Q1 2020 Earnings Call
[music].
[noise], ladies and gentlemen, thank you for standing by and welcome to urban ones 2021st quarter earnings call. As a reminder, this conference is being recorded.
I will begin this call with the following Safe Harbor statement. During this conference 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 that you.
Excuse me one moment, please urban one cautions that she 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 companys actual results to differ materially from those indicated by its projections or forward looking.
Statements. This call will present information as of May 28, Twentytwenty. Please note that urban one disclaims any duty to update any forward looking statements made in the presentation.
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 dot urban one dot com.
A replay of this conference call will be available from 12 PM. Eastern time today May 28, 2020 until 11 59 PM may 31st 2020.
Others May access a replay by calling 186 620 710 for one or four zero to 970 0847 with the access code for 774 or 576.
Access to live audio and a replay of the conference call will also be available on urban ones.
Corporate website at Www Dot urban one dot com. The 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 Alford C. Liggins, Chief Executive officer of urban.
One who is joined by Peter D. Thompson, Chief Financial Officer Mr. Liggins. Please go ahead. Thank you operator and welcome to our Q1 conference call I'm also joining Peter and I are or the CFO at TV, One Jody drew our general Counsel, Chris Simpson, and our Chief administrative officer care.
And wishart.
You have you got the press release I don't think that.
There's a ton a new information other than what our EBITDA ended up being in Q1 would.
We were happy that we were able to improve it you know.
That radio for US started off Q1, great and in January and February and you're certainly well aware of what happened in March and and we talked on the year end conference call about but things that weve.
On to offset the effects of closures due to the pandemic.
And all of those things you know.
Our in place I think that we have you know that they save you you know if you do something you know too.
Oh, yes.
In preparation or fear of a calamity actually go a step further and do more because you probably haven't done enough.
And I think that we took.
That approach as it related to our cost base.
Going in and into Q2, and we we did enough such that we felt that under.
A number of stress tested scenarios.
We were going to be compliant with our debt covenants, which was which was paramount no to us we want to continue.
Down our path of de levering and paying down debt and.
And we think that where you know we're in that position still in that position Peter is going to talk you through.
The numbers I think that yeah, Q2, yeah is coming out where we thought it was gonna be.
In terms of a pacings, you know kind of down high Fiftys.
We have not yet seen.
A bounce back from the.
Plan or actually the Reopenings that are in some state of progress now depending on what jurisdiction.
In June we haven't seen that effect yet.
However.
What I can say is that in may and Peter I give you the exact.
Numbers is that we added beyond money.
During may a good portion of the days in May so.
You know, we're hopeful that we will.
Do the same in June and now it's really about what the the bounce off the bottom looks like.
And the recovery, which none of us really no.
But we are prepared to whether it.
Our casino investment at MGM shut.
Down so there is zero contribution of from that started in mid March you're starting to see casinos.
Open up around the country I think Louisiana opened up.
Yeah, I think it was a montana or why only one of the our South Dakota one of those.
Northern Midwest States. It open up kind of first and now they're talking about Las Vegas, starting to open up.
In the first week of June I do not know.
When Maryland is going to open up you know.
If I had to guess I would say that it would probably be sometime.
In June and at some sort of reduce capacity.
One of things too you know to remember is that our income off of that.
His gaming revenue off the top so when that does happen, we'll see immediate contribution we don't have to wait for the the actual EBITDA to bounce back but certainly.
The that the value of for all you know for all businesses will be impaired for this kobin period, this year and ER and look we're optimistic and hopeful that.
We will what will climb out this just don't know what app at what rate, but were super focused on.
On on maintaining our liquidity cost control.
Grabbing.
The kinds of revenue shares you know that the stuff that we're used to even in a declining market.
And then ultimately looking for.
Are there any opportunities to create value already EBITDA through.
Can you sort of consolidations and things like that I don't think that any of that stuff is really on the table now because people really kind of want to figure out where they're going to be yet.
In terms of recovery.
But I do believe the there.
Should be some opportunity there.
Certainly people are going to be worse off.
By the end of this year than they had planned to question as to what degree.
And that ultimately should create some sort of catalyst for people to want to do more into work in terms of finding expense synergies with competitors et cetera.
We've been exploring some options for our new cable network.
Kliewer Cleo to see if there is a way to.
Yes find some synergies with some other partners there as well.
Nothing to do at this point in time, but it's kinda kind of stuff that you know we're looking at there's lot of conversation about should there be more radio consolidation. The answer is yes, there shouldn't be more radio consolidation.
Tire industry is gonna be levered higher than it had been in the past after me on many folks come in.
Scale through through bankruptcies, and so I think you know people should really start to take a really harder look at which combinations.
Yield the highest possible operational synergies.
But again, that's a conversation I think for.
Q.
As people get into Q4 and see what the their year end performance and numbers are going to look like so with that I will turn it over to Peter Thompson to go.
Deeper into the numbers Peter Thanks.
So net revenue was down 3.6% quarter ended March 31st 2020 at approximately $94.9 million.
Radio segment net revenue was down 5% in the first quarter National advertising sales were up 1.9%, while local AD sales were down 5.7%.
The same station basis, which excludes Detroit.
Radio segment net revenue was down 0.7% and excluding political advertising it was down 5.7%.
Revenue for reach media was down by 4.1% in the first quarter and their adjusted EBITDA was up by approximately $226000 year over year.
Net revenues for our digital segment decreased by 15.4% in Q1 on adjusted EBITDA for the digital segment decreased by approximately $909000 and this was due primarily to 2009 teens major tent pole of and the image awards not recur in 2020.
We recognized approximately 47 and a half million dollars revenue from our cable television segment during the quarter decrease of 0.7%.
Well TV advertising revenue was up 4.2% driven by increased delivery.
And also clear LTV was approximately $100000 year over year.
Cable TV affiliate revenue was down by 4.6%.
