Q3 2021 Urban One Inc Earnings Call

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to the urban one 2021 third quarter earnings call. As a reminder, this conference is being recorded we will be getting a call with the following safe Harbor statement.

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 ever.

Urban one cautions you that certain factors, including risks and uncertainties referred to in the 10-K's 10 cues and other reports he periodically files with the Securities and Exchange Commission could cause the company's actual results differ materially from those indicated by its projections or forward looking statements.

This call will present information as of November 4th 2021. Please note that urban one disclaims any duty to update any forward looking statements made in the presentation.

In this call everyone. One may also discuss some non-GAAP financial measures and talking about its performance.

These measures will be reconciled the gap 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 will be made available from 12 P. M. Eastern standard time today November 4th 2021 until 11 59 P. M November 8th 2021 colleague.

Colleagues may access the replay by calling 18662071041 or 4029700847 with the access code 816858 to.

Access to live audio and a replay of the conference will also be available on air with one's corporate web site again 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 will now turn the call over to Alpha Chi Liggins, Chief Executive Officer of urban one who is joined by Peter Thompson, Chief Financial Officer. Mr. Liggins. Please go ahead.

Very much operator, and welcome everybody to our third quarter results Conference call also with Peter I today are Christopher Simpson, Our General Counsel, Karen wish for our secret administrative officer, and Joey drew or our Chief Financial Officer at T V. One I.

We issue our results and and I think you have to yeah.

The the the Big thing that you know people are probably going to want to talk about and the Q&A as you know the results of the the Richmond gaming referendum, which we narrowly lost yeah, 50, 149 and yeah. It's.

It's definitely was a a close vote and and and very unfortunate given what we got the significant benefits to the city, where I'm happy to take questions on it and and discuss it everybody wants to know.

Well you know what next we it's not 20th 24 hours old and so we're in the process of evaluating our our our options yeah as is I think the city too.

Feel like it's a great project and and an opportunity.

In any event you know we do plan to continue to pursue this opportunity in the Commonwealth of Virginia, We just gotta figure out exactly how we're going to go about it and so yeah I'm gonna be happy to take questions on it but again the the information is 20th.

Four hours old for us. So we really are just kind of digesting at all.

Yep that aside the company based in business is doing exceptionally well and and our results yeah speak to that.

We're.

Got to increase our guidance for four year EBITDA from the mid 130 to 140 to 145, which are really good about the demand that's out there for our audience, even though the.

[noise] economies got its challenges, which supply chains, and auto and yeah et cetera. There there still is a a.

A decent recovery trajectory happening and and we feel.

Feel like we're gonna continue into this in this recovery mode with also the wind in our sails surrounded by our particular business into 2022, so with that I'm going to turn it over to Peter and let him take you through the details of the numbers.

Thank you all for it can solve that I should just have EBITDA was $42.7 million for the course of eight cents or $3.2 million from 2020.

It was up for $1 million from 2019, we've been seeing an increased demand for major advertisers for a digital network and cable inventory, which is reflected in a segment results uhm compared to Prepandemic 2019, adjusted EBITDA for a radio plus re.

<unk> plus digital segments is up 12.7% in a cable T V segment is at 9.5%.

Yeah today adjusted EBITDA is also favorable to 2019 and we expect the same should be true for the full year.

It is often said we've raised a full year just of EBITDA guidance to between 140 $45 million.

That revenue for color was off by 21.3% year over year, approximately $111.5 million net revenue for the radio stations radio divisions Pardon me was up 21.8% year over year in the third quarter local advertising sales for Q3, we're up 32.

4% year over year, while national AD sales were down 15.7% compared to last year or down 4% excluding political.

Most of the major advertising categories.

Up from last year, except for government on public spending, which was down 29% due to normal occurring political in the sense of spending but.

But that was still the largest category entertainment category. So the biggest increase from last year up 240% driven by casinos concerts and events.

The other categories services retail health care financial food and beverage on automotive also a double digit increases compared to Q3 last year telecommunications was the only category that was down from last year.

Excluding political fourth quarter of 2021 is currently pacing up in the high teens percentage range fourth quarter political revenue in 2020.

Was $15.4 million versus a forecast for fourth quarter of 2021 of approximately $1.5 million. So revenue comes to the fourth quarter are going to be impacted by approximately $13.9 million, while we forecast.

Net revenue for each media was up by 28.2% in the third quarter driven by increased appetizer demand for network audio.

And adjusted EBITDA that I was up by $410000 a year over year.

Net revenues for digital segment increased by six $5 million in the quarter continued demand blackout and talkative brands drove the growth in direct emphasizing sales I want digital.

Just an EBITDA increase for the cost of my approximately $3.8 million a year over year.

And by $4.7 million compared to 2019.

Digital platform is becoming a significant drive a revenue and EBITDA growth for the company and with a higher multiples clients digital businesses.

