Q4 2020 Urban One Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to urban one 2020 year end earnings call. At this point all the participant lines are in a listen only mode. However, there will be an opportunity for your questions and instructions will be given at that time if.
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During this conference call urban one will be sharing with you certain projections or other forward looking statements regarding future events or its future performance.
Urban one cautions you that certain factors, including risks and uncertainties referred to in the 10-K's 10-Q's and other reports it periodically files with the Securities and Exchange Commission could cause the company's actual results to differ materially from those indicated by its projections or forward looking statements.
This call will present information as of March 18th 2021. 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 AR.
A replay of this conference call will be available from one P. M. Eastern time March 18th 2021 until Midnight March 'twenty one 2021.
Callers may access the replay by calling 866 excuse me 171, 041 International callers may dial direct four zero to 97 008473.
The replay access code is 1854 to four 7%.
Access to live audio and a replay of the conference call will also be available on urban one's 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 are authorized or may be relied upon.
I'll now turn the call over to Al from C. Liggins, Chief Executive Officer of urban one who is joined by Peter D. Thompson Chief Financial Officer. Please go ahead. Thank you operator and also.
Today is our.
Chief administrative officer.
Karen Wishart.
CFO for TV, one Jody or and our general Counsel Christopher Simpson.
Hi.
Fourth quarter and year end results are out.
Net.
Anti climatic given that we've released.
Much of this information already in association with <unk>.
That we did but.
On that repeating story is.
As always fall and then the.
On a year that we experienced given the pandemic and the.
The depths of spare in the uncertainty to.
Rallied in the fourth quarter and.
Amid layoffs and cost cuts rally.
Our rallied in the fourth quarter and to actually.
Post a year that was greater than 2019, Israeli testimony to our amazing management team that really.
Sucked it up worked hard.
In Florida, all kinds of.
Unprecedented work conditions and I am truly grateful I know our investors are also appreciated.
They are from showed that appreciation with support of our our global refi that put us in a much better position extending out our maturities significantly in.
Our cost of capital also significantly so.
With that I.
I'm going to turn it over to Peter to go into the details on the numbers and then I'm going to add a little color afterwards about on new initiatives that we're working on and then we'll take some questions Peter.
Thanks Alfred.
So net revenue was up seven 3% year over year for the quarter ended December 31 2020.
Approximately $113 $5 million. This is sequentially up by 23, 5% from third quarter revenue.
Radio segment net revenue was down three 2% year over year on the fourth quarter, but was up 37, 5% from third quarter.
This is a significant sequential improvement from second quarter, which was down by $58 four per cent year over year in the third quarter, which was down by 31, 9% year over year.
This includes approximately $11 $5 million of net political advertising revenue.
Excluding political.
Radio segment net revenue was down by 27, 7% year over year.
National AD sales fourth quarter were up by 29, 1% year over year, while local AD sales were down 13, 7%.
Driven mostly by a historically high political advertising revenue, our Atlanta, Charlotte Philadelphia on Raleigh clusters, the most significant revenue growth in the fourth quarter.
Washington D C Baltimore, Dallas, and Houston clusters had the most significant revenue declines.
As previously announced as part of this station swap with Entercom and the station sales and Gateway, we exited the St. Louis market, We gave up WT am in Washington, D C and W. P. H I in Philadelphia, and we gained three new stations in Charlotte.
Looking at categories.
All the categories, except for government was down year over year for fourth quarter Entertainment travel automotive telecom and retail have the most drastic.
<unk>, followed by financial Health care services, and food and beverage.
First quarter 2021, pacings are currently down approximately 17%, excluding political revenues and minus 20% with political.
Excluding political by month January was down 28% February down 20% in March is down two five per cent. Obviously these are tough comps against pre COVID-19 months and also those months included significant political revenues, but we have seen.
A significant improvement in March pacings over the past week.
Net revenue for reach media was up by 28, 1% in the fourth quarter on adjusted EBITDA was up by approximately $2 $5 million year over year, including $1 $6 million of political revenue.
Demand for network radio targets on African Americans was more robust than either local or national radio demand.
Lower operating costs on a result of lower talent and compensation expense in the wake of Tom joined his retirement at the end of last year.
Net revenues from our digital segment increased by 77% in Q4, driven by the strength in direct advertising sales I, one digital including $1 $1 million of political revenue.
And as a result of increased demand from brands to engage with African American audiences on digital platforms. This contributed to adjusted EBITDA growth of approximately $5 $6 million year over year.
We recognized approximately $45 $6 million of revenue from our cable television segment during the quarter, an increase of one 8% cable TV advertising was up five 4%.
Excluding $1 $2 million of political AD revenue and it was up 11, 4%, including political.
