throughout the year, with revenue and operating income typically lowest in the first calendar quarter, in part due to reduced advertising spending following the holiday season. In addition to cash advertising sales, we enter into barter transactions in which advertising time is exchanged for goods or services. These transactions are recorded at the estimated fair value of the goods or services received. We generally limit barter activity to items or services that we would otherwise purchase for cash and maintain a policy of not preempting paid advertising spots with barter advertising. The following table summarizes the sources of our revenues for the three months ended March 31, 2026 and 2025. The category “Other” includes, among other items, revenues related to network revenues and barter. (dollars in thousands) Three Months Ended March 31, 2026 % of Total 2025 % of Total Net revenues: Spot Radio & TV Advertising $ 14,197 45 $ 16,031 57 Digital 15,539 50 9,537 34 Syndication 332 1 668 2 Events and Sponsorships 155 1 239 1 Other 1,163 3 1,555 6 Total net revenues $ 31,386 $ 28,030 Roughly 20% of our expenses vary in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions, and bad debt, as well as certain technical and engineering costs that fluctuate with operational activity. Our costs that do not vary significantly with revenue are primarily in our programming and general and administrative departments, including talent costs, ratings fees, rent, utilities, engineering-related maintenance, and salaries. Lastly, our costs that are highly discretionary are incurred in our marketing and promotions department, which we primarily use to maintain and/or increase our audience and market share. KNOWN TRENDS AND UNCERTAINTIES The U.S. 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, 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. -20- Table of Contents 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. As part of the Estrella Acquisition integration, we developed a plan to close and relocate certain studio and marketing operations. In fulfilling this plan, we incurred no involuntary termination costs in the three months ended March 31, 2026 and 2025, included in operating expenses on our condensed consolidated statements of operations included elsewhere in this report. CRITICAL ACCOUNTING ESTIMATES During the three months ended March 31, 2026, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 31, 2026. We have considered information available to us as of the date of issuance of these financial statements and are not aware of any specific e vents 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, and our actual results may differ materially from our previously disclosed estimates. 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 condensed consolidated financial statements and notes thereto included elsewhere herein. The key developments in our business for the three months ended March 31, 2026 are summarized below: • Net revenues of $31.4 million increased $3.4 million, or 12%, during the three months ended March 31, 2026 compared to net revenues of $28.0 million during the three months ended March 31, 2025. • Operating loss of $7.5 million increased $2.8 million, or 61%, during the three months ended March 31, 2026 compared to operating loss of $4.7 million during the three months ended March 31, 2025. • Net loss of $9.4 million increased $0.8 million, or 9%, during the three months ended March 31, 2026 compared to net loss of $8.6 million during the three months ended March 31, 2025. • Cash flows used in operating activities of $2.0 million, represent a decrease of $4.1 million, or 199%, during the three months ended March 31, 2026 compared to cash flows provided by operating activities of $2.1 million during the three months ended March 31, 2025. • Adjusted EBITDA for the three months ended March 31, 2026 was $0.2 million decreasing 86% compared to Adjusted EBITDA of $1.4 million for the three months ended March 31, 2025. -21- Table of Contents Consolidated Operating Data The following table sets forth a summary of each of the Company’s components of operating expense as a percentage of net revenue for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 (Dollars in thousands) Amount % Amount % NET REVENUES $ 31,386 100 $ 28,030 100 OPERATING EXPENSES: Operating expenses 34,822 111 29,212 104 Corporate expenses 1,666 5 1,593 6 Depreciation and amortization 1,676 5 1,769 6 Loss on disposal of assets 752 2 139 — Total operating expenses 38,916 32,713 OPERATING LOSS $ (7,530) $ (4,683) Three-Month Periods Ended March 31, 2026 compared to March 31, 2025 Three Months Ended March 31, Change (Dollars in thousands) 2026 2025 $ % NET REVENUES $ 31,386 $ 28,030 3,356 12 OPERATING EXPENSES: Operating expenses 34,822 29,212 5,610 19 Corporate expenses 1,666 1,593 73 5 Depreciation and amortization 1,676 1,769 (93) (5) Loss on disposal of assets 752 139 613 441 Total operating expenses 38,916 32,713 6,203 19 OPERATING LOSS (7,530) (4,683) (2,847) 61 OTHER INCOME (EXPENSE): Interest expense, net (3,940) (3,754) (186) 5 Other income, net 3,679 111 3,568 3215 Total other expense (261) (3,643) 3,382 (93) LOSS BEFORE INCOME TAXES AND EQUITY METHOD INVESTMENTS (7,791) (8,326) 535 (6) PROVISION FOR INCOME TAXES 1,322 280 1,042 372 LOSS BEFORE EQUITY METHOD INVESTMENTS (9,113) (8,606) (507) 6 EQUITY LOSS IN INVESTMENTS (255) — (255) N/A NET LOSS (9,368) (8,606) (762) 9 Net revenues: Net revenues increased during the three months ended March 31, 2026 primarily due to increased digital revenue, partially offset by a decrease in spot revenue as the Company increased its focus on digital offerings. Operating expenses: Operating expenses increased during the three months ended March 31, 2026 primarily due to higher digital platform costs, which rose in line with