Q4 2019 Earnings Call

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Okay.

[noise] welcome to the urban was 29 Fame.

Fourth quarter earnings call I've been actually we had 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 events or its future performance urban one cautions you about certain fan.

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.

Could cause the company's actual results to differ materially from those indicated buys for injection well 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 its 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 be avail.

Global from one P.M. Eastern daylight time March 20 of 2020 until 11 55, P.M. Eastern daylight time March 27th 2020 callers may access the replay by calling 186 620 710 for one international.

In all callers may Dow direct plus 140 to 970 0847. The replay access code is four to 49913 access the live audio and a replay of the conference call will be well also be available on everyone wants corporate web site.

Www Dot urban one dotcom the replay will be made available on the website for seven days after the call no other recordings or copies of this call our author rise or may be relied upon I'll now turn the call over to Alfred C. Liggins, Chief Executive Officer of urban one was drawn.

And 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 Chris.

Chris Anderson, our general counsel enjoying your other CFO at at TV. One. Thank you for joining start for a couple of day delay while our auditors finished a up 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.

Links 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 our.

Unique an extraordinary and on encountered.

Hi.

So starting with current events and what we know so far about the impact of the cold 19 outbreak one of our business.

Jeremy is up data 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% in February and finished up 13.

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Q1 pacing has fallen to 2.2% in a little over a weeks' time more noticeably Q.

Q1, pacings at fallen to 2.2% and a little over weeks time more noticeably Q2 pacings have dropped from 13.3.

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 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 engage.

Aging with businesses and government entities and seeking out bright spots with campaigns and categories such as home business online education ecommerce sites food delivery services entertainment streaming.

And cleaning and hygiene products for example.

Cancelled all in person station events and postponed one of our major event women's empowerment in Raleigh reach media has processed about $200000 an AD cancellations, but the more significant impact has been the postponement of the annual Tom Joyner Fantastic voyage cruise. This event was expected to do.

Generate over $10 million of revenue and more than $1.5 million in profit for Q2.

One is faring better than radio and is taking about $850000 in cancellations. We are 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 with every other casino in there.

Countries, our investment income what would use temporarily I'm not sure exactly how long the closures.

We'll be and stated.

We have taken some immediate steps to mitigate the fallout out of 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. This is evolving on a on a on a daily basis and we're analyzing now.

What we think the impact of a really strong.

Yes, and at a downdraft in Q2 is going to look like on our business.

We have not yet.

Well together all of those projections as of yet, but yeah. We're.

Focused on it.

On a on an hourly basis and as we start to communicate with folks going forward. He doesn't go offline all from the conference call.

And hopefully give some better visibility on to where we think we will be and what the impact might be and what kind of mitigation. We can put in place now I'll turn it over to Peter to go through more detail.

Thanks Alfred.

So as Alfred said during the fourth quarter, we reclassified interest expense component of operating leases, which we've been.

As interest expense and we have to put them back into operating expense. So in January January 1st the last year CH 42, we changed the way we were accounted for leases we gross them all.

Assets from the liabilities on the balance sheet that was fine.

And then the piano geography, as a result, changing the cabinet.

We will have in a quarterly pickup to operating expenses on a quarterly.

Hits to interest expenses, we've been transparent on calling that out on each of the quarterly earnings calls so that really should come as no surprise what came as a bit of a surprise was at year end the orders is.

Look to that more closely undecided actually they didn't agree with.

Piano geography will use and so essentially we just went back to the old way of accounting.

As often says doesn't affect net income doesn't affect free cash flow doesn't affect bank covenant calculations, because we did not change that methodology. We just continue to do those calculations under the old gap.

So really what it did was it changed.

Headline adjusted EBITDA number on that for a.

Headline gap.

Leverage number.

And it put any dislocated from a guidance that we'd given because obviously our guidance was given.

On the basis of the accounting we've done in Q1 through Q3. So that's that's running what went on that happy to take questions on that if a if that's not cliff.

So the fourth quarter Replas.

All of interest expense was approximately $1.6 million and the full year Reclass was approximately $5.7 million.

Absent this change our adjusted EBITDA would've been a 139.2 million.

Tell us, which can pass our previous guidance of $138 million to $140 million.

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 inline with the guidance the pacings guidance, we've given of down low single digits.

Net revenue 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%.

TV advertising revenue was down 5.4%, including approximately half million dollars from new Cleo TV network.

And affiliate revenue was down by 0.4%.

With rate increases for approximately $1.3 million offset by churn of approximately $1.4 million.

Cable subscribers as measured by Nielsen finished fourth quarter 2019 at 52.2 million down from 54.3 million or the end of Q3.

We recorded approximately $1.7 million cost method income for our investment and 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 noncash expenses were up by $1.9 million due to a onetime adjustment.

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 three and a half a cent.

Each operating expenses were up 13.1%.

Program in technical expenses, it reach three and half percent driven by one time severance compensation for the programming changes in the wake of Tom joined his retirement reach SGN <unk> expenses were up 96% due to unfavorable variance in bad debt expense.

Corporate 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 stuff bonus expense and lower advertising expense helped offset higher content amortization, which was up by about $2.7 million.

Operating expenses in the corporate and elimination 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 copper 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 consolidated 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 his 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 balance remained zero through the quarter, but no borrowing or payment activity.

Senior secured term loan balance increased by the Pik interest amount of approximately $520000 provision 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 or approximately $116.9 million or 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 our Detroit, Michigan Radio station W., Dmk FM and three translates as to Beasley broadcast group Inc., we continue to operate.

W. GPR FM in Detroit under his 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 stop writing that station as well company execute a stock quest tax repurchases of 86512 shares of class B common stock in the amount of $192000.

The covenant 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 of LTM reported adjusted EBITDA for total net leverage ratio of 6.42 times with that I'll hand by itself. Thank you operator.

The open it up open the lineup for questions. Please.

Ladies and gentlemen, if you like to next question. Please press one and then zero as an operator, we'll take your name online again, if you like to answer your question. Please first one then T. Rowe.

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No questions a robotic that nobody is a request and questions operator.

Right now we have no one in Q for questions.

Okay.

Well look I know, it's a oh.

Barry chaotic time in everybody's focused on you know there they're does their loved ones and their business yeah.

Falling off a cliff and so if there are any additional questions you know that yeah.

People think of afterwards, you know we always.

Try to be available and transparent so feel free to reach out to Peter and I via email or telephone and then we will can many continue to communicate openly and and transparently and you know in godspeed to everybody and trying to sort through this.

This call that 19, you know.

Catastrophe issue and you know.

Our prayers with our of 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.