Q3 2019 Earnings Call
[noise], ladies and gentlemen, thank you for standing by welcome to urban ones 2019 third quarter earnings Conference call.
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During this call urban one we'll 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-K's 10-Q's 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 7th 2019.
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 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 urban one dotcom.
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I'll now turn the call over to Alford, C. Liggins, Chief Executive Officer of urban one who is joined by Peter D. Thompson Chief Financial Officer.
Mr. liggins, Thank you operator, and welcome everyone to our third quarter results call also joining us our general counsel for Sampson that TV, one CFO Jody drawer, and our chief administrative officer care, where short so now we need to drill down on that TV one specifics.
We get there as well you obviously all got the press release today for our third quarter results.
In line with kind of how we guided pretty happy with the performance of our radio Division.
And and and also our interactive division, even though revenues were down yet they made a big strides and reducing and reengineering their cost basis.
So as we look at our 2019 results for our interactive business, we should have a big swing and in terms of of EBITDA there.
We are continuing to march towards our goal of of continuing to de lever.
And to position ourselves for Oh re Fi of our capital structure next year, which we're going to really start to focus in earnest on it after April of 2020.
We're positioning ourselves now to talk about strategies, you know because there's a number different ways to get at it but.
But that the marketplace should expect yeah that after after April when now the the last of our call premiums for the most part now drop substantially we're gonna be poised and ready to take advantage of.
Any positive market momentum that might be there to get a to get the refiled done I think the biggest thing from my perspective that we did.
With this releases we've given you.
Year end guidance.
For for 2019.
Close enough to the end yeah, we felt comfortable doing that and yeah. That's adjusted EBITDA in the range of 138 to 140 million.
And you know with that I will.
Turned over to Peter who will go into details in the numbers and then we'll take some questions.
Thank you all from net revenue was up 2.3% for the quarter ended September Thirtyth 2019 at approximately $111.1 million.
As usual a breakout revenue by source found on page five of the press release quite a breakout by segment can be found on page seven.
Radio segment net revenue was up 1.1% in the third quarter National AD sales were up 4.3%, while local AD sales were down 2.1% on a same station basis third quarter revenues.
Oh, 4.2% year over year or up 5.5% excluding political.
Retail entertainment financial food and beverage categories were all up in the quarter.
With automotive health care services, and tally films flat and then government than public was down.
A radio stations currently pacing down low single digits in the fourth quarter, excluding political on the same station basis.
Net revenue for reach media was <unk> 0.0, 0.9% in third quarter and declines in AD revenue offset by revenue from the Tom Joyner, one more time multi market event, which added approximately $1 million revenue in the quarter adjusted EBITDA was down slightly by approximately $100000.
Year over year.
Net revenues for our digital segment decreased by 6.6% in Q3, driven by lower direct sales Oh, Hi, one digital Oh.
Our adjusted EBITDA off the digital segment increased by approximately $809000.
Due to lower cost of revenue, a particular lower traffic acquisition costs and other ongoing cost control measures.
Recognized approximately $46 million of revenue cable television segment during the quarter, an increase of 1.3 person.
Cable TV advertising revenue was up 7.8%, including approximately $500000 for the new Cleo network.
We had a 10% average CPM increase.
A 7% average delivery decline on a 6% increase in D.R. rates.
Cable TV affiliate revenue was down by three and a half a cent with rate increases of approximately $1.3 million offset by churn of approximately $1.7 million and also nonrecurring pry Perry true up in Q3 of last year of approximately half a million dollars.
Cable subscribers as measured by Nielsen finished Q3 2019 at 54.3 million down from 55.0 million at the end of Q2.
We recorded approximately $1.8 million of cost method income our investment in the MGM National Harbor proxy the quarter.
Up 5.7% over last year [noise].
Operating expenses, excluding depreciation amortization impairments and stock based compensation increased by $5 million or 7.2% to approximately $74.1 million in third quarter.
Noncash expenses were up by $7 million [noise] due to onetime adjustments are excluded from adjusted EBITDA.
Additionally, as a result of the adoption of I see a 42 for operating lease accounting.
Operating expenses decreased by $1.35 million. However, this is a change in PML geography, and not a reduction of expense.
