Q1 2020 Earnings Call

[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.

We 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 you 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 Twond T.H. 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, P. 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 774 or 576 access to live audio and I've read.

Play 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 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 or the CFO at TV, One Jody drew our general Counsel, Chris Simpson, and our Chief administrative officer care.

Our wishart.

You 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 and February and you're 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 yeah. Our in place I think that we have yeah that they say if you you know if you do something you know too.

Oh, yes in in preparation for fear of a calamity actually go one step further and do more because you probably haven't done enough.

And I think that you know we took.

That approach as it related to our cost base.

Going in a in and into Q2, and we you know we did enough such that we felt that you know 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 you know we want to continue down our path of de levering and paying down debt and and we think that you know where.

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 you know high fiftys.

We have not yet seen.

A bounce back from the yeah plan or actually the Reopenings that are in some state of progress now depending on what jurisdiction.

Oh gosh in June we haven't seen that affects 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 of the days it may so.

Yeah, we're hopeful that yeah, we will.

Do the same in June and and now it's really about you know what the the bounce off the bottom looks like.

And the recovery, which you know none of us really now.

But we are prepared to whether it.

Our casino investment at MGM shot 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.

For the 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 some time.

In June and at some sort of reduced capacity.

One of things too you know to remember is that our income off of that is gaming revenue off the top so when that does happen. Yeah. We'll see immediate contribution we don't have to wait for the the actual EBITDA to bounce back but start.

Only.

The that the value of for all you know for all businesses will be impaired for this covin period, this year and ER and look we're optimistic and hopeful that now we will what will climb out. This just don't know what yeah.

At what rate, but were super focused on a on maintaining our liquidity.

Cost control.

Grabbing.

The kinds of revenue shares.

That that's out there that were used to even in a declining market.

And then ultimately looking for you know are there any you know 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 they're going to be yeah. Yeah in terms of recovery.

But I do believe that there.

Shouldn't be some opportunity there certainly people are going to be worse off.

By the end of this year than they had planned to a question as to what degree.

And that ultimately should create some sort of catalyst for people to want to do more didn't 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.

Yeah.

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 you know we're looking at there's lot of conversation about yeah should there be more radio consolidation. The answer is yeah. There should be more radio consolidation the entire industry is gonna be levered higher than it had been in the past after me how many.

Folks come in.

Yes through through bankruptcies, and so I think people should really start to take a really harder look at which combinations.

Reload the highest possible operational synergies.

But again, that's the conversation I think you know for you know Q as people get into Q4 and to see what the their year end performance and numbers are going to look like.

With that I will turn it over to Peter Thompson to go.

Deeper into the numbers Peter Thanks, Alan.

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.

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 event. The 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 of 0.7%.

We'll TV advertising revenue was up 4.2%.

The increase delivery.

So cleo TV was approximately $100000 year over year.

Cable TV affiliate revenue was down by 4.6%.

These increases of approximately $1.3 million.

Offset by churn of approximately $2.6 million.

Payables 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.

We recorded approximately $1.4 million of cost method income less administrative expenses.

Yes, when 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.

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 noncash expenses were down by approximately 900000.

Wallace.

The one time 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 reached SGN <unk> expenses were up 13.8% due to an increase in affiliate station compensation expense for the quarter copper SGN I expenses reached down 11.

On the Hobson due to stock compensation savings.

Operating expenses in the digital segment were down 5.4% driven by support cost savings and 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 and a few a premier Alice.

Operating expenses in the corporate and elimination segment were down by $1.25 million, including favorable variances $700000 noncash adjustments to the company's employment agreement on war liability, which is excluded from adjusted EBITDA.

And that's what those adjustments corporate SGN I expenses went down approximately $600000 driven by the reversal of accrued bonuses nonrecurring third party cyberattacked remediation expenses from the first quarter over the last.

For the first quarter consolidated broadcast and digital operating income was approximately $37.6 million up 12.8% $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%.

When you make cash interest payments of approximately $13.9 million Onyx outstanding debt in the quarter.