growth in digital revenue. These increases were partially offset by reductions in repairs and maintenance, utilities and rent. -22- Table of Contents Corporate expenses: Corporate expenses increased for the three months ended March 31, 2026 primarily due to an increase in employee related costs, and corporate insurance charges. Depreciation and amortization: Depreciation and amortization expense decreased during the three months ended March 31, 2026 as certain assets became fully depreciated in the prior year, partially offset by new assets placed into service. Loss on disposal of assets: Loss on disposal of assets increased for the three months ended March 31, 2026 primarily due to the disposal of certain fixed assets due to the amendment for an existing lease agreement, while there were no such disposals in 2025. Operating loss: See “Net revenues,” “Operating expenses,” “Corporate expenses,” “Depreciation and amortization,” and “Loss on disposal of assets” above. Interest expense, net: Interest expense increased during the three months ended March 31, 2026 primarily due to higher outstanding debt balances, due to PIK and accretion on loans, partially offset by lower interest rates. Equity loss in investments: Equity loss in investments increased during the three months ended March 31, 2026 due to the investment in unconsolidated affiliates as of January 1, 2026. Other income: Other income increased during the three months ended March 31, 2026 compared to the prior year primarily driven by a gain on a lease modification, interest and penalty income related to an equity clawback, income from managed services agreements under which the Company began providing accounting and other services on April 17, 2025, and sublease income from one of the Company’s facilities that commenced in the first quarter of 2025. Provision for income taxes: Provision for income taxes decreased during the three months ended March 31, 2026 compared to the prior year due to changes in the deferred tax liability and additional interest and penalties accrued. Consolidated net (loss) income: The increase in consolidated net loss was primarily due to the increase in digital platform costs partially offset by the increase in digital revenue. See “Net revenues,” “Operating expenses,”, “Corporate expenses,” “Depreciation and amortization,” “Loss on disposal of assets,” “Interest expense, net,” “Equity loss in investments,” “Other income” and “ Provision for income taxes,” above for additional details. -23- Table of Contents Performance by Business Segment Audio Segment The Company’s Audio Segment 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) Income for our Audio Segment were as follows: Audio Segment Three Months Ended March 31, (Dollars in thousands) 2026 2025 Net Revenues $ 9,763 $ 13,692 Operating Expenses (1) 14,547 12,997 Segment Operating (Loss) Income $ (4,784) $ 695 (1) Operating expenses comprise several line items, including operating costs, depreciation and amortization, and other segment-specific items, as detailed in the Segment Information disclosures in Note 12. Revenue from our Audio Segment decreased $3.9 million and operating expenses increased $1.5 million, respectively, during the three months ended March 31, 2026 compared to the same period in 2025, driven primarily as a result of the decrease in spot revenue and increases in operating expenses such as loss on disposal of assets and other departmental costs. Video Segment The Company’s Video Segment includes the results of the 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 Three Months Ended March 31, (Dollars in thousands) 2026 2025 Net Revenues $ 21,623 $ 14,338 Operating Expenses (1) 22,703 18,123 Segment Operating Loss $ (1,080) $ (3,785) (1) Operating expenses comprise several line items, including operating costs, depreciation and amortization, and other segment-specific items, as detailed in the Segment Information disclosures in Note 12. Revenue and operating expenses from our Video Segment increased $7.3 million and $4.6 million, respectively, during the three months ended March 31, 2026 compared to the same period in 2025. These increases were primarily in digital revenue and increases in impression expense, partially offset by decreases in employee related expenses. Corporate and other Operating expenses related to Corporate and other increased to $1.7 million for the three months ended March 31, 2026 compared to $1.6 million for the three months ended March 31, 2025, primarily due to an increase in employee related costs, and corporate insurance charges. -24- Table of Contents Non-GAAP Financial Measures Reconciliations of Net Loss to Adjusted EBITDA (1) Three Months Ended March 31, (Dollars in thousands) 2026 2025 Net Loss $ (9,368) $ (8,606) Provision for income taxes 1,322 280 Equity loss in investments 255 — Interest expense, net 3,940 3,754 Depreciation and amortization 1,676 1,769 Loss on disposal of assets 752 139 Other income (3,679) (111) Acquisition, integration and synergy services 2,277 2,859 Mergers and acquisitions transaction costs 576 833 Office exit facility consolidation 282 290 Expansion related costs 1,967 161 Other non-cash adjustments (1) 203 38 Adjusted EBITDA (2) $ 203 $ 1,406 (1) Other non-cash adjustments include compensation adjustments, non-cash rent charges and other non-cash expenses. (1) We define Adjusted EBITDA as consolidated net loss adjusted to exclude restructuring expenses, business combination transaction costs, unusual and non-recurring expenditures, non-cash items and non-cash compensation included within operating expenses, as well as the following line items presented in our Statements of Operations: Equity loss in investments, Depreciation and amortization, Loss on disposal of assets, and Other income. Alternatively, Adjusted EBITDA is calculated as Net loss, adjusted