Ready operating expenses were down 1.9%.
Radio S.G., an a. expense line was flat with increased events expenses for the Tom joined a multi market event being offset by lower expenses from the change in lease accounting and also other nonrecurring station events.
Radio program in technical expenses were down 6%.
Given the favorable accounting impact for the tower lease expense.
Reach operating expenses were up 2.2% program and technical expenses were down 4.6% driven by savings in town and costs reach SGN <unk> expenses were up 22.3% due to the hiring spent a expenses for the Tom Joyner event. However, the increase in the event revenue exceeded the.
Increase and expense and event expenses.
For SGN expenses at reach were down 48% due to lower staff incentive compensation expense.
Operating expenses and the digital segment were down by 20.3% or $1.9 million.
We had lower internal labor costs and would use third party inventory costs, making up most of those savings.
Cable TV expenses were up by 3.9% or $890000 year over year content amortization was up by about $930000 year over year [noise].
Operating expenses in the corporate eliminations segment were up by $6.3 million, including a noncash variance of $7.4 million related to the Ceos employment agreement award liability, where we booked a nonrecurring favorable adjustment in Q3 of 2018, which was excluded from.
Adjusted EBITDA.
Net these adjustments corporate <unk> expenses were down by about approximately $1.1 million.
Compensation costs were lower due to ongoing cost savings efforts.
And there was a favorable impact from the insurance claim reimbursements related to the cyber attack that we had earlier this year.
For the third quarter consolidated broadcast and digital operating income was approximately $44.8 million.
3.2% from $43.4 million in 2018 consolidated adjusted EBITDA was $40.0 million, an increase of 5.8% year over year.
Interest expense was approximately $21.6 million for the third quarter compared to approximately $19.0 million for the same period in 2018 and increased $2.6 million of that $1.35 million of interest expense was recorded for operating leases under the adoption of assay.
42.
Company made cash interest payments of approximately $11.7 million in the quarter.
The new senior unsecured term loan was paid down by approximately $7.1 million and the term loan B was paid down by approximately $824000. The asset backed line of credit was paid off in the quarter.
Senior secured term loan balance increased by Pik interest of approximately $526000.
The provision for income taxes was approximately $6.5 million in the quarter and there was a net cash tax refund of approximately $16000.
Net income was approximately $5.4 million or 12 cents per share compared to net income of approximately $23 million or 51 cents per share for the third quarter 2018.
For the third quarter capital expenditures were approximately $1.8 million compared to $1.6 million last year.
On August 31st we sold Detroit, Michigan Radio station, W., Dmk FM and three translators to Beasley broadcast in group.
Teen and a half million dollars, we will continue to operate WG PR FM in Detroit under its current local marketing agreement until we ended the year.
So represents a reduction of approximately $1.1 million of adjusted EBITDA on an LTM basis.
The company repurchased 6345 shares of class a common stock in the amount of $14000.
On 448742 shares of class B common stock in the amount of $975000.
We also executed stock west tax repurchase of 13264 shares of class B common stock.
In the amount of approximately $25000.
For covenant purposes pro forma LTM EBITDA was approximately $140.9 million net senior leverage was 4.56 times against the Covenant of 5.85 times net debt was approximately $862.4 million.
Compared to $145.4 million of LTM reported adjusted EBITDA for a total net leverage ratio of 5.93 times and with that I'll hand that Alfred Thank you Peter Adam and again, it's one I reiterate the company Super focused on.
On.
Next year's re five at the front end of the capital structure.
Which is.
Proximately $700 million give or take.
We'll need to.
The refinance.
We need to be refinanced by April of 2020 ones that we got some time to do it.
But just again want to get it get ahead of it and obviously we're looking at.
Now all scenarios.
For that re Fi, including a complete global Wi Fi.
Everything in our capital structure.
So with that operator, I would like to open it up for questions from the lines.
Absolutely ladies and gentlemen, if you do have a question. Please press Star then one linear touchtone phone, you'll hear a tone, indicating have been placed in Q and you may remove yourself from Q by pressing the pound key if you're using a speaker phone. We ask you. Please pick up your hand said before pressing anybody.
Again for questions Press Star then one on your Touchtone phone at this time.