The 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 was drawn from the revolving asset back line of credit as a preemptive measures to improve liquidity during the pandemic.

The senior term loan balance increased by the pick interest of approximately $518000.

Tony recorded a non cash impairment charge.

Of approximately $47.7 million or radio market broadcast licenses.

Well as $6 million in total goodwill assets for Atlanta Indianapolis Monkey.

These non cash impairments results from changing market assumptions as a result cope with 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 for the 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 repurchase a 547801 shares of class B common stock in the amount approximately $1.

Covenant purposes pro forma LTM EBITDA was approximately $137.5 million.

Net senior leverage was 4.6 times against the Covenant test of 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 going 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.

Order to combat the steep and southern 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 of delaying the Tom Joyner Fantastic voyage cruise.

2 million as from the cancellation of radio station 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.

400 million is for reduced or delay marketing spend two and a half million at other savings as lower commissions and rep fees about $1 million post Q2 savings is in TV programming content and million amount off is in travel in the office expenses.

We expect to continue these cost saving measures.

Lisa the 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 we saw him a positive as 15 out of 16 days the.

Advertising sales outweighed the count the cancellations so to outfits point I think we 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 asking a question have some questions and we apologize about the that 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 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 question from Ben Briggs. Please go ahead.

Morning, guys, thanks for holding them all.

My questions.

I've got you.

I want to run through there really quickly.

So first of all just kind of I know, we're probably putting probably looking out a little bit here, but yes. On you know eventually you guys you're going to have to.

Address capital structure and refine and.

Assuming that revolver that comes due in 21.

Going to be too much of an issue to extend out the next one coming up is a settlement.

Notes due June 22.

I know typical typically out.

And your preference.

Not have thing current obligation on the balance sheet.

It could get 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 that's going on in the world.

Yes.

You want to yeah 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 on those assets.

Significantly ahead in value in terms of the draw on some of the capacity that's out. So I don't think that's an issue I think you won't get what gets to be an issue is the seven in three days.

And so by.

The end the Q.

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 on for whatever reason market conditions are not favorable we could go current with that we've had those conversations with the orders has provided a happy that we have a path ultimately to re Fi I don't think Diana and then all of itself is the issue.

For a long way out from it and to answer your question Alpha can jump in our preference is not to have that go current but we have explored that yeah look we spent yeah. We spent a significant amount of time with our auditors going through our going concern that last go around and we laid out a plan that we're going to be and comply.

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 T.N. up.

Our re Fi win win win coal that happens so we were going to go.

Early right yeah.

The market was favorable.

So now yes. 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.

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 again and so.

Yes, if we don't have to we're not going to go and print Yale.

A desperate re by 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 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 about what the auditors and we know how much runway, we're gonna have and that runway would push us now in.

Two.

Further into 21 so.

Yes, yes, no that data.

That that really makes a lot of time.

Yeah.

Okay. So talk to talk talk to your your fellow investors and ill start they looked at the good management team did what they supposed to do that give them a co vid repreve.

[laughter] yeah ill all thank you guys over a few of our reports I hope you like would you Sir.

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, we're going to be whether increases or decreases can you can you just refresh my memory Oh I am.

Yes, they increased every year.

At a mid at a mid single digit club.

Alright, Thank you and that that is that you all the case.

What I want to make sense.

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 Yao style, yes, our bill.

You get line stays at reasonably stable.

Which is a good thing now.

Yes, yes, no. It's it's definitely go up and then what about are there any contracts that are you 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 Jody.

21, Mtc, which is super small for US is 21, but yes chartered hasn't come up to 23.

Okay comment 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 is you had talked about consolidation or a little bit.

It was that more like hypothetically speaking you guys are you guys are always.

Hi.

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.

Are there enough prior to coal bed.

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 im more bullish than I've seen in a long period of time.

Okay.

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 extremely high.

With this year with co bid because people stocks have been holding up reasonably well in fact, moving up significantly right now.

And so.

But the back the matter is once cove, it happens and I'm just going by.

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 reduced expenses now whether folks get 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 that warehouse, but.