Cable TV affiliate revenue was down by five 6% with rate increases of approximately $700000 offset by churn of approximately $2 1 million.
Cable subscribers as measured by Nielsen finished fourth quarter 2020 at $51 4 million down from $51 8 million at the end of the third quarter.
We recorded approximately $1 $6 million of cost method income less administrative expenses for our investment in the MGM National Harbor property for the quarter compared to $1 $7 million for the same period last year.
Operating expenses, excluding depreciation amortization impairments on stock based compensation decreased by $8 $1 million on nine 9% to approximately $74 1 million in the fourth quarter television programming content expenses were down by approximately $2 6 million.
Also include savings of approximately $1 million in radio station special event expenses, $1 $1 million and contract labor talent costs and consulting and professional fees.
The 800000, and reduced travel and office expenses and about $400000 in reduced or delayed marketing spend.
Radio operating expenses were down 22, 6% the radio SG&A expense line was down by 23%.
Mostly from the cancellation of stay.
On station events, and discretionary marketing and promotion expenses.
Radio programming and technical expenses were down 21, 7%, mainly from lower employee and talent compensation on reduced music royalties.
Reach operating expenses were down three 8% programming and technical expenses were down 17, 8% driven by lower talent and employee compensation expense.
As a result of the posts Tom Joyner morning show program and restructure.
SG&A expenses were up 29, 4%, mainly due to a nonrecurring favorable true up of event expenses in the fourth quarter of last year.
Operating expenses in the digital segment were up by 4% driven by higher cost of revenues and sales commissions.
<unk> expenses were down seven 8% year over year programming content expense has decreased approximately $2 6 million.
Operating expenses in the corporate and elimination segment were up by 11, 6% driven bypass from bonus accruals for 2020.
For the fourth quarter consolidated broadcast and digital operating income was approximately $51 9 million up 51, 3%.
Holiday that the adjusted EBITDA was $41 7 million, which was an increase of 51, 3% year to year.
All of our operating segments posted double digit or better percentage growth and adjusted EBITDA for the quarter.
Full year, adjusted EBITDA was 138.0 or $1 million in line with the previous guidance.
That we gave around the refinancing.
Interest expense was approximately $18 7 million for the fourth quarter compared to approximately $19 8 million for the same period in 2019.
Company made cash interest payments of approximately $23 $4 million on its outstanding debt in the quarter.
Benefit from income taxes was approximately $13 million in the quarter on the company received a net cash refund of $395000.
Net income was approximately $26 4 million or <unk> 58 per share compared to a net loss of approximately $7 $9 million or <unk> 18 per share in the fourth quarter of 2019.
Capital expenditures were approximately $622000 compared to $1 $2 million last year.
Net debt was approximately $781 8 million.
Compared to a $138 million of LTM reported adjusted EBITDA for total net leverage ratio of 566 times.
On January 25, 2021, we successfully refinanced all of the company's existing debt with.
Cash on hand, and $825 million.
Secured note at a rate of 7%, 38%, which is due February one 2028.
This transaction simplifies the company's capital structure and significantly extends our debt maturities and it also reduces the interest expense.
Under the company's 2021 ATM program as of March 17, 2021, the company had issued and sold.
On aggregate of 420439 class a shares and received net proceeds of approximately $2 $9 million.
I'm from the inception of our ATM programs to date, we have sold a total of $4 million 745541 class a shares and received net proceeds of 29 $26 9 million.
Also on February 19, 2021, the company closed on a new asset backed credit facility through bank of America on the new <unk>.
Al facility provides for up to $50 million in revolving loan borrowings on.
On the line of credit is currently Undrawn.
And with that I will hand back to Alfred Thank you Sir.
So as far as Q1 is concerned we're seeing robust.
Minimum pacing across reach me TV, one and digital continues to actually.
Very very well.
Excuse me.
And local radio as Peter had called out to you is steadily improving.
Something that.
Is.
In the press, but I don't think specifically call it out because it's been mostly local press and we haven't really made a note.
On a fish oil company.
Announcement about it is on February 22nd.
The company submitted.
For an RF E.
For the Richmond, Virginia Casino license and and we submitted a proposal as.
The primary owner of.
With that.
Of that license, we did it in <unk>.
Partnership with.
A gaming company called Peninsula.
The big debt has significant gaming experience owns casinos.
Cross the country and also operates already operates in Virginia the on the <unk>.
The race track colonial downs, and the associated gaming or <unk>.
Across the state so they've got significant experience in Virginia and resources.
Where we're.
Is it about this opportunity we've done well.
With our MGM National Harbor.
Investment.
We actually created.
This opportunity by over a year ago successfully lobbying the.
The Virginia General Assembly.