For the rates increases of approximately $1.3 million being offset by churn of approximately $2.6 million.
Cable subscribers as measured by Nielsen finished first quarter 2020 at 51.8 million down from 52.2 million at the end of fourth quarter 2019.
Recorded approximately $1.4 million of cost method income less administrative expenses foreign investment in the MGM National Harbor proxy for the quarter, which was down 17.2% from last year and this decrease is a direct result of the casino closure due to covert 19, Maryland state mandates.
[noise] operating like operating expenses, excluding depreciation amortization impairments and stock based compensation decreased by $9.3 million or 12 point focus and to approximately 65.6 million first quarter noncash expenses were down by approximately nine on.
$1000 due to onetime adjustments are excluded from adjusted EBITDA.
Radio operating expenses were down 4.8% radio SGN expense line was down 5.87.
Primarily from lower lower revenue variable expenses, such as sales commissions and national Rep fees as well as nonrecurring station events radio programming and technical expenses were down 3.2%, mainly from the discontinuation radio stations in the Detroit to market.
Reach operating expenses were down 8.3% program and technical expenses were down 15.9% driven by lower talent compensation expense reach SGN <unk> expenses were up 13.8% due to an increase in affiliate station compensation expense for the quarter corporate SGN I expenses it reached down 11.
On an hawks and due to stock compensation savings.
Operating expenses in the digital segment were down 5.4% driven by support cost savings not digital hop.
Cable TV expenses were down 22% year over year programming expense decreased by approximately $3 million driven by the absence of image awards in the quarter on fewer premia hours.
Operating expenses in the corporate eliminations segment were down by $1.25 million, including favorable variance to $700000 noncash adjustments to the company's employment agreement award liability, which is excluded from adjusted EBITDA.
And that's what those adjustments corporate MSG and <unk> expenses were down approximately $600000 driven by the reversal of accrued bonuses a nonrecurring third party cyberattacked remediation expenses from the first quarter of last.
For the first quarter consolidated broadcast and digital operating income was approximately $37.6 million up 12.8% from $33.4 million in 2019 consolidated adjusted EBITDA was $32.3 million, an increase of 16 point focus and yes.
Interest expense was approximately $19.1 million for the first quarter compared to approximately $20.8 million for the same period in 2019 decrease of 8.1 person.
Many make cash interest payments of approximately $13.9 million on his outstanding debt in the quarter.
[noise] senior unsecured term loan was paid down by approximately $11.9 million during the quarter on the term loan B was paid down by approximately $824000.
$27.5 million withdrawn from the revolving asset by line of credit as a preemptive measures to improve liquidity during the pandemic.
The senior term loan balance increased by pick interest of approximately $518000.
Company recorded a noncash impairment charge.
Of approximately $47.7 million or radio market broadcast licenses.
Well as $6 million in total goodwill assets for Atlanta than the Indianapolis month.
These non cash impairments result from changing market assumptions as a result covert 19.
Benefit from income taxes was approximately $21.9 million in the quarter. When there were no cash taxes paid during the quarter.
Net loss was approximately $23.2 million off 51 cents per share compared to net loss of approximately $3.1 million or seven cents per share first quarter 2019.
First quarter Capex were approximately $1.4 million compared to $707000 last year.
During the quarter the company executed a stop less tax repurchase of 547801 shares of class B common stock in the amounts to approximately $1 million.
The covenant purposes pro forma LTM EBITDA was approximately $137.5 million.
Net senior leverage was 4.6 times against a covenant test to 5.85 times.
Net debt was approximately $839.3 million.
This compares to $138.1 million LTM reported adjusted EBITDA for total net leverage ratio of 6.08 times.
I'm going to go in to a little bit of detail on on what we're saying Q2, just long from alphas point, so on a same station basis.
April radio revenues finished down approximately 58% on the second quarter overall is pacing down by around 58% as well.
In order to combat the steep and southern revenue decline primarily in our radio Division company has taken a swift actions to protect the company in and show a continuous liquidity and that compliance, including drawing the 27 and a half million dollars from the asset by line of credit.
Aggressively cutting or delaying costs.
We have reduced second quarter expenses by almost $30 million since the beginning of March.
9 million of that as a result of delaying the Tom Joyner Fantastic voyage cruise.
The 2 million is from the cancellation of radio stations events.
8 million of those savings is employee expense reductions through a combination. Unfortunately have layoffs lows pay cuts about 4 million of which are expected to be temporary in nature.
Four and a half million is for reduced or delay marketing spend two and a half million at other savings as lower commissions and fees about a million dollars of those Q2 savings is in TV programming content in a million and a half is in travel in the office expenses.
We expect to continue these cost saving measures.
Lisa third quarter, depending on the return of normal advertising revenue.
Alfred mentioned.
The.
Radio ads in May when he was speaking to that was back in April we were the cancellations on a daily basis, we're outweighing the amount of revenues booked in radio.
And so far since Corona Vars hit we've had roughly $14 million of cancellations cross the radio properties.
But we see we saw him a positive ads 15 out of 16 days where the.
Advertising sales outweighed the count cancellations, so to outfits point I think we've found a floor and we're actually manage into two had advertising.
Dollars.
Thank you Peter.
Operator, let's open it up for questions and hopefully this call we will actually get asked a question have some questions and we apologize about the that access code Snafu on the last conference call. So here goes nothing operator.
Ladies and gentlemen, if you would like to ask a question. Please press. One then zero on your telephone keypad, you will hear acknowledgment that your line has been placed in Q. Once again, if you would like to ask a question. Please press. One then zero on your telephone keypad one moment. Please for the first question.
We have a cut a question from Ben Briggs. Please go ahead.
Morning, Docs, thanks for holding them, all and taking the questions.
I've got you.
I want to run rule, there really quickly. So first of all just kind of I know a probably putting.
A little bit here, but just on you know eventually you guys are going to have to address capital structure and refine and.
