Executive Summary / Key Takeaways

• Strategic Transformation: MediaCo Holding Inc. is undergoing a significant pivot, evolving from a traditional radio operator into a multicultural, multiplatform media powerhouse, primarily driven by the strategic Estrella Acquisition. This expansion into Spanish-language television and digital Free Ad-Supported Television (FAST) channels is central to its long-term growth.
• Digital Momentum: The company demonstrates strong digital engagement, with EstrellaTV's prime-time audience growing 35% among Persons 18-49 in Q2 2025, and its owned and operated FAST channels achieving a 19% year-over-year increase in monthly digital uniques, exceeding 310 million minutes consumed per month.
• Improved Financial Performance: The Estrella Acquisition significantly boosted revenues, with Q2 2025 net revenues up 19% and H1 2025 net revenues up 80% year-over-year. Operating losses and net losses have substantially narrowed, reflecting early integration benefits and cost management.
• Competitive Niche: MediaCo leverages its strong local brands and integrated radio, television, and digital channels to serve Black, Hispanic, and multicultural audiences, offering a differentiated value proposition in a fragmented media landscape.
• Key Risks and Outlook: While showing promising growth, MediaCo faces challenges including intense competition from new media, macroeconomic headwinds, and the ongoing integration of acquired assets. Management's focus on digital expansion and operational efficiency is critical for sustaining positive momentum and addressing liquidity needs.

MediaCo's Strategic Pivot: Forging a Multicultural Media Powerhouse

MediaCo Holding Inc. is an owned and operated multi-media company, strategically focused on television, radio, and digital advertising, premium programming, and events. Formed in Indiana in 2019, the company initially established its presence with iconic New York City radio stations, WQHT-FM and WBLS-FM, targeting Black, Hispanic, and multicultural consumers. This foundational period saw MediaCo streamline its operations, divesting its Outdoor Advertising segment in late 2019 to sharpen its focus on broadcasting.

The pivotal moment in MediaCo's evolution arrived in April 2024 with the transformative Estrella Acquisition. This strategic move dramatically expanded the company's footprint, integrating Estrella's network, content, digital, and commercial operations. The acquisition brought 11 radio stations in key markets like Los Angeles, Houston, and Dallas, and nine television stations across Los Angeles, Houston, Denver, New York, Chicago, and Miami into MediaCo's portfolio. Crucially, the EstrellaTV network, its influential linear and digital video content business, and its eight Free Ad-Supported Television (FAST) channels became integral to MediaCo, solidifying its identity as a multicultural, multiplatform media powerhouse.

This expansion is a direct response to the broader industry trends of stalled growth in traditional U.S. radio and television broadcasting. The media landscape has been reshaped by the proliferation of new media channels—digital video, live streaming, YouTube, and social networks—which have fragmented audiences and captured significant advertising share. MediaCo's overarching strategy is to counter these headwinds by aggressively embracing broadband and mobile media distribution, developing emerging business opportunities in the FAST marketplace, and creating interactive direct-to-consumer (D2C) apps and websites.

Technological Edge: Fueling Digital Engagement and Growth

MediaCo's core technological differentiation lies not in a single proprietary invention, but in its strategic application of digital platforms and advanced content distribution. The company is actively harnessing the power of broadband and mobile media to develop emerging business opportunities. This includes capitalizing on the rapidly growing FAST marketplace through its eight operated channels: EstrellaTV, Estrella News, Cine EstrellaTV, Estrella Games, EstrellaTV Mexico, Curiosity Explora, Curiosity Motores, and Curiosity Animales.

These digital initiatives are delivering tangible, quantifiable benefits. EstrellaTV Network's weekday 7p-11p prime-time audience among Persons 18-49 grew an impressive 35% in the first two months of Q2 2025 compared to the same period a year ago. Furthermore, the company's owned and operated FAST channels have seen monthly digital uniques increase by 19% year-over-year, with total minutes consumed now exceeding 310 million minutes per month, marking a new high for the company. These metrics underscore MediaCo's success in driving audience engagement and expanding its digital reach.

The "so what" for investors is clear: these digital advancements are crucial for diversifying revenue streams beyond traditional spot advertising and capturing a larger share of the growing digital ad market. By creating highly interactive D2C apps and websites and leveraging digital video across various platforms, MediaCo is enhancing audience engagement and building a pathway to sustained revenue growth and improved profitability. The company's capital expenditures in H1 2024, which included investments in a new digital platform project, demonstrate its commitment to this technological roadmap.

Competitive Arena: Carving a Niche Amidst Giants

MediaCo operates within a highly competitive media and advertising landscape, vying for audience attention and advertising dollars against both traditional broadcasters and digital giants. Its direct competitors include major radio groups like iHeartMedia (IHRT) and Cumulus Media (CMLS), as well as outdoor advertising specialists such as Lamar Advertising (LAMR) and Outfront Media (OUT). Indirectly, the company competes with digital advertising networks like Google (GOOGL), streaming services like Spotify (SPOT), and social media platforms like Meta (META), which offer alternative, often more scalable, avenues for advertisers.

