Urban One, Inc. (NASDAQ:UONE) Q2 2023 Earnings Call Transcript

Urban One, Inc. (NASDAQ:UONE) Q2 2023 Earnings Call Transcript December 7, 2023

Operator: Ladies and gentlemen, thank you for standing by and welcome to Urban One’s First Half 2023 Conference Call. During this conference call, Urban One will be sharing with you certain projections and other forward-looking statements regarding future events or its future performance. Urban One cautions you that certain factors including risks and uncertainties referred to in the 10-Ks, 10-Qs and other reports it periodically files with the Securities and Exchange Commission, could cause the Company’s actual results to differ materially from those indicated by its projections or forward-looking statements. This call will present information as of December 7, 2023. Please note that Urban One disclaims any duty to update any forward-looking statements made in the presentation.

In this call, Urban One may also discuss some non-GAAP financial measures in talking about its performance. These measures will be reconciled to GAAP, either during the course of this call or in the Company’s press release, which can be found on its website at www.urban1.com. A replay of the conference call will be available from 12 o’clock noon today running through midnight at December 14th. Callers may access the replay by dialing 1-866-207-1041. International dialers may call 402-970-0847. The replay access code is 3718185. Access to live audio and a replay of the conference call will be available on Urban One’s corporate website at www.urban1.com. The replay will be made available on the website for seven days after the call. No other recordings or copies of this call are authorized or may be relied upon.

I’ll now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter D. Thompson, Chief Financial Officer.

Alfred C. Liggins: Thank you very much, operator. And welcome everyone to our first half conference call for 2023. With me also in addition to Peter D. Thompson, is Kris Simpson, who is our General Counsel and Jody Drewer, who is our Chief Financial Officer at TV One. We’ve released our earnings. We’ve got the Q1 and Q2 commentary. Radio in the first half of the year was decent and is showing softness in the second half of the year. The cable television business struggled in the first half of the year, due to ratings and churn and ADU, Q1 in particular. However, that has actually stabilized going into the back half of the year. So, they flip-flopped. Our digital business is actually moving along as planned and is surprising to the upside in Q4.

And with all of that, we are comfortable continuing to reaffirm our full year EBITDA guidance of the range of $125 million to $128 million of EBITDA. This is also the first call we’ve had with our investment in MGM being fully monetized, and it is shown in our cash balance. And we have been to one large investor conference and gotten a lot of questions about what are our plans for our cash now that our Richmond referendum for the casino investment failed to pass for the second time. And so we are thinking through all of those things now. And certainly, debt paydown is something that is a top consideration. And so we are going to be happy to talk more about that in Q&A, if anybody wants to get a bit more granular on it. With that, I want to turn it over to Peter, so he can go into the specifics on the numbers and then we will open it up to Q&A and go from there.

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Q&A Session

Peter D. Thompson: Thank you, Alfred. So for the first six months consolidated net revenue was up 3.8% year-over-year. The Indianapolis radio acquisition added approximately $7.6 million, and the Reach cruise event generated $10.1 million in the second quarter that was absent from 2022. So, normalizing for those two items, net revenue was down 3.9% or down 3.2% excluding political advertising. Net revenue for the radio segment increased 8.3% year-over-year, the decrease of 1.3% on a same station basis. Excluding political, net revenues increased by 1% on a same-station basis. According to Miller Kaplan and on a same-station basis, our local ad sales were down 4.6%, against a market that was down 2.7%. National ad sales were down 2.4% against the market that was down 7.7%.

The radio spot markets were down 1.6% in Q1 and down 6.8% in Q2. Spot markets were down 7.5% in Q3. And we finished Q3 down 0.6% overall, down 14.4% on a same-station basis and down 12% on a same-station basis excluding political. For Q4, we’re currently pacing down 11.6% all in, down 21.2% same-station, and down 10.1% same-station, ex political, with national down 26%, local down 2.1%. So we definitely experienced some softening in market revenues for the second half of the year, although Q4 local has improved sequentially over Q3. Net revenue for Reach Media was $31 million for the first half of the year. And that included the $10.1 million for the Tom Joyner Fantastic Voyage cruise event, and that compared to $21.1 million last year. Adjusted EBITDA was $8.1 million, including $1.75 million from the cruise.