Assuming that the revolver that comes due in 21 isn't going to be too much of an issue to extend out. The next one coming up is a settlement.
Uh huh.
No do doing 22.
I I know typical typically outright it did your preference.
Have they become current obligation on the balance sheet.
It's a guesstimate that it'd be your preference here as well or are you going away, possibly until until like mid mid 21 to address those just because of all that's going on in the world.
Yeah.
You want to yeah, I look I think obviously, we're thinking about it and this is you know a pretty big bump in the road from a time and standpoint of refinancing those out specifically.
I don't think the revolver plus JBL is going to be an issue to renew.
Given that that's asset backed and those assets.
Significantly ahead in value in terms of the draw and within the capacity that so I don't think that's an issue I think you don't get what gets to be an issue is the seven in three days.
And so you know by.
The end the Q you know Q1 next year it would be good to have taken care of that.
To your question, if we have to if we get to that point them for whatever reason market conditions are not favorable.
We could go current with that we have those conversations with the orders has provided a happy that we have a path ultimately to revise it don't think Diana and then all of itself is the issue what we're a long way out from it and to answer your question Alpha can jump in our preference is not for how about go current but we have explored that.
Yeah look we spent yeah. We spent a significant amount of time with our auditors going through you know are going concern. This last go around and yeah. We laid out a plan that said, we're gonna be and compliance and we feel good about that so yeah. We were actually going to go and do a re by after are you.
Sure in France.
I mean literally we were weeks away from you know T.N. up.
A brief by win win win Cobot happens. So we were going to go early right yeah.
The market was favorable.
So now you know my my biggest issue is we're going to have this cold that hole in our in our earnings and look my experience has been that you know markets don't really if they if they can take advantage of you in a in a position of weakness economically they.
Do it right you know in so quite frankly, and I get it you know we want to give ourselves as much runway as possible to get off a read by that is you know is reasonable right yet I mean, yes, and yes. So yeah, if we don't have.
Two we're not gonna go and print you know I'm, a desperate rebuy and hang the company with yeah, and even more onerous capital structure right. Yeah. We've done as a management team. We've done everything that we said we were gonna do we've been paying down debt now even through this we've managed our expense.
This is et cetera. So the answer to your question as Peter said I reiterate you know we prefer not to go kite, yeah, but I'm more concerned about not having a qualified audit opinion and we work you're asking about what the auditors and we know how much runway, we're gonna have and that runway would push.
Yes, you know into you know further into 21 so.
Yep, Yeah, no that that ER that that really makes a lot of time, yeah I'm sorry.
Talk to your your fellow investors and Yeah. We are starting to say Hey look that's a good management team did what they supposed to do that give them a co veered repreve [laughter], yeah, I'll I'll I'll tell you guys over a few of our reports I I hope you like where do you start.
Oh, Yeah of course of course, I've got a couple of more here you guys got my.
So just touching on the cable TV.
You know so I know that previously provided a little bit of guidance on what the contracted affiliate fees right right, we're going to be whether increases or decreases can you can you just refresh my memory, Oh and that that they increased every year and it had a mid at a mid single digit clip.
Okay, alright that you're in that that is that it will be Kate <unk>, what I want to et cetera.
That's still the case, but unfortunately, and everybody who invest in cable networks knows that gets offset by the higher churn that yell you know kind of nobody had expected five years ago, but look it's better than not having a and still having the churn yeah. So yes are a fairly.
Get line stays at reasonably stable, which is a good thing you know.
Yeah, Yeah, no. It's it's definitely got thing and then what about are there any contracts that are you guys have with <unk> with cable providers that are going to be talking up for renewal in the near term I I. Our next one is for rising the happens later this year yeah.
Okay, and then what about after that.
Not until 23 that right Joe.
21, well Mtc, which is super small for US is 21, but you know chartered hasn't come up to 23.
Okay and contract and then Comcast and 18, T. don't come up to 25 and 26.
Okay. Okay. That's very helpful. Thank you.
And then next thing here is you taught you had talked about consolidation a little bit.
With that more like hypothetically speaking you guys are you guys are always I.
I know.
Look I mean, one we're always looking for we have then yeah, we try to be rational actors and we have been buyers and we have been stellars, depending on what you know what makes sense to rationalize you know the port the portfolio.
Are there enough prior to cold bid, yeah, I got to tell Ya.
Investors that we talk to were more bullish on radio as an industry. You know then it Didnt then on cable TV right, Yeah, and Ah and more bullish than I've seen in a long period of time.
And quite frankly, I would argue that investors are still kind of bullish on radio even you know with the the the idea that a lot of the pure play radio companies are going to be Levered extremely high you know.
You know this year with co bid because people stocks have been holding up reasonably well in fact, moving up significantly right yeah.
And so up but that's the matter is once co bid happens you know and I'm just going by you know what I've seen in the analyst report people are predicting higher levels of leverage in the radio industry.
And next year. It just kind of makes sense you know that you know if possible people consolidate and and reduced expenses now whether folks get religion on that I mean, I don't know, but you know that to me, it's sort of the rational outcome.
The situation that that that way, but you know yeah. It's you know, it's typically been difficult to get radio folks to see I on value you know, but we'll see yeah. This is a this is a different scenario, but look you know leverage goes you know.
Excuse me.
A world becomes you know.
More normal again, I think what people like about radio is that the disruption the digital disruption in and has largely happened already right, yes, and so.
There's a level of stability, even if you view that stability as a slow melting ice cube at least it's a slow melting ice cube right now.
And so.
So yeah I mean, you know we're open to looking at at that as we as as we always have been and.
And we're always looking for an opportunity to two to de lever and increased value.
Okay. That's very helpful. And then I've got a couple real quick ones all rattle them off all at once.
So first of all can you give me a cash from ops number I know you get 1.4 billion Capex can you give us a cash from operations number just so we can calculate free cash flow quarter.