MediaCo's market positioning is distinct, focusing on urban and multicultural audiences, particularly Black and Hispanic consumers, through its integrated radio, television, and digital offerings. While iHeartMedia and Cumulus Media boast broader national networks and greater scale, MediaCo aims for deeper engagement within its targeted demographics. Lamar Advertising and Outfront Media, specializing in outdoor displays, have extensive physical infrastructure and robust cash flow generation from long-term contracts.

A look at TTM financial ratios reveals MediaCo's unique standing. Its Gross Profit Margin of -3.17% and Operating Profit Margin of -13.20% significantly lag behind the more established and diversified competitors like Lamar (67% Gross, 24% Operating) and Outfront (48% Gross, 23% Operating), and even Cumulus (61% Gross, -29% Operating) and iHeartMedia (59% Gross, -20% Operating). This suggests MediaCo faces higher relative costs of revenue and operational expenses, likely due to its smaller scale and ongoing integration efforts. However, MediaCo's TTM Net Profit Margin of 25.30% appears notably higher than its peers. This anomaly is primarily attributable to significant non-cash items, such as the $31.027 million "Change in fair value of warrant shares liability" recorded in the recent periods, which positively impacts net income but does not reflect core operational profitability.

Despite these profitability challenges, MediaCo's Debt/Equity ratio of 0.53 is considerably lower than most of its direct competitors, indicating a more conservative leverage profile relative to its equity base. Its current ratio of 0.54, while tighter than some radio peers, is comparable to outdoor advertising specialists. MediaCo's competitive advantages stem from its strong local brand presence, particularly with stations like HOT 97 and WBLS, and its integrated cross-platform approach that offers advertisers a unique pathway to multicultural audiences. Its regulatory licenses also provide a barrier to entry, protecting its core broadcasting assets. However, its smaller scale compared to industry giants can lead to higher operational costs, and continuous investment in digital capabilities is essential to avoid falling behind in innovation.

Financial Performance: A Transformative Year in Review

The Estrella Acquisition in April 2024 has been the primary catalyst for MediaCo's recent financial performance, driving substantial top-line growth and a notable reduction in losses. For the three months ended June 30, 2025, net revenues surged to $31.245 million, a 19% increase from $26.202 million in the prior-year period. The six-month period saw even more dramatic growth, with net revenues climbing 80% to $59.275 million from $32.908 million in H1 2024. This revenue expansion underscores the immediate impact of integrating Estrella's assets.

Operational efficiency also showed significant improvement. The operating loss for Q2 2025 decreased by 49% to $6.785 million, compared to $13.326 million in Q2 2024. Similarly, the six-month operating loss narrowed by 32% to $11.468 million from $16.793 million. This improvement was largely driven by lower corporate expenses, which decreased due to reduced professional service fees related to the Estrella Acquisition in the prior year. However, operating expenses for the six-month period increased overall due to the expanded asset base from the acquisition, and depreciation and amortization also rose for the same reason.

The bottom line reflects these positive trends, with the net loss for Q2 2025 dramatically decreasing by 82% to $8.800 million from $48.307 million in Q2 2024. For the six-month period, net loss improved by 67% to $17.406 million from $51.984 million. This substantial reduction in net loss, while still negative, signals a positive trajectory post-acquisition. Other income also saw a significant boost, primarily from a one-time employee retention tax credit, income from managed services agreements, and subleasing income.

Segment-wise, the Video segment, largely comprising Estrella's television operations, was the primary growth engine. Its revenues for Q2 2025 increased by $7.0 million, or 78.1%, to $16.009 million, driven by digital revenue growth. For the six-month period, Video segment revenues soared by $21.4 million, or 237.6%, to $30.347 million. The Audio segment, while experiencing a Q2 2025 revenue decrease of $2.0 million due to lower event revenue, saw its H1 2025 revenues increase by $5.0 million, or 21.0%, reflecting the integration of Estrella's radio assets. Both segments also showed improved operating losses, contributing to the consolidated financial recovery.

Liquidity and Capital Structure: Managing Growth and Debt

MediaCo's liquidity position reflects the significant investments made in the Estrella Acquisition and the ongoing operational demands of a growing media enterprise. As of June 30, 2025, the company held $2.936 million in cash and cash equivalents, a decrease from $4.443 million at December 31, 2024. The company's negative working capital increased to $32.30 million from $18.00 million over the same period, primarily due to the cancellation of certain programming rights contracts, and increases in accounts payable, accrued expenses, and deferred revenue, partially offset by increased accounts receivable.