That was down from $8.6 million last year. Advertising revenue was down for the first half of the year, and affiliate station compensation expense was up. Net revenue for the cable television segment was $102.1 million for the first half of the year, decrease of 6.8%. Cable TV advertising revenue was down 5.8% or $3.5 million, with an unfavorable rate volume impact of $2 million, and an additional $1.3 million of ADU deficiency. P25-54 Prime delivery was down 31% in Q1 and down 21% in Q2. Cable TV affiliate revenue was down by 7.8% or $3.9 million with favorable rate increases of $2.2 million, more than offset by $5.3 million of net churn, and $800,000 of increased launch support. Net revenue for our digital segment increased by 1.8% for the first half of the year, which includes $1 million of revenue from the Indianapolis acquisition.

Direct sales from our national New York office were down as advertisers pulled back somewhat on marketing budgets due to recession concerns and fewer advertisers committed to Black History Month and the Juneteenth efforts compared to a year ago. Streaming revenue from our radio station inventory was up. However, increased traffic acquisition costs, sales and marketing expenses offset those revenue increases. And adjusted EBITDA was $9.9 million for the first half compared to $12.3 million for the same period last year. For the six-month period ended June 2023, consolidated adjusted EBITDA was $67.8 million, down $21.7 million or down 24.3% from last year. $4.1 million of the decrease is from the sale of MGM. The Indianapolis acquisition added about $1.8 million but radio and Reach segments were down by $1.1 million combined.

Digital segment was down by $2.4 million and cable TV was down $13.8 million, due to the advertising revenue decrease, subscriber churn and some increased content amortization costs. Cable subscribers for TV One, as measured by Nielsen, finished Q2 ‘23 at 45.1 million compared to 46.5 million at the end of 2022. CLEO TV had 42.5 million Nielsen subs. Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of long-lived assets, increased to approximately $172.8 million for the six months period ended June 30th, up 16.2% from approximately $148.7 million incurred for the comparable period in 2022. There was an increase of approximately $8.3 million related to Reach’s cruise event, $1.2 million in other radio event expenses, $4.6 million in cable TV content amortization, $5 million in employee compensation expenses, $3.8 million in contract labor, talent costs and consultant fees, $2.7 million in corporate professional fees, $2.2 million in variable expenses, and $1 million in travel, entertainment, marketing and office expenses.

These increases were partially offset by a decrease of approximately $3.3 million in the Employment Agreement Award expense, and also a decrease of $1.6 million for corporate business development costs. Approximately $5.9 million of those increased expenses related to the Indianapolis radio acquisition. And that’s included in the totals that I just mentioned above. Radio operating expenses were up by $6.4 million with the Indianapolis to add in about $5.4 million of that increase. Atlanta’s Birthday Bash event added about $1 million of expense. Reach operating expenses were up $10.4 million with $8.3 million of that from the cruise, $1.2 million of additional affiliate station compensation and $750,000 in additional talent compensation.

Operating expenses in the digital segment were up by $3 million, driven predominantly by variable expenses related to traffic acquisition and audience extension, which were up by $1.3 million, and also, ad production and marketing, which was up by $1.6 million. Cable TV expense was up by $6.4 million with the content amortization, the largest part of that up by $4.6 million. Operating expenses in the corporate and elimination segment were down by $2.2 million, including a favorable variance of $3.3 million for the non-cash TV One employment award charge and $1.6 million for reduced corporate business development, which was offset by increases in professional fees and some employee compensation. Impairment of goodwill, intangible and long-lived assets was $38.9 million for the first half of the year, $16.8 million of that was associated with the sale of KROI-FM, the radio broadcasting license in Houston.