And then second one is can you just what was the total amount of cost savings you provided in the scripted portion and then finally Arafat alright, Ben what was the second long.
The second one was what was the total cost savings number that you guys.
Okay, and then third one that.
Go ahead, sorry finish it finished I'll circle back.
Okay and then the final one was what is.
If any second quarter EBITDA guidance, you can get a would would be helpful. I know you may not want to get give guidance just considering all that's going on but any any guidance you could get would be helpful.
I'm in <unk> things are moving around we don't want to yeah. We don't want to do that I mean, I mean, what do they look like.
We're going to have we're gonna have ample covenant cushion, yeah, then, okay, but but yeah, we don't know.
And with it.
Put us way, it's not going to do anybody any good for us. The it didn't give guidance is not going to mean anything anybody because it you know if you're going to be an ugly number compared to last year and so yeah. I think the thing that that investors should note is that we're not going to have a committed issue in Q2.
Yeah, and and you know it won't be by a little bit.
Yeah and then.
Question. The number I mentioned was it's just on the $30 million of savings for the second second quarter.
So we've taken.
Insist on March and then we're going to pull our 10-Q out which will have the cash from operations in that I don't have not finalized number in front of me Ben but we'll put that out you'll see you'll see it and if you want to circle back we were happy to talk through them.
Perfect I appreciate that Oh, there's been very helpful. That's it from me and good luck guys. Thank you. Thank you.
Your next question is from Solomon Alexander Please go ahead.
Good morning, gentleman, one or two assets are there any other internal risk assessment. So I've been done because if I pull that 19 resurges or for the end of third or the beginning of fourth quarter will we have different oh.
Well the company function in a different Maryland.
Going forward and are there any and second part sort of question is do we have any other oh.
Lloyds of London policies or things of that nature to hopeless in this catastrophic type of environment. We're in.
Yeah.
We do not have any policies that I've that backlog. We've asked the question our business interruption policies don't cover you know this pandemic in any significant way is that correct well yeah, Chris do you want to sell there there is some possibility of coverage under some state legislation.
What we're seeing the most of it is gonna be targeted towards smaller <unk> I under 250 employees. So at this point, we're playing in where I can and do something there won't be yeah. So that state that's where a state is going to basically tell insurance companies that they got to cover these guys correct and have their acts.
Some issues there there's a hair on that they're actually some comp news motions that could be implicated so even if that legislation is passed it's not.
<unk>.
There's no guarantee that we worked out well work. We're we're operating assuming that we won't be covered right correct. Although we are tracking everything.
That would allow us to make a claim we think the young.
<unk> losses, resulting from viruses are generally excluded from policies that may get challenged in the course and if it does we will at least have all about known gas ready to go.
Look I mean, it and no we don't really I mean, you know, we've we've stress test Q <unk> Q4 down to some.
Some numbers, but you know if you have a repeat in Q4 of what Q2 looks like you know no weird <unk> today, we're not prepared for that but I don't think anybody is I mean, you know all I do as watched the news.
While these days and you know read you know business.
Yeah, Yeah yeah.
Yeah information and you know and stuff and you know everybody's expecting you know some sort of bounce back I mean, I. Just don't you know I mean, I don't know I've no idea of what you know a repeat of what happened in April you know looks like right now so.
Yeah, I mean look to your question, we're obviously able to cooperate remotely and have been doing so since mid March or obviously operating with significantly less people and so I guess you know we proved that we can weather you know a minus 60 quarter in radio.
Panic that stuff to looked like it might happen again in fourth quarter, we would take whatever pereira measures we need to take.
Well I mean.
Congrats.
[noise] so a lot I you we.
Stress tested a great deal on the back half.
And I don't know what a second wave looks like I'm not a doctor I'm not epidemiologist you know my sense, though is that as we get closer to a vaccine which people are saying can be here in Q1, Yeah. I would also say that governments are more adept now.
Now at managing yes, sort of the hospitalization and things of that nature. So there would not be as much about panic and it also would not be widespread and host sale in every jurisdiction in America now that even if there was.
Second wave, it's going to look you know I'm very different than what we got hit with the first time, which was unexpected and we weren't ready for.
The second question less true a presidential Turner, we didnt see the advertising.
Numbers from certain candidates I.
I believe this year it should be a big uptick in the and I hope you're able to capture a as much as that as possible as far as advertising dollars.
But.
Going into it further oh, how can we make sure that we prevent that from ever happening again and have a down kicked in and those political ads not absolute actually we've been doing you know, we actually punch above our way you know on on on political.
We.
Forgot what year. It was what was it wasn't last year here. When you would you like $8 million was that.
We did the highway <unk> was 9.1 in 2012 data than we did 7.9 in 16, Yeah. We did $8 million in 16, Yeah and then in 18, we did 7.40, yeah. So look we were expecting a big political year and.
We were doing you know we were doing great. We were particularly sad to see Bloomberg give up so fast.
Because he was spent an awful lot of money and.
Yeah look the political game is change this year now they've been moving primaries delaying them I'm in you know it depends on how open the country is and and what People's perception of radio you know is I had a conversation yesterday with the.
Person, who handles our political.
And that person actually was pretty bullish you know on what they thought they could do.
Not holding that person to it but you know she thought that you know she can get to at least 85% of what our budget at number was but you know you all know that the game has changed right now and Ah.
And radio you know is about people being out in about an end cars and television is about.
People being at home and in the hands in the work from home environment that helps TV now one of the things. It's also going to happen I suspect that TV is gonna be oversold like it never has been before and so that could push money that generally pushes money.
To radio.
And ER and that in and that could end up being.
Very helpful. TV does not have the same flexibility that radio does.
To add units you know to their onto them out because they carry networks and things of that nature. So so we're hopeful.
Excellent. Thank you guys. So much for all that you do thank you.
And we have no other questions you may continue.