To put language in there.
On the casino itself that would actually spire minority investment, but most importantly on making sure that the Richmond license would be an open process where.
It actually make a proposal before it was actually going to be.
<unk> process, where the where the preference the Atlas.
I'm going to go to.
Yes.
State Designee.
Designated a federally designated Indian tribe.
Indian tribe actually at already had locked in.
<unk> seen a license as a preferred operator for Norfolk, Virginia, and so we want as an opportunity to go.
For Richmond.
You can actually go to.
Our website and it's called one <unk> casino resort in Dot Com and you can see all of information all about the project several videos explaining what we're proposing the impact that would have on the community renderings et cetera.
The company would one.
80 plus percent of our.
Of this entity versus the 7% we one of.
Of MGM.
From a partnering also with more than 50 local minority investors in the Richmond, Virginia market, which.
Is very important.
This is about making sure that the indigenous communities also benefit from.
Economic development opportunities and and this would actually be the only black owned casino in the entire country.
Yes continue.
Look for new opportunities create net to create value and also hover.
To give you an idea of how big the opportunity could be.
This particular opportunity should we.
The chosen.
Third rival our radio and in our cable TV business in terms of EBITDA scale. So.
It can be significant and and considerably further diversify.
The company again.
A significant value.
So the timeline is we submitted the.
The proposal on February 22nd Theres, a process, that's going on locally now.
On a selection committee put together.
Hi.
The city administration and.
And the city Council.
And theyre going to choose a preferred casino operator by the beginning of June it's a competitive process there six bids including ours that we're competing against Bally's Golden Nugget.
On the Cordish companies, which compete with MGM.
Maryland, two Indian tribes.
Yeah.
Bank debt.
Got it.
Decent shot at this and.
Just something you know too painful for on the Horizon people, who participated in our refi will probably largely familiar with our effort here because we explained it.
On a lot so isn't there a refi was actually signed.
Gives us the ability.
To participate in this RFP.
So things are.
Moving in the right direction in terms of the economic rebound strong strong continued strong interest in our demographic.
We had.
Conference call yesterday with the head of investment from one of the Big AD holding companies on them.
I'm talking about their commitment.
Not only multicultural targeted but a minority one.
<unk>.
Media. So I think we're continuing to see tailwind from from from.
From that whole movement.
And the company will continue to look to Delever pay down debt and.
And growth and grow shareholder value.
Operator, I'd like to open it up to audience for questions.
Certainly and ladies and gentlemen, if you would like to ask a question. Please press one then zero on your telephone keypad.
You may withdraw your question at any time by repeating the ones you're on command if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again if you have a question you May press. One then zero at this time.
And first one line of on Todd Morgan with Jefferies. Please go ahead.
Thank you and good morning, everyone and thanks for all the detail on some exciting news with the proposal, but just looking back at the media assets.
If you can talk a little bit about any sense of the political advertising displacement of your traditional local and national advertising is there any way to think about.
One of our normalized.
Sort of traditional advertising environment, and I guess secondly, if possible could you talk about the sort of the operating expense drivers for 2021, you. Obviously made a lot of changes this year with the pandemic how much of that kind of continues into 'twenty, one or how are you thinking about that thank you.
Peter do you want to handle.
And all I mean, I think his question was alright, you had a lot of political last year, what do you think normalized.
They will add revenue is going to be.
Right sure.
Yeah.
And then and then on the expense drivers so maybe start with the expense drivers we took.
A question on the I think on the last earnings call on probably on the previous one on it and I said then on I guess I'll repeat it it's a tricky one to answer but on a macro level.
Some of the expense savings that we made in 2020 on not really sustainable.
Particularly when it comes to programming on markets in at TV one.
When the pandemic hit we Couldnt make any programming and then as we kind of worked our way through it we were.
On producing less original content is a deliberate savings strategy to offset the downturn in the radio business and so some of that program and expense needs to be laid back in and is being led back in.
On associated with that last year, we were able to either eliminate or defer on <unk>.
Marketing expenses, so we're going to have to let those back into.
I would say on the radio business.
As I mentioned earlier Q1 tough comps right you know January and February pre Covid last year I know, there's a couple of million dollars of political in Q1 radio so.
Looking at the first quarter radio I think we see that those savings are coming through quite strongly in first quarter and they need to write because revenue is not as robust given what I just mentioned.
So you're going to have a balance of <unk>.
TV, one had a banner year on amazing year, but we're going to have to spend more resource. There. So you should expect to see the TV one EBITDA come back down this year for those reasons, but then radio.
The sequential progression of radio leads us to believe that radio will will grow this year certainly ex political we will keep our.
On a foot down on cost savings there.
