Urban One Q3 2024 Earnings Call Transcript

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November 12, 2024

There are 3 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Urban One 20 24 Third Quarter Earnings Call. As a reminder, this conference is being recorded. We will begin the call with the following Safe Harbor statement.

Operator

During this conference call, Urban One will be sharing with you certain projections or 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 November 12, 2024. 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.

Operator

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.urbanone.com. A replay of this conference call will be available from 1 p. M. Eastern Time, November 12, 2024 until 12 a. M.

Operator

Eastern Time, November 19, 2024. Callers may access the replay by calling 1-eight 66 207-ten forty one. International callers may dial direct at 1-four zero two-nine seven zero zero eight four seven. The replay access code is 3607803. Access to live audio and a replay of the conference will also be available on Urban One's corporate website at www.urbanone.com.

Operator

The replay will be made available on the website for 7 days after the call. No other recordings or copies of this call are authorized or may be relied upon. I will now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter Thomson, Chief Financial Officer. Mr.

Operator

Liggins, please go ahead.

Speaker 1

Thank you, operator, very much. Also joining us is Chris Simpson, who's our General Counsel Karen Wishart, our Chief Administrative Officer and Joe DeJour, our Chief Financial Officer at TV One. Thanks and welcome to the Q3 earnings call. As you've seen in the press release, we released our numbers this morning for Q3. We've continued to experience advertising headwinds in Q3 as we've expected.

Speaker 1

So the company has continued to reduce its indebtedness in the quarter. We repurchased $14,500,000 of our outstanding bonds at $0.75 on the dollar. Q4 excuse me revenues are forecasting at this point to be almost about flat because of a robust political spending of approximately $20,500,000 net. That's in comparison to about $22,500,000 in 2020. So not quite as good, but not bad.

Speaker 1

However, there's continuing weakness in our cable TV segment that's going to require us to modify our year end EBITDA guide from $110,000,000 to a range of $102,000,000 to $105,000,000 We expect to have a year end cash balance of $140,000,000 by by twelvethirty one this year. And we'll continue to manage through this in a prudent manner and march towards our continued debt reduction. With that, I'm going to turn it over to Peter Thompson to go through the details of the quarter and then we'll open it up for Q and A. Peter?

Speaker 2

Thank you, Alfred. And just to clarify, those were full year political numbers, not just Q4. Obviously, the bulk is in Q4, but they were full year numbers that Alfred gave and full year comps for 2020. So just going through the numbers, consolidated net revenues was down 6 point 3% year over year for the 3 months ended September 30, 2024, at approximately $110,400,000 Net revenue for the Radio Broadcasting segment was $39,700,000 a decrease of 1.1% year over year, but down 3.6% on a same station basis. Excluding political, net revenue was down 4.8% year over year, down 7.7% on a same station basis.

Speaker 2

According to Miller Kaplan, our local advertising sales were down 4.7% against our markets that were down 5.7%. And national advertising sales were down 6.2% against our markets that were down 0.6%. Net revenue for the Reach Media segment was $10,200,000 in the 3rd quarter, down 8.2% from the prior year. And adjusted EBITDA was $3,700,000 for the quarter, up from $3,400,000 last year. Net revenues for the digital segment were flat in Q3 at $20,400,000 Direct national sales were down driven by decreased advertiser demand, but Connected TV and podcast revenue showed growth compared to last year.

Speaker 2

Adjusted EBITDA for that segment was $6,400,000 down 13.5%. We recognized approximately $40,700,000 of revenue from our cable television segment during the quarter, which was a decrease of 13%. Cable TV advertising revenue was down 13.3%. Delivery erosion continued down 29% in total day PE-two thousand five hundred and fifty four, resulting in a rate decrease impact approximately $4,700,000 which was partially offset by slightly higher volume and sponsorships. Cable TV affiliate revenue was down by 12.8%, with contractual rate increases of approximately $700,000 being more than offset by approximately $3,500,000 in net subscriber revenue churn.