Great well. Thank you everyone I'm glad we got the technology squared away. This go around we look forward to talking to your next quarter.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
We're sorry your conference is ending now please hang up.
[music].
[music].
Ladies and gentlemen, thank you for standing by welcome to urban ones 2021st quarter earnings call. As a reminder, this conference is being recorded.
Well begin this call with the following Safe Harbor statement. During this conference call urban one we'll be sharing with you certain projections and other forward looking statements regarding future events or its future performance.
In one cautions that you.
[music] excuse me one moment. Please urban one cautions that you 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 could cause the companys actual results to differ materially from those indicated by its projections or forward looking.
Statements. This call will present information as of May 20, Eights Twentytwenty. 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 dot urban one dot com.
A replay of this conference call will be available from 12 PM. Eastern time today May 28, 2020 until 11 59 PM may 31st 2020.
Callers may access the replay by calling 186 620 710 for one or four zero to 970 0847 with the access code for 774576.
Access to live audio and a replay of the conference call will also be available on urban ones.
Corporate website at Www Dot urban one dot com. The replay will be made available on the web site 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 Executive officer of urban.
One who is joined by Peter D. Thompson, Chief Financial Officer Mr. Liggins. Please go ahead. Thank you operator and welcome to our Q1 conference call I'm also joining p. or and I are are the CFO at TV, one Jody drew our general Counsel, Chris Simpson, and our Chief administrative officer care.
Or wishart.
You are you got the press release I don't think that there's a ton a new information other than what our EBITDA ended up being a in Q1, which yeah. We were happy that we were able to.
Improve it no that radio for US started off Q1, great and ER in January February.
Certainly well aware of what happened in March and and we talked on the yearend conference call about the things that we've done to offset the effects of closures due to the pandemic.
And all of those things you know.
Our in place I think that we don't have yeah that they say if do you know if you do something you know too.
Oh, yes, we didnt in preparation or fear of a calamity actually go a step further and do more could you probably haven't done enough.
And I think that you know we took.
That approach as it related to our cost base.
And in into Q2, and we we did enough.
Such that we felt that under.
A number of stress tested scenarios.
We were going to be compliant with our debt covenants, which was which was paramount.
To US you know, we want to continue down our path of de levering and paying down debt and.
And we think that.
Where.
We're in that position still in that position on Peter is going to talk you through.
The numbers I think that yeah, Q2, yeah is coming out where we thought it was gonna be.
In terms of a pacings kind of down high Fiftys.
We have not yet seen.
A bounce back from the Yep plan or actually the Reopenings that are in some state of progress now depending on what jurisdiction.
In June we haven't seen that effect yet.
However.
What I can say.
Is that in May and Peter I give you the exact.
Ah numbers is that we added be our money.
During may a good portion.
Of the days in May so.
We're hopeful that yeah, we will.
Do the same in June and now it's really about what the the bounce off the bottom looks like.
And the recovery, which none of us really now.
But we are prepared to whether it.
Our casino investment in imaging EM.
Sure.
Down so there is zero contribution of from that started in mid March.
You're starting to see casinos.
Open up around the country I think Louisiana opened up.
Yeah, I think it was the Montana or why only one of the our South Dakota one of those.
Northern Midwest States. It opened up kind of first and now they're talking about Las Vegas, starting to open up.
In the first week of June I do not know.
When Maryland is going to open up you know.
If I had to guess I would say that it would probably be sometime.
In June and at some sort of reduced capacity.
One of things to to remember is that our income off of that.
As gaming revenue off the top so.
When that does happen.
We'll see immediate contribution we don't have to wait for the the actual EBITDA.
To bounce back but certainly.
The that the value of for all you know for all businesses will be.
Impaired for this kobin period, this year and dot and look we're optimistic and hopeful that.
Now we will what will climb out this just don't know what yeah app at what rate, but were super focused on a on maintaining our liquidity.
Cost control.
Grabbing.
The kinds of revenue shares.
That that the step that were used to.
Even in a declining market.
And then ultimately looking for.
Are there any opportunities to create value our EBITDA through.
Any sort of consolidations and things like that I don't think that any of that stuff is really on the table now because people really kind of want to figure out where theyre going to be at yes in terms of recovery.
But I do believe the there.
Should be some opportunity there.
Certainly people are going to be worse off.
By the into this year than they had planned to question as to what degree.
And that ultimately should create some sort of catalyst for people to want to do more.
Then to work in terms of finding expense synergies with competitors et cetera.
We've been exploring some options for our new cable network.
The U.S. Cleo to see if there is a way to.
Yes find some synergies with some other partners there as well.
Yeah, nothing to do at this point in time, but it's kind of kind of stuff that we're looking at there's lot of conversation about yes should there be more radio consolidation. The answer is yes, there should be more radio consolidation.
The entire industry is going to be levered higher than it had been in the past after many folks come and yes.
Yeah through through bankruptcies, and so I think people should really start to take a really harder look at which combinations.
The yield the highest possible operational synergies.
But again, that's a conversation I think for.
Q.
As people get into Q4 and to see what the their year end performance and numbers are going to look like so with that I will turn it over to Peter Thompson the go.
Deeper into the numbers Peter Thanks.
So net revenue was down 3.6% quarter ended March 31st 2020 at approximately $94.9 million.
Radio segment net revenue was down 5% in the first quarter National advertising sales were up 1.9%, while local AD sales were down 5.7%.
Same station basis, which excludes Detroit.
Radio segment net revenue was down 0.7% and excluding political advertising that was down 5.7%.
Revenue for reach media was down by 4.1% in the first quarter.
Adjusted EBITDA was up by approximately $226000 year over year.
Net revenues for our digital segment decreased by 15.4% in Q1.
EBITDA for the digital segment decreased by approximately $909000 and this was due primarily to 2009 teens major tent pole event image awards not recurring in 2020.