Our first question will come from the line of Matthew San Schaffer with marriage or financial go ahead. Please.
Hi, guys I was just wanted to ask if you could bridge a little bit from your a year to date adjusted EBITDA number 110 million to the full year number of 30 138 to 140.
It's obviously, a pretty significant step down it kind of that the numbers, we've seen on a quarterly basis recently.
Yeah, I mean, two big things. They obviously the single biggest is political will be nonrecurring.
We did $4.3 million a net political in fourth quarter last year in the radio segment.
And that's not coming back so that that's probably the single biggest impact and then the second.
As a TV won we've guided if you've been listening.
For those folks who been listening for several quarters that we've we needed to reinvest or real in TV, one program and to some extent and so the other big variance will be TV, one amortization line in fourth quarter, which will be higher than than in fourth quarter last year.
And those two are really the key variances for the upcoming fourth quarter.
Great. Thank you.
And for our next question will go to line of Tracy Hodges with St. Louis product prosperity go ahead.
Yes. Good question that I believe you said your CIO weekly.
In this meeting you mentioned the fabric and I was curious about the financial impact of the fabrication and also what corrections have been made from a controls perspective to to prevent future Sabocheck live video is involved in helping you too.
I can tell the issue.
Yeah. So obviously, we've done the tunnel work since the attack to answer the first part of your question first I think we incurred just north of a million dollars of ex of losses, if you want to call at that somewhere between.
Seven $800000 of expense, maybe half a million issue of lost revenue lost revenue was very difficult to quantify to be honest, but but we think thats about where it was and then we were able to claim bat.
I think roughly six 700000 to that through insurance. So so net net it was not a material financial loss to as a tool in fact, we.
You know, we got through it pretty well to the second part of your question what are we done to remediate the answer is.
A heck of a lot so that the initial stages.
Outside of doing all the analysis and diagnostics was to rip out a whole bunch of malware and cyber protection systems that we had that we're obviously insufficient to catch.
The virus that was put into the system and replace them with a whole kind of next generation of detection and monitoring systems. So we did that over the the weeks the ensued from discover and the attack and then I enabled us to bring back up on networks and <unk> and get back to you know relative normal.
C, which is why we're operating from now the second stage then once we dealt with that was to look at more permanent upgrades and longer term upgrades.
And the kind of 2.0 fashion and that work.
That work is going is going on and so going back to the attack itself. It was it was a day zero virus it with the it'd be modified and why they did it never has been seen before.
And that's kind of kind of the route of of the issues that we've been solving for subsequently.
So with that said, we are pretty well remediated. The remediation is going to continue through the first half of next year.
Video.
I have not been.
I've been involved obviously as our audiences.
And we kept them appraised every step of the way, but we've taken specialist advice from other third party I T companies and obviously, we have hide as CIO, who has a ton of experience in this area and we've also had an another guy into the organization who previously was.
Let's see so a chief information security officers. So we have beefed up our capabilities. Both in terms of infrastructure software monitoring and the personnel we have on board to to handle this and then the only thing I'd say you never say from there's no companies say from this we're constantly in an environment, where people are trying to do bad things to us.
On a lot of corporate America, So, we're just being vigilant and improving our capabilities.
As we move forward.
And as a reminder, ladies and gentlemen, if you do have a question. Please take this opportunity now to press Star then one on your Touchtone phone.
We'll go next to the line of Nick Brown with dissolving Associates go ahead. Please.
Hi, Thanks for taking my question.
A question about your comment regarding the need to.
Refinance your debt by April 2021 can you.
Sort of elaborate on why that data so important.
It really is just due to the timing of maturities and we never want to get within a year of that because we don't want to being a discussion with orders is about you know things turning current within 12 months and therefore going concern issues. So if you look at maturity stack, that's a year inside of the nearest mature.
If you come in doing so we want to have it all dealt with ahead of that.
Date.
Okay that makes sense. Thank you.
Okay.
At this time, we have no further questions in queue.
Great well, thank you everybody.
Please feel free to reach out to us offline. If you got any additional questions.
The next quarter.
And ladies and gentlemen that will conclude your conference call for today. Thank you for your participation and for using Eightys Executive Teleconference Service you may now disconnect.