Yes, it's you know, it's typically been difficult to get.

Radio folks to see I on value Yale.

But we'll see how this is a this is a different scenario, but look you know leverage goes no excuse me.

The world becomes.

More normal again, I think what people like about radio is that the disruption the digital disruption and then have largely happened already right and so.

There is 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 yes, I mean, you know we're open to looking at at that as we as we always have then and.

Hi.

And we're always looking for an opportunity to to de lever an increase value.

Okay, that's very helpful.

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 million of 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.

Bided into scripted portion and then finally.

All right Ben what was the second along.

The second one was what was the total cost savings number you guys in the script.

Again.

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.

Would would be helpful. I know you may not want to give guidance just 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 going to have ample covenant cushion yeah, okay, but that we don't now.

And it.

Put us way, it's not going to do anybody any good for us the can give guidance not going to mean anything anybody guys. It now it's going to be an ugly number compared to last year and so I think the thing that.

That investors should now is that we're not going to have a covenant issue in Q2.

Yes, and no it won't be by a little bit.

Yeah, and then thanks, So I guess question the number I mentioned was.

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 that finalize number in front of me Ben but.

Called that out you'll see you'll see and if you want to circle back we are happy to talk through that.

I appreciate that it's been very helpful. Thats. 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.

Any other internal risk assessment, so I've been done because if.

Corporate 19 Resurge is for the end of third or the beginning of fourth quarter will we have different oh.

I will accompany function in the different manner.

Our goal for and are there any and second part. So the question is do we have any other.

Yeah.

Logs in London policies or things of that nature of hopeless in this catastrophic type of environment. We're in.

Yeah.

We do not have any policy that I've that I believe we've asked the question our business interruption policies don't cover this pandemic in any significant way is that correct well.

So there there is some possibility of coverage under some state legislation, but what we're seeing in most of it is going to be targeted towards smaller businesses.

Under 250 employees. So at this point were lagging.

We're acting on these option there won't be yeah. So thats 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.

Yes.

There's no guarantee that we've worked out well, 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 that.

By losses, resulting from viruses are generally excluded from policies that may get challenged in the Kohl's and if it does we will at least have all of our non-GAAP EPS ready to go.

Look I mean.

No we don't really I mean, we stress test Q.

Q4 down to some.

Some numbers, but you know if you have a repeat in Q4 of what Q2 looks like.

No. We know today, we're not prepared for that I don't think anybody is I mean, all I do as watched the news now 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 honestly I have no idea of what yeah, I'll I'll repeat of what happened in April yellow 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 operate with significantly less people.

So I guess, we've proved that we can weather.

A minus 60 quarter on radio.

And as that starts to look like it might happen again in fourth quarter, we would take whatever pereira measures we need to take.

Well I mean.

Yes.

So a lot.

I know you we.

We stress tested a great deal on the back half.

And I don't know what a second wave looks like him out adopter I'm not epidemiologist.

Since though is that as we get closer to a vaccine which people are saying can be here in Q1, Yes, I would also say that governments are.

More adept now at managing yes, sort of the hospitalizations 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.

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.

And second question less true presidential so 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 for the Oh, how can we make sure that we prevent that from ever happening again and have a downtick in those political ads not absolute actually we've been doing.

We actually punch above our way.

On on on political.

We.

Forgot what year. It was what was it wasn't last year. When you are we do like $8 million was that.

We did the high watermark was 9.1 in 2012.

And we did 7.9 in 16, you have we did $8 million Insixteen, Yeah, and then in 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 they've been moving primaries delaying I'm in you know it depends on how open the country is.

And.

And what People's perception of radio.

I had a conversation yesterday with.

[music].

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 budgeted number was flat.

No that the game has changed right now.

And.

And radio is about people being out in about an end 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. 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 and net and that could end up being.

Very helpful.

TB does not have the same flexibility that radio does.

To add units to there.

Onto them out as a carry networks and things of that nature. So so we're hopeful.

Thank you guys. So much for all the Judy Thank you.

Sure.

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.

We're sorry your conference is ending now please hang up.