We recognized approximately 47 and a half million dollar revenue from our cable television segment during the quarter decrease or 0.7%.
Cable TV advertising revenue was up 12.2% driven by the increased delivery.
Also clear LTV was approximately $100000 year over year.
Cable TV affiliate revenue was down by 4.6%.
Right increases of approximately $1.3 million being offset by churn of approximately $2.6 million.
Cable subscribers as measured by Nielsen finished first quarter 2020 at 51.8 million down from 52.2 million at the end the fourth quarter 2019.
Recorded approximately $1.4 million of cost method income less administrative expenses, our investment in the MGM National Harbor proxy for the quarter, which was down 17.2% from last year. This decrease as a direct result of the casino closure due to covert 19, Maryland state mandates.
Operating operating expenses, excluding depreciation amortization impairments and stock based compensation decreased by $9.3 million or 12 point focus and to approximately 65.6 million first quarter non cash expenses were down by approximately nine.
In $2000 due to onetime adjustments that are excluded from adjusted EBITDA.
Radio operating expenses were down 4.8% radio SGN expense line was down 5.8 cents.
Primarily from lower lower revenue variable expenses, such as sales commissions and national Rep fees as well as nonrecurring station events radio programming and technical expenses were down 3.2%, mainly from the discontinuation radio stations in the Detroit to market.
Reach operating expenses were down 8.3% programming and technical expenses were down 15.9% driven by lower talent compensation expense reach SGN expenses were up 13.8% due to an increase in affiliate station compensation expense for the quarter.
SGN, a expenses, which were down 11 on hopson due to stock compensation savings.
Operating expenses in the digital segment were down 5.4% driven by support cost savings cannot digital Hawk.
Cable TV expenses were down 22% year over year programming expense decreased by approximately $3 million driven by the absence of image awards in the quarter and fewer Premier Alice.
Operating expenses in the corporate and elimination segment were down by $1.25 million, including favorable variance to $700000 noncash adjustments to the company's employment agreement award liability, which is excluded from adjusted EBITDA.
So those adjustments corporate SGN I expenses were down approximately $600000 driven by the reversal of accrued bonuses nonrecurring third party cyber attack remediation expenses from the first quarter last.
For the first quarter consolidated broadcast and digital operating income was approximately $37.6 million up 12.8% from $33.4 million in 2019 consolidated adjusted EBITDA was $32.3 million an increase of 16.4%.
Interest expense was approximately $19.1 million for the first quarter compared to approximately $20.8 million for the same period in 2019 decrease of 8.1% company made cash interest payments of approximately $13.9 million on its outstanding debt in the quarter.
The senior unsecured term loan was paying down by approximately $11.9 million during the quarter on the term loan B was paid down by approximately $824000.
$27.5 million withdraw from the revolving asset by line of credit as a preemptive measures to improve liquidity.
In the pandemic.
The senior term loan balance increased by pick interest of approximately $518000.
Company recorded a non cash impairment charge.
Of approximately $47.7 million or radio market broadcast licenses.
As well as $6 million in total goodwill assets for land on the Indianapolis market.
These non cash impairments, resulting from changing market assumptions as a result cope with 19.
Benefit for income taxes was approximately $21.9 million in the quarter and there were no cash taxes page on the quarter.
Net loss was approximately $23.2 million off 51 cents per share compared to net loss of approximately $3.1 million or seven cents push first quarter 2019.
First quarter Capex were approximately $1.4 million compared to $707000 last year.
During the quarter the company executed a stock less tax repurchased 547801 shares of class B common stock in the amounts to approximately $1 million.
Covenant purposes pro forma LTM EBITDA was approximately $137.5 million.
Net senior leverage was 4.6 times against a covenant test of 5.85 times.
Net debt was approximately $839.3 million. This compares to $138.1 million LTM reported adjusted EBITDA for a total net leverage ratio of 6.08 times.
I'm going to go on to a little bit of detail on what we're saying Q2, just a follow on from outputs point. So on a same station basis.
April radio revenues finished down approximately 58% on the second quarter overall is pacing down by around 58% as well.
In order to combat the steep and sudden revenue decline primarily in our radio Division company has taken swift actions to protect the company in unsure.
Continuous liquidity and debt compliance, including drawing the 27 and a half million dollars from the asset by line of credit.
Aggressively cutting or delaying costs.
We have reduced second quarter expenses by almost $30 million since the beginning of March.
$9 million as a result, delaying the Tom Joyner Fantastic voyage cruise.
$2 million from the cancellation of radio station and events.
8 million of those savings is employee expense reductions through a combination. Unfortunately have layoffs lows pay cuts about 4 million of which are expected to be temporary in nature.
Four and a half million is for reduced or delay marketing spend two and a half million at other savings as lower commissions and fees about a million dollars. Those Q2 savings is in TV programming content and million on that how is in travel in the office expenses.
We expect to continue these cost saving measures.
Lisa third quarter, depending on the return of normal advertising revenue.
Alfred mentioned.
The.
Radio ads in May when he was speaking to that was back in April we were the cancellations on a daily basis or outweighing the amount of revenues booked in radio.
And so far since.
Corona Vars hit we've had roughly $14 million of cancellations crossed a radio provinces, but.
But we see we saw him a positive as 15 out of 16 days where the.
Advertising sales outweigh the count the cancellations so to outfits point I think weve found a floor and we're actually managing to add advertising.
Dollars.
Thank you Peter.
Operator, let's open it up for questions and hopefully this call we will actually get asked that question have some questions and we apologize about the.
Access code snap go on the last conference call. So here goes nothing operator.
Ladies and gentlemen, if you would like to ask a question. Please press one none zero on your telephone keypad.
You will hear acknowledgment that your line has been placed in Q. Once again, if you would like to ask a question. Please press. One then zero on your telephone keypad one moment. Please for the first question.
We have a quick question from Ben Briggs. Please go ahead.
