Q4 2019 Earnings Call
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Welcome to the urban was 2019 fourth quarter earnings call I've been actually in this call with the following Safe Harbor statement. During this conference call urban one we'll be sharing with you certain projections or other forward looking statements regarding future you've.
Vince or its future performance urban one cautions you about certain factors, including risks and uncertainties referred to in the 10-K's 10-Q's and other reports it periodically filed with the Securities and Exchange Commission [noise].
Could cause the company's actual results could differ materially from those indicated buys for injection or for local <unk> looking statements. This call will present information as of March Twentyth 2020. Please note that urban one disclaims any duty to update any forward looking statements made in this presentation in this call.
Oh urban one may also discuss some non-GAAP financial measures when talking about his performance. These measures will be reconciled to GAAP either during the course of this call or in the company's press release, which could be found on its website at www Dot urban one dotcom a replay of the conference call will.
Both from one P.M. Eastern daylight time March 20 of 2020.
The 11 55, P.M. Eastern daylight time March 27, 2020 callers may access the replay by calling one.
Six 620 710 for one international callers May Dow direct.
140 to 970 084.
In the replay access code is four to 49913 axis. The live audio and a replay of the conference call will be well also be available on everyone wants corporate website at www.
That urban one dot com replay will be made available on the website for seven days after the call no other recordings or copies of this call our authorized or may be relied upon I'll now turn the call over to Alfred C. Liggins Chief.
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Who is joined by Peter D. Thompson, Chief Financial Officer gentlemen.
Thank you very much operator also joining me is that Karen wish our chief administrative should administrative officer.
Simpson, our general counsel on Jody draw the CFO at at TV. One. Thank you for joining start for a couple of day delay while our auditors finished.
The audit we had a last minute reclassification that Peter is going to talk to you about and we've outlined.
In the press release doesn't affect our free cash flow our net income.
And so.
Its a.
Something that Peter can explained in detail we've had.
Some conversations about it in.
Earlier conference calls.
Relates to our lease accounting.
And.
So before we get to fourth quarter results, let me start with.
The current events at hand, which we all know are.
Yes.
Unique an extraordinary and on encountered.
Hi.
So starting with current events and what we know so far about the impact of the code is 19 outbreak one of our business I'm sharing these updates with you in real time. However, the situation continues to change daily.
Prior to the outbreak we were showing Q1 same station radio pacings up 6.9% political advertising from the primary.
Election have been very strong and we are considerably ahead of comparable election years for this category January finished up 3.2% and February finished up 13.2%.
Q1, pacing has fallen to 2.2% and a little over a weeks' time more noticeably.
Excuse in Q1 pacing set fallen to 2.2% in a little over weeks time more noticeably Q2 pacings have dropped from 13.3 to plus 13.3 to minus 13.3 in the same 10 day period radio has taken about $4.3 million in cumulative cancellations since last.
Last week. However, the frequency of cancellations has slowed in some clients are simply to foreign campaigns until later in the year. Our sales leadership team is actively engaging with businesses and government entities and seeking out bright spots with campaigns and categories such as home business online education ecommerce sites.
Every surfaces entertainment streaming.
And cleaning hygiene products for example.
Cancelled all in person station events and postponed one of our major events.
I means empowerment in Raleigh reach media has process about $200000, an AD cancellations, but the more significant impact has been the postponement of the annual Tom Joyner Fantastic voyage cruise.
Most of that was expected to generate over $10 million of revenue and more than $1.5 million in profit for Q2.
Team one has fared better than radio and is taken about $850000 in cancellations were optimistic about the downside to our television segment. The digital digital segment has taken about $1.4 million in cancellations also MGM National Harbor Casino in Maryland is close along.
Our casino in the country Saar investment income will reduce temporarily im not sure exactly how long the closures.
Hopefully.
Oh.
We have taken some immediate steps to mitigate the fallout.
The abundance of caution we have free emptively drawn $27.5 million from our asset backed line of credit to improve our liquidity position in the short term. In addition to the 30 plus million dollars a cash we already have on the balance sheet. This action is in line with many other companies with what many other companies have done given the economic.
Uncertainty.
Weve implemented telework for non essential ploys and I'll also hospice business travel.
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This is evolving.
Yes on a daily basis, and we're analyzing now.
What we think the impact of.
Yes.
A really strong.
At a downdraft in Q2 is going to look like on our business.
Have not yet.
Together all of those projections.
As of yet, but we're focused on it.
On an hourly basis and.
As we start to communicate with folks going forward, even the scale offline off from the conference call.
We can hopefully give some better visibility on to where we think we will be and what the impact might be in what kind of mitigation. We can put in place now I'll turn it over to Peter taking through more detail.
Thanks Alfred.
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During the fourth quarter, we reclassified interest expense component of operating leases, which we've been showing as interest expense.
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Back into operating expense. So on January January 1st the last year.
42, we changed the way were accounted for leases, we gross the mall.
Both the assets on the liability is on the balance sheet that was fine.
And then the piano geography, as a result without changing the Ken.
Meant that we will have in a quarterly pickup to operating expenses on a quarterly hits to interest expenses, we've been trying to spiraling, calling on each of the quarterly on his call. So that really should come as no surprise, what came as a bit of a surprises at year end the audiences.
Looked at that more closely on this side of the actually they didnt agree with what the piano geography will use and so essentially we just went back to the old way of accounting.
And as Alfred said it doesn't affect net income doesn't affect free cash flow doesn't affect the bank covenant calculations, because we did not change that methodology. We just continue to do those calculations on the the old gap.
So really what it did was.
Hey changed.
Headline adjusted EBITDA number on that or headline gap.
Leverage number.
And it put any dislocated from guidance that we've given because obviously our guidance was given.
On the basis of the account and we've done.