On the radio division should be able to produce more EBITDA this year than last year, which will in turn offset.
Some of the some of the investments that we're making.
In the TV business, so I know thats, not really giving you any numbers, but it's it's tricky and it's also tricky when you talk about <unk>.
Political displacement on what do we think that that implies for normalized kind of add run rate.
You know when we get into Q2, I think we'll have a better feel for that we were down 60% essentially in radio in second quarter last year, and we just don't know how that's going to Pan out is too early to say.
And so.
I would say, it's very difficult to give a normalized ad.
Right in terms of run rate.
When we set the budget thought about while we think that we're going to be roughly half way between 2020 radio advertising levels in 2019.
Radio advertising levels and Thats, how we set our budget and that's kind of how we built our cost.
Cost structure around that.
And then finally.
The you know on the previous earnings call. We tend the similar questions and people were really looking for how does 2021 shape up from an EBITDA standpoint on that and at that point.
We had some previous guidance out there and.
Kind of one per ish range, and we said we.
On the budget will be set and not to go backwards from that number and I think thats still true and valid today.
Today as we look at the business.
Great. That's all very helpful. Thank you and as exciting to us to watch as the RFP process unfolds.
Thank you. Thank you next question please.
We'll go to Patrick Wang with volume on investments. Please go ahead.
Yeah, Thank you and good morning.
Can you talk a little bit about what this RFP and it sounds like the investment could be at net access of $1 billion and how do you plan to finance that going to be in the bond collateral group or.
Or is it going to be down through a permitted investment yeah, yeah, I'm not sure where you got $1 billion from.
So all of the press announcements.
The all in.
The all in spend on it is actually going to be.
Half that right out of it.
Call It five 500 million at million ish.
517, I think is the headline number of debt.
Proposed to the city at.
That includes everything all in construction cost interest carry the whole nine.
And it's also staged over a period.
Of time.
What the company is ultimately committing to.
Is backstopping.
Our $75 million common equity.
Investment Peninsula is going to put in 25 million of preferred.
And the whole no common equity.
Between.
One other investors local minority investors et cetera, I suspect the company you might ultimately write a check for like $60 million, just give or take right now.
So you know.
And he will do that.
With cash from our balance sheet.
Of which.
Where.
We're stockpiling, we're going to build a lot of cash this year.
We continue to have access to our ATM.
Equity program and we continue to take advantage of that from build cash that way we've got one.
<unk> from asset sales from our St. Louis asset sales coming in which is another $8 million you got another of other per.
Potential.
Smaller asset sales opportunity.
And it will be project financed right. So that's the bigger thing I think debt that you are asking yes, there'll be a common equity commitment a.
Our preferred equity commitment and there'll be a separate project financing debt.
We'll probably be $385 million or so for the for the construction of the casino.
So nowhere near as big.
Our project is sort of view.
Just.
Just outlined.
And outside of our existing capital structure.
Right and then the $75 million.
Equity check will be coming out of the permitted investment.
Basket correct that come out of it come out of our baskets that.
And again I suspect it will be smaller than that now, but that's just one.
We're committed to that.
Because you've already raised money from local investors et cetera, but yet to come out a permitted investment basket our projections also.
Quite frankly by year end share with us being able to make that investment. In addition to still have enough left over to continue to pay down debt.
Right speaking about paying down debt Oh your debt is the first one secured note.
Do you intend to buy bonds per market or how do you pay down debt.
We have a call right now.
We a we could buy bonds in the open market.
I believe when we want it to I think.
On the last I looked at.
Yesterday bonds are trading at like 100, 175, almost one O. Two we have a right to prepay.
Up to 10 per cent of the tranche each year one of three so in the event that it's cheaper to just buy it and the market will do that if not.
We'll just pay the.
And the 103 premium but just.
Just a quick question on the preferred partner partner that peninsula at this part of debt Boyd gaming entity.
Well.
So it's the same it's the same management team.
But the first peninsula gaming Boyd bought for one two or $1 $4 billion I don't remember it was it was it was a big number.
And that management team.
Created another entity called <unk> Peninsula Entertainment too.
And they own.
Gaming facilities in New York, Louisiana, Iowa, and what I described to you in Virginia.
So it's the same people just a different entity and not Boyd.
That's it congrats thank you. Thank you.
Ladies and gentlemen, just a quick reminder, if you do have a question. Please press one then zero at this time.
And allowing a few moments Mr Liggins and no further questions coming in.
Thank you operator, and thank you everybody for your attention and support.
Sorry, I'm, a little under the weather today.
But we appreciate it please reach out to Peter or myself offline. If you have any questions.
I think about for the conference call.
Operator, that's it thank you.
You're welcome and ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
We're sorry your conferences.
Now please hang.