Morning, guys. Thanks for holding all add for taking the questions.
I've got you.
Want to run through here really quickly.
So first of all just kind of I know it probably putting.
Looking out a little bit here, but just on.
You guys are going to have too.
Address capital structure and refine and.
Assuming that the revolver that comes due in 21.
Going to be too much of an issue to extend out the next one coming up.
This is evident.
Notes due in 22.
I know typical typically outright it then your preference.
Have things become current obligation on the balance sheet.
Is it safe guests that that's going to be your preference here as well or are you going away, possibly until.
Until like mid mid 21 to address those just because of all of its going around the world.
Yes.
You want to yeah, I look I think obviously, we're thinking about it and this is a.
A pretty big bump in the road from a timing standpoint of refinancing those out specifically.
I don't think the revolver slash JBL is going to be an issue to renew.
Given that that's asset backed and those assets.
Significantly ahead in value in terms of the draw.
The last out so I don't think that's an issue I think you won't get what gets to be an issue is a 703 AIDS.
And so by the end the Q O Q1 next year it would be good to have taken care of that.
[music].
To your question. If we had two if we get to that point them for whatever reason market conditions are not favorable we could go current with that we've had those conversations with the order to provide in a happy that we have a path ultimately to re Fi I don't think.
And then of itself is the issue.
We're a long way out from it and to answer your question African jump at our preference is not we'll have that go current but we have explode.
Yes look we spent yeah, we spent a significant amount of time with our auditors going through.
Our going concerns that last go around and we laid out a plan that we're going to be and compliance. So we feel good about that so we were actually going to go and do a re bye.
After our year end print.
I mean literally we were weeks away from tee it up.
A brief by win win win Colgate happened. So we were going to go.
Early right yeah.
Yes, the market was favorable.
So now yes. My my biggest issue is we're going to have this code that hole in our in our earnings and look my experience has been that yell markets don't really if they if they can take advantage of you in a in a position of weakness economically they.
Do it right now and so quite frankly, and I get it we want to give ourselves as much runway as possible to get off of reef by that.
Is it.
It is reasonable right, yes, I mean, yes, and yes. So.
Yes, if we don't have to we're not going to go and print you know.
A desperate re by and hand, the company with Yelp and even more onerous capital structure right. Yes, we've done as a management team. We've done everything that we said we were going to do we've been paying down debt now even through this we've managed our expenses et cetera.
So the answer to your question as Peter said I reiterate we prefer not to go kite, but I'm more concerned about not having a qualified audit opinion and we work you're asking what are the auditors and we know how much runway, we're gonna have and that runway would push US you know in.
Two.
Further into 21 so.
Yes, yes, not that that ER.
That really makes a lot of time yeah.
So let's talk to talk talk to your your fellow investors then ill start they looked at the good management team did what they supposed to do that give them a co veered repreve [laughter], yes, I'll I'll. Thank you guys over a few of our reports I hope you like where do you start.
Oh, yeah, well of course of course.
I've got a couple of more here if you guys don't mind.
So just touching on the cable TV.
So I know that previously provided a little bit of guidance on what the contracted affiliate fee.
Right right, we're going to be whether increases or decreases can you can you just refresh my memory or.
They increased every year at a mid at a mid single digit club.
Okay, Alright, thank you and that that is that well be Kate.
What I want to makes geriatric.
That's still the case, but unfortunately, and everybody who invest in cable networks knows that gets offset by the higher churn that yell kind of nobody had expected five years ago, but look it's better than not having and still having the churn yeah. So yes, our affiliate line.
At this stage reasonably stable.
Which is a good thing it out.
Yes, yes.
It's definitely got thing and then what about are there any contracts that are.
Guys have with.
With cable providers that are going to be coming up for renewal in the near term I. Our next one as Verizon that happens later this year yeah.
Okay, and then what about after that.
Not until 2003 that right.
21, Mtc, which is super small for US is 21, but ill chartered hasn't come up to 23.
Okay and contract and then Comcast and 80, and T. don't come up to 25 and 26.
Oh, Okay. Okay. That's very helpful. Thank you.
And then next thing here. So you talk you had talked about consolidation or a little bit.
It was that more like hypothetically speaking you guys are you guys are always.
Look I mean, one we're always looking for we have then yes, we try to be rational actors and we have been buyers and we have been stellars, depending on what you know what made sense to rationalize the port the portfolio.
I did enough prior to coal bed, yeah, I got to tell Ya.
Investors that we talked to were more bullish on radio as an industry.
Then on cable TV right, yes, and I am more bullish than I've seen in a long period of time.
And quite frankly, I would argue that investors are still kind of bullish on radio even.
With the the the idea that a lot of the pure play radio companies are going to be levered at extremely high.
With this year with co bid because people stocks have been holding up reasonably well in fact, moving up significantly right yeah.
So up but the fact the matter as once co bid happens.
I'm just going by.
What I've seen in the analyst report people are predicting higher levels of leverage in the radio industry social here and next year. It just kind of makes sense. You know that you know if possible people consolidate and and reduce expenses now whether folks.
Religion on that I mean, I don't know, but you know that to me is sort of the rational.
Outcome of the situation.
That that warehouse, but.
Yeah. It you know, it's typically been difficult to get.
Radio folks to see I on value Yale.
But we'll see yeah. This is a this is a different scenario, but look leverage goes on excuse me.
The world becomes yellow.
More normal again, I think what people like about radio is that the disruption the digital disruption in and have largely happened already right and so.
There's a level of stability, even if you view that stability as a slow melting ice cube at least a slow melting ice cube right now.
And so.
So yeah I mean, you know we're open to looking at at that as we as we always have been and.
And we're always looking for an opportunity to to de lever and increase value.
Okay, that's very helpful.
I've got just a couple real quick ones, all rattle them off all at once.