Speaker 2

Churn is trending at about 11% per annum. Cable subscribers for TV One, as measured by Nielsen, finished Q3 'twenty four at $39,100,000 compared to $39,800,000 at the end of Q2. And Clio TV had 37,300,000 Nielsen subscribers. Operating expenses excluding depreciation and amortization, stock based compensation and impairments of goodwill, intangible assets and long lived assets increased to approximately $87,400,000 for the quarter ended September 30, 2024, up 3.5% from the prior year. The overall increase in operating expense was primarily due to higher expenses in the Houston radio market as a result of our acquisition we made in August of 2023 and also higher third party professional fees and cloud based software licenses.

Speaker 2

Radio operating expenses were up 4.8 percent or $1,500,000 driven by the Houston acquisition and also an unfavorable adjustment to the bad debt reserve in the quarter. Reach operating expenses were down by 24.8 percent driven by reduced affiliate station fees, also a favorable adjustment to the bad debt reserve in the quarter. Operating expenses in the Digital segment were up by 2.4%, driven by 3rd party cost of sales and traffic acquisition costs. Operating expenses in the Cable TV segment were up 4.4% year over year, driven by increased rating service costs and some higher employee compensation benefit costs. Operating expenses in the Corporate and Elimination segment were up by approximately $2,000,000 primarily as a result of higher outside professional fees and cloud based software license fees.

Speaker 2

Consolidated adjusted EBITDA was $25,400,000 for the 3rd quarter, down 26.7%. Consolidated broadcast and digital operating income was approximately $35,400,000 decrease of 19.2%. Interest income was approximately 1 point compared to $2,300,000 last year. Decrease was due to lower cash balances and interest bearing investment accounts. Interest expense decreased to approximately $11,600,000 for Q3, down from 14 $1,000,000 last year due to the lower overall debt balances as a result of this debt reduction strategy.

Speaker 2

Company made cash interest payments of approximately $22,700,000 in the quarter, including the semiannual debt service payment on the 20 28 notes. During the quarter, the company repurchased $14,500,000 of its 20 28 notes at 75% par, bringing the outstanding balance to $599,975,000 $46,800,000 in non cash impairments were recorded in the 3rd quarter for broadcasting licenses in the radio segment and the TV 1 trade name. The primary factors leading to the impairments was an increase in the discount rate, continued decline of projected gross market revenues and a projected decline in operating profit margin. Benefit from income taxes was approximately $1,800,000 for the 3rd quarter and the company paid cash income taxes in the amount of $201,000 Capital expenditures for the quarter were approximately $1,600,000 Net loss was approximately $31,800,000 or $0.68 per share compared to a net loss of $54,400,000 or $1.20 per share for the Q3 of 2023. During the 3 months ended September 30, 2024, the company repurchased 1,015,023 shares of Class A common stock in the amount of approximately $2,000,000 at an average price of $2.01 per share and repurchased 586,989 shares of Class B common stock in the amount of approximately $800,000 at an average price of $1.31 per share.

Speaker 2

As of September 30, 2024, total gross debt was approximately $600,000,000 Pending unrestricted cash was $115,000,000 resulting in net debt of approximately $485,000,000 compared to $103,700,000 of LTM reported adjusted EBITDA for a total net leverage ratio of 4.68 times. And with that, I'll hand back to Alfred.

Speaker 1

Thank you very much, Peter. Operator, could you open it up for questions, please?

Operator

Thank you. And at this time, there are no questions.

Speaker 1

Thank you very much, operator, and thank you, all for joining our Q3 conference call. Please feel free to reach out to Peter or I offline if you have any additional questions, that you forgot to ask or didn't get a chance to ask. We look forward to talking to you next quarter.

Operator

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT and T Teleconference. You may now disconnect.

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Earnings Conference Call
Urban One Q3 2024
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