In Q1 through Q3, so that's that's really what went on that happy to take questions on that if if that's clear.
So.
Fourth quarter Replas.
No.
Interest expense was approximately $1.6 million on the full year Reclass was approximately $5.7 million.
Absent this change our adjusted EBITDA would've been.
139.2 million.
It was which compares to our previous guidance of $138 million to $140 million.
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Net revenue was down 6.8% for the quarter approximately $105.9 million as usual breakout revenue by source can be found on page five of the press release the breakout by segment.
Found on page seven.
Radio segment net revenue was down 11.6% in the fourth quarter.
A lot of that obviously driven by political national AD sales were down 21.8%, while local AD sales were down 9.3%.
Excluding political revenue and on a same station basis, excluding Detroit. The radio segment net revenue was down by 2.9%, which was in line with the guidance with the pacings guidance that we give me down low single digits.
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Net revenues for reach media was down by 13.3% in the fourth quarter adjusted EBITDA down by approximately $1.7 million year over year.
Net revenues for our digital segment increased by 6.4% in the fourth quarter adjusted EBITDA for the digital segment decreased by approximately $674000 recognized approximately $44.8 million or revenue from our cable television segment during the quarter decreased 2.4%.
Cable TV advertising revenue was down 5.4.
Including approximately half million dollars for new Cleo TV network.
And affiliate revenue was down by 0.4%.
Yes, right increases for approximately $1.3 million offset by churn of approximately $1.4 million.
Yes.
Cable subscribers.
Measured by Nielsen finished fourth quarter 2019 at 52.2 million down from 54 point.
$3 million at the end of Q3.
We recorded approximately $1.7 million cost method income for our investment in MGM National Harbor proxy for the quarter down 11.6% from last year.
Operating expenses, excluding depreciation amortization impairments and stock based compensation increased by $2.2 million, 2.8% to approximately $2.3 million in fourth quarter.
Cash expenses were up by $1.9 million.
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Yes.
There are excluded from adjusted EBITDA.
Radio operating expenses were down 3.9% radio SGN a expense line was down 4.2% primarily from lower.
Revenue variable expenses, such as sales commissions and national Rep fees.
As well as nonrecurring station events.
Radio program and technical expenses were down 3%.
Reach operating expenses were up 13.1%.
We're going to and technical expenses it reach three and half percent driven by one time severance compensation for the programming changes in the wake of Tom joined this time.
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And I expenses were up 96% due to unfavorable variance in bad debt expense.
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Expenses, which were down 3.6%.
Operating expenses in the digital segment were up 8% driven by staff bonus accrual in the course of for the full year.
Cable TV expenses were up by 3.3% year over year, the absence of staff bonus expense and lower advertising expense helped to offset higher content amortization, which was up by about $2.7 million.
Operating expenses in the co across and eliminations segment were up by $1.1 million, including an unfavorable variance of $2.8 million noncash adjustment to the company's employment agreement award liability, which is excluded from adjusted EBITDA.
Those adjustments corporate SGN, a expenses were actually down by $1.7 billion stock compensation costs were lower mainly due to the absence of executive bonuses in 2019.
For the fourth quarter consolidated broadcast and digital operating income was approximately.
$34.3 million down 23.1%.
From $44.6 million in 2018 consolidate into adjusted EBITDA was $27.5 million decrease of 22.1% year to year.
Interest expense was approximately $19.8 million for the fourth quarter compared to approximately $19.2 million for the same period in 2018.
And increased 2.6% company made cash interest payments of approximately $23.7 million on its outstanding debt from the quarter.
Senior unsecured term loan was paid down by $3.6 million on the term loan B was paid down by approximately $824000.
Asset backed line of credit bonds remained zero through the quarter, no borrowing or payment activity senior secured term loan balance increased by the pick interest amount of approximately $520000.
Vision for income taxes was approximately $2.5 million in the quarter.
And there was a net cash tax refund of approximately $321000.
Net loss was approximately $7.9 million or 18 cents per share compared to net income of approximately $116.9 million of two point.
$2.62 per share for the fourth quarter 2018.
For the fourth quarter capital expenditures were approximately $1.2 million compared to $709000 last year.
On August 31st we sold out Detroit, Michigan Radio station WGN KFN three translates as to Beasley broadcast group Inc., we continue to operate.
W. GPR FM in Detroit under its former.
Hello, I may until the end of the year so that.
Was.
The end of last year to be clear not we ended this year and so we see stock right in that station as well company execute a stock less tax repurchases of 86512 shares of class B common stock in the amount of $192000.
Purposes pro forma LTM EBITDA was approximately $133.9 million net senior leverage was 4.78 times against Covenant of 5.85 times net debt was approximately $856.8 million compared to $133.5 million.
LTM reported adjusted EBITDA for total net leverage ratio of 6.42 times with that I'll hand by itself. Thank you operator, let's open it up over the line up for questions. Please.
Ladies and gentlemen, if you like to access a question. Please press one and then zero as an operator, we'll take your name off line again, if you like to answer your question. Please first one then T. Rowe.
Okay.
In.
No questions Nobody's Nobody has requested questions operator.
Right now we have no one in Q for questions.
Okay.
Well look I know, let's say.
A very chaotic time and everybody's focused on the out there there their loved ones and their business.
Falling off a cliff and so if there are any additional questions.
That.
People think of afterwards, we always try to be available and transparent so feel free to reach out to Peter and I via email.
Our telephone then we will can many continue to communicate openly and and transparently and.
Thank god speed to everybody and trying to sort through this.
This call that 19.
Jim catastrophe issue and.
Our prayers was there.
All of our families and your families as well thank you very much.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for use in 18 T. teleconference service you may now disconnect.
We're sorry your conference is ending now please hang up.