So first of all can you give me a cash from ops number I know you get 1.4 billion Capex can you give us a cash from operations number just so we can calculate free cash flow quarter.
And then second one is can you just what was the total amount of cost savings you are provided in the scripted portion and then finally I'm.
All right what was the second along.
The second one was what was the total cost savings number you guys.
Okay and yes.
Got it.
Go ahead, sorry finish it finished I'll circle back.
Okay and then the final one was what is.
If any second quarter EBITDA guidance you can get.
What would be helpful. I know you may not want to give guidance is considering all that's going on but any any guidance you could get would be helpful.
I'm in it.
Things are moving around we don't want to yeah, we don't want to do that I mean, I mean I'll put it this way, yes, we're going to have we're gonna have ample covenant cushion yeah.
But but we don't now.
It does.
Put us way, it's not going to do anybody any good for us. The it can give guidance is not going to meeting thing to anybody because it's now it's going to be an ugly number compared to last year and so yes, I think the thing that.
That investors should note is that we're not going to have a covenant issue in Q2.
Yeah, and you know it won't be by a little bit.
Yeah.
So I guess question the number I mentioned was.
Just on the $30 million of savings for the second second quarter.
Yes.
Insist on March and then we're going to pull out 10-Q out which will have the cash from operations in that I don't have that finalized number in front of me, Ben but we'll pull that out you'll see you'll see and if you want to circle back we are happy to talk through them.
Perfect I appreciate that.
It's been very helpful. That's it from me and good luck guys. Thank you.
Thank you.
Your next question is from Solomon Alexander Please go ahead.
Good morning, gentleman, one or two assets are there any or the internal risk assessment, so I've been done because if.
At 19, Resurges or for the end of third or the beginning of fourth quarter, where we have different.
We will accompany functioned in a disciplined manner.
Our goal for and are there any and second part sort of question is do we have any other.
[noise] larger London policies or things of that nature.
To help us in this catastrophic type of environment we're in.
Yeah.
I do not have any policies that I've that backlog. We've asked the question our business interruption policies don't cover this pandemic in any significant way is that correct well.
Do you want to so there there is some possibility of coverage under some legislation, but what we're seeing the most of it is going to be targeted towards smaller.
I'd under 250 employees. So at this point were lagging.
We're acting on these something there won't be yeah. So that's state that's where a state is going to basically tell insurance companies that they got a cover these guys correct. There actually some issues there there's a hair on that they're actually some constitutional issues that could be implicated so.
Even if that legislation is passed if not.
There's no guarantee that we've worked out well work, we're operating assuming that we won't be covered right correct, although we are tracking and everything.
That would allow us to make a claim we think that.
Fire losses.
As often from viruses are generally excluded from policies that may get challenge in the Colts and if it does we will at least have all of our non-GAAP EPS ready to go.
And look I mean.
No we don't really I mean, we stress test Q.
[music] for down to some.
Some numbers, but you know if you have a repeat in Q4 of what Q2 looks like you know where we know today, we're not prepared for that I don't think anybody is I mean, all I do as watched the news.
While these days and read.
Business.
Yes, yes, yes.
Information and stuff and now everybody is expecting you know some sort of bounce back I mean, I. Just don't you know I mean, I don't the I have no idea of what yeah, I'll I'll repeat of what happened in April looks like right now so.
Yeah, I mean look to your question, we're obviously able to operate remotely and have been doing so since mid March or obviously operating with significantly less people.
So I guess, we proved that we can weather.
A minus 60 quarter in radio.
And it starts to look like it might happen again in fourth quarter, we would take whatever pereira measures we need to take.
Well I mean.
Congrats.
So a lot.
I know you we.
Stress tested a great deal in the back half.
And I don't know what a second wave looks like im not adopter I'm not epidemiologist.
My sense, though is that as we get closer to a vaccine which people are saying can be here in Q1, Yeah. I would also say that governments are more adept now at managing yes sort of the hospitalization.
And things of that nature, so there would not be as much about panic and it also would not be widespread and host sale in every jurisdiction in America.
With.
That even if there was a second wave it's going to look you know.
Very different than what we got hit with the first time, which was unexpected and we weren't ready for.
Second question less true presidential Turner, we didnt see the advertising.
Numbers from certain candidates.
I believe this year should be a big uptick in the and I hope you're able to capture as much as that as possible.
As far as advertising dollars.
But.
Going into it further oh, how can we make sure that we prevent that from ever happening again and have a downtick in those political.
Not absolute actually we've been doing we actually punch above our weight.
On on on political.
We.
Forgot what year. It was what was it wasn't last year when year, we do like $8 million was that.
We did the high watermark was 9.1 in 2012 bad than we did 7.9 in 16, you have with at $8 million Insixteen, Yeah, and then an 18, we did 7.4.
Yeah. So look we we were expecting a big political year and we were doing now we were doing great. We were particularly sad to see Bloomberg give up so fast because he was spent an awful lot of money.
And down.
Look the political game is change this year now theyve been moving primaries delaying them I'm in you know it depends on how open the country is.
And and what People's perception of radio.
As I had a conversation yesterday with.
The.
Person, who handles our political.
And that person actually was pretty bullish.
On what they thought they could do.
Not holding that person to it but she thought that she can get to at least 85% of what our budget at number was but.
No that the game has changed right now.
And.
And radio is about people being out in about adding cars and television is about.
People being at home in the Pan and work from home environment that helps TV now one of the things. That's also going to happen I suspect that TV is gonna be oversold like it never has been before and so that could push money that generally pushes more.
Money to radio.
And and that and that could end up being.
Very helpful.
TB does not have the same flexibility that radio does.
To add units to there.
To the mode, because they carry networks and things of that nature. So.
So we're hopeful.
Thank you guys so much for all the Judy.
Thank you.
And we have no other questions you may continue.
Great well. Thank you everyone I'm glad we got the technology squared away. This go around.
We look forward to talking to you next quarter.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.