Mood Media’s 3Q18 revenue fell by 11% year-over-year while EBITDA dropped only slightly, according to three sources familiar with the situation.

The company booked USD 88m in revenue for the quarter, down from USD 98m for the corresponding period, driven by lower sales in all segments due to delayed execution on projects, two of the sources said. The EBITDA decline – USD 21m in the recent quarter from USD 21.6m in 3Q17 – was partly kept in check by cost-cutting measures to offset lack of organic growth.

Mood’s new CFO hire announced this week will implement further cost cuts and synergies, one of the sources noted.

“They were building projects around customers in global locations and they were expecting a couple to start in 3Q, but they didn’t, and so they will start in 4Q or 1Q19,” the first source said.

Some investors were taken aback that that the company’s recent acquisition of Focus Four Media didn’t translate to revenue growth, the source continued. On a segment basis, Mood’s in-store media unit in North America generated USD 60.9m of revenues, down 3%, while its international in-store media unit generated USD 21.3m in revenues, down 17%, a source said.

The consolidated results left the media company 6.3x levered, two of the sources said.

Mood burned USD 17m of cash in the quarter, based on USD 7m of cash from operations less USD 24m of capex, according to the first source. As of 30 September, the company had USD 13.76m of liquidity, with USD 8.13m in cash and USD 5.63m of combined availability on its USD 15m revolver and USD 2.5m ABL facility.

In a downgrade of the credit to CCC+ from July, S&P noted the borrower has an “unsustainable” capital structure with “limited ability to grow revenues and margins sufficiently to offset its elevated debt burden, which will likely continue to increase due to the accretion of PIK interest on its second-lien notes.”

Still, the USD 207m 16.5% second lien PIK notes due 2024 are up around par, last changing hands in odd lots at 98.75 on 26 November, down slightly from its last trade in size at 99 on 5 July, according to MarketAxess. And two of the sources said the company could come to the market in 2019 to refinance the seconds.

The borrower’s USD 288m Libor+725bps TLB due 2022 is quoted today in the 98.625/100.125 context, in line with recent levels, according to Markit.

The company did not respond to request for comment.

2018 Debtwire