to exclude Provision for income taxes, Equity loss in investments, Interest expense, net, Depreciation and amortization, Loss on disposal of assets, 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 flows generated from operations. Our primary uses of capital have been, and are expected to continue to be, capital expenditures, working capital requirements, and strategic acquisitions. As of March 31, 2026, the Company’s liquidity position is constrained by its working capital deficit and upcoming debt maturities. While management is actively implementing plans to improve liquidity, including enhancing operating performance, managing working capital, and pursuing refinancing and additional capital, there can be no assurance that these efforts will be successful. At March 31, 2026, the Company had cash, cash equivalents and restricted cash of $5.1 million and negative working capital of $54.5 million. At December 31, 2025, the Company had cash, cash equivalents and restricted cash of $7.1 million and negative working capital of $49.0 million. The increase in negative working capital was driven by the cancellation of certain programming rights contracts reducing the current portion of programming rights as well as increased accounts payable. Despite net losses, management continues to actively manage liquidity through close monitoring of working capital and disciplined cash management practices. These efforts include extending payment terms with vendor partners, enhancing collection efforts to accelerate cash inflows, and maintaining a focus on expense control. As a result of these actions, the Company has reduced its cash burn during the period. Additionally, regarding the $10.0 million in Delayed Draw Term Loans due July 2026, the Company intends to refinance on a long term basis, pay down using cash flow from operations, or receive additional investments. As part of its business strategy, the Company continually evaluates potential acquisitions of businesses it believes hold promise for long-term appreciation and that can leverage our strengths. While any such acquisitions could impact our liquidity position, management is committed to maintaining appropriate liquidity levels and managing cash resources prudently as the business grows. -25- Table of Contents In addition to its short-term liquidity constraints, the Company expects to have ongoing cash requirements beyond the next twelve months. These longer-term liquidity needs relate primarily to capital expenditures required to maintain and upgrade broadcasting and digital infrastructure, contractual commitments for content and programming, and potential strategic investments or acquisitions that support long-term growth. The Company may seek to fund these longer-term requirements through a combination of cash flows from operations, existing cash and cash equivalents, and access to external financing sources, including potential borrowings under existing or future credit facilities or other capital-raising alternatives. However, given the Company’s current liquidity position and the conditions described above, there can be no assurance that sufficient cash flows will be generated or that external financing will be available on acceptable terms, or at all. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. Based on current operating plans and assumptions, management is pursuing various initiatives to improve the Company’s liquidity position, including enhancing operating performance, managing working capital, refinancing existing debt, and raising additional capital. However, these plans are subject to inherent risks and uncertainties, and there can be no assurance that they will be successfully implemented or will generate sufficient liquidity to meet the Company’s obligations as they become due. Accordingly, substantial doubt about the Company’s ability to continue as a going concern remains. Subsequent to year-end, the Company entered into amendments to its First Lien Credit Agreement and Second Lien Credit Agreement that waived certain covenant requirements. As of March 31, 2026, the Company was in compliance with all applicable financial covenants. Future liquidity and capital requirements will depend on a number of factors, including operating performance, macroeconomic conditions, changes in working capital, and the timing and extent of discretionary investments. The Company will continue to evaluate its liquidity position and capital structure and may adjust its financing strategy as conditions warrant. Operating Activities Cash flows used in operating activities were $2.0 million for the three months ended March 31, 2026, compared to cash flows provided by operating activities of $2.1 million for the three months ended March 31, 2025 . The decline in operating cash flow was primarily driven by a higher net loss and unfavorable changes in working capital, including decreases in deferred revenue and other liabilities and smaller increases in accounts payable, partially offset by improved collections on accounts receivable. Investing Activities Cash flows provided by investing activities were $0.2 million for the three months ended March 31, 2026, primarily attributable to the proceeds from the sale of land. Cash flows used in investing activities were $0.1 million for the three months ended March 31, 2025, primarily attributable to the purchases of equipment. Financing Activities Cash flows used in financing activities were $0.1 million for the three months ended March 31, 2026, attributable to finance lease principal payments. Cash flows provided by financing activities were $0.2 million for the three months ended March 31, 2025, attributable to finance lease principal payments and settlement of tax withholding obligations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide this information.