Despite the negative working capital, cash flows used in operating activities saw a dramatic improvement, decreasing by 96% to $0.893 million for the six months ended June 30, 2025, compared to $24.711 million in the prior-year period. This improvement is attributed to enhanced operating income and a focused approach to cash management. Management anticipates that existing cash and projected cash flows from operations will be sufficient to meet its liquidity needs for the next twelve months.

The Estrella Acquisition significantly altered MediaCo's capital structure, introducing substantial long-term debt and preferred stock. As of June 30, 2025, total long-term debt stood at $66.698 million, comprising First Lien Term Loans of $45.00 million and a Second Lien Term Loan of $29.200 million (before unamortized discounts). The company also has $38.328 million in Series B Preferred Stock, which is mandatorily redeemable and classified as a long-term liability. The rising interest rate environment has impacted the variable interest rates on these loans, contributing to increased interest expense. However, the company's Debt/Equity ratio of 0.53 is relatively favorable compared to many of its broadcasting peers, suggesting a manageable level of leverage against its equity base.

Outlook and Strategic Initiatives: Building for the Future

While MediaCo does not provide explicit quantitative forward-looking guidance, its strategic direction and recent operational achievements paint a clear picture of its future focus. The company remains committed to leveraging its expanded portfolio to deliver culturally resonant content to Hispanic and Black audiences across diverse platforms. The continued investment in its digital and FAST channel ecosystem is paramount.

Recent announcements underscore this commitment, with EstrellaTV being named the exclusive U.S. television partner for Miss Universe Mexico 2025, a move designed to maximize audience reach and engagement. The return of the iconic musical reality series "Objetivo Fama" on EstrellaTV in August 2025 further highlights the strategy to offer premium, engaging content. On the audio front, the success of HOT 97's 31st Annual Summer Jam in June 2025 demonstrates the continued strength of its flagship radio brands in driving community engagement and event-based revenue.

MediaCo is also strengthening its leadership to propel its multicultural growth strategy, with recent promotions in national and digital sales, and key executive appointments across audio and video platforms. These organizational changes are aimed at accelerating strategic growth and innovation. From a regulatory perspective, the recently enacted One Big Beautiful Bill Act (OBBBA) is not expected to have a material impact on the company's financial position or operations. Furthermore, the approval of the 2025 Equity Incentive Plan by shareholders on August 8, 2025, provides a framework for attracting and retaining talent through performance-based awards, aligning employee incentives with long-term company growth.

Investment Risks: Navigating the Headwinds

Despite the promising strategic pivot and recent financial improvements, investors must consider several pertinent risks. The highly competitive media landscape, characterized by audience fragmentation and the relentless rise of new digital media, poses an ongoing challenge to MediaCo's ability to attract and retain audiences and advertising spend. The company's success hinges on its ability to continually innovate and effectively monetize its digital offerings against well-capitalized indirect competitors like Google and Meta.

The integration of the Estrella Acquisition, while largely complete, still presents operational risks. The company previously identified a material weakness in its internal control over financial reporting related to the accounting for the Estrella business combination, specifically concerning the oversight of third-party valuation specialists and the accuracy of data used for intangible asset valuation. While remediation efforts, including hiring additional personnel and implementing new controls, are underway, the full effectiveness of these measures will require sustained execution.

Macroeconomic factors, including inflation and the rising interest rate environment, continue to impact MediaCo's financial health, particularly its variable-rate debt. The Federal Reserve's cautious stance on rate reductions and the potential for future increases could lead to higher interest expenses, affecting profitability and cash flow. Furthermore, the company's status as a controlled company, with potential conflicts of interest with SG Broadcasting, warrants investor attention. The ability to attract and retain on-air talent, produce compelling programming, and maintain distribution platforms are also critical operational risks.

Conclusion

MediaCo Holding Inc. stands at a pivotal juncture, having strategically transformed itself into a multicultural, multiplatform media powerhouse through the Estrella Acquisition. This bold pivot into Spanish-language television and digital FAST channels is not merely an expansion but a fundamental reorientation designed to thrive in a rapidly evolving media landscape. The early results are encouraging, with significant revenue growth and a substantial reduction in losses, driven by the integration of new assets and a clear focus on digital engagement.

The investment thesis for MediaCo is rooted in its ability to leverage its unique positioning to serve diverse, high-growth multicultural audiences. Its technological strategy, centered on robust digital platforms and engaging content, is already yielding tangible results in audience growth and digital consumption. While the company faces intense competition and operational challenges, particularly concerning its debt load and internal controls, its strategic initiatives and leadership focus on digital innovation and audience engagement are critical drivers for its future. Continued execution on these fronts, coupled with effective management of its capital structure, will determine MediaCo's long-term success in capturing a significant share of the evolving media market.