Believe is now significant value being created by those digital assets.

We recognize approximately $48.8 million of revenue from our cable television segment during the course of an increase of 9.2%.

Cable television advertising revenue was up 17.2% excluding politically.

Increased demand drove higher average unit right I'm Cleo television advertising revenue was also up by $1.1 million cable T. V affiliate revenue was up by 6% driven by rate increases and conversing free subs to paying subs, which is partially offset by John.

<unk> subscribers T V. One is measured by Nielsen finished third quarter of 2021 of $42.3 million down from $45.5 million at the end of Q2, Cleo had $34 6 million Nielsen subscribers.

We recorded approximately $2.1 million cost method income less administrative expenses foreign investment in the MGM national hover pharmacy for the quarter compared to $1.6 million last year and $1.7 million in 2019, so the MGM businesses doing exceptionally well.

Operating expenses, excluding depreciation and amortization impairments in stock based compensation increased approximately $74 6 million in third quarter compared to $55 $6 million in Q3 of 2000 2075 $5 million in the third quarter of 2019.

Chloe compensation expenses increased by approximately $4.7 million due to the reversal of temporary salary cuts that were in effect last year and also staff salary increases given at the beginning of third quarter. This year.

Following several years pay freezes.

Program content I'm also Ization, a cable television segment increased by $2.7 million.

Revenue variable expenses increased by $2.4 million.

Boston and promotional spending increased by $2.2 million, mostly T V. One.

Outside services increased by $2 million.

Expenses increased by $1.6 million.

Increase in corporate selling on general of minutes or administrative expenses.

Primarily to $2.5 million of expenses related to the Richmond gaming opportunity, which I added that to adjusted EBITDA.

Radio operating expenses were up $5.1 million against the revenue increased to $6 $9 million employee compensation and commissions were up as well as expenses to support special events or Lance stations hosted a successful 25th anniversary birthday Bash in July.

Reach operating expenses were.

$26 million against the revenue increase of $2.2 million, mainly higher mainly due to higher employee and talent compensation.

Alea station costs.

Operating expenses and the digital segment were up by $2.7 million against the revenue increased $6.5 million.

Predominantly five variable expenses related traffic acquisition sales causes cable television expenses were up $6 $2 million a year over year programming content expense increased by approximately $2.7 million sales and marketing expenses were up approximately $2.4 million driven by increased media campaigns.

To support programming.

Operating expenses and the Cobra, an elimination set up by $3.3 million, which included the Richmond Casino chase cost of $2.5 million.

For the third quarter consolidated broadcast in digital operating income was approximately $49.1 million an increase of 11.2%.

Interest expense was approximately $15.9 million for the third quarter compared to approximately $18.2 million for the same period in 2020.

And the company may cash interest payments of approximately $31.6 million in the quarter.

Since semiannual debt service payments of Jew February 1st and focus post.

Provision for income taxes was approximately $6.3 million in the quarter. The company did not pay any cash taxes.

Net income was approximately $13.9 million or 2007 cents per share compared to a net loss of $12.8 million or 29 cents per share third quarter of 2020.

Capital expenditures were approximately $1.7 million compared to $526000 last year.

Many repurchased 6715 shares class the common stock for $39000 executed stock best repurchase of 3285 shares classes common stock for $18000.

As of September 30th 2021, total gross that was $825 million.

Ending unrestricted cash balance was $111 $4 million.

And therefore net debt was approximately $713 $6 million compared to 159 $4 million of LTM adjusted EBITDA for a telephone that leverage ratio of 4.48 times.

We continue to generate strong free cash flow unexpected here and cash balance is now and the 160 million dollar range, reducing net debt to approximately $665 million.

As we think about net leverage moving forward with targeting to get below four times within the next 18 months and ultimately we see a path to get below three times based on the free cash flow generation from our core businesses.

With that I'll hand, right now thank you.

As you heard the company is.

As in good shape from a leveraged standpoint, we've come a long way.

Many of you have been following the company.

Wow.

Two.

A place where.

It's manageable and we continue to look.

To reduce our leverage.

We as it relates to what are we going to do with all our cash or hope had been that we're going to have invested in the Richmond casino opportunity.

We are.

Focused on figure it out.

What our options are for.

Plan, B et cetera, but we're also exploring a number of other opportunities.

With the company.

Stated before I do believe that.

The radio business is right for some sort of.

Consolidation that opportunity and particularly and market consolidation or digital business has become real and robust and has a high level of demand.

From from advertisers.

So we're looking at that space and we continue to figure out what our cable television.

Both options are we don't have a direct to consumer.

Play.

At this point in time.

We've been spending a lot of our time and energy obviously in Richmond.

Casino effort and so I think.

Will will.

We'll take a step back figure out what.

The next moves.

In these in these places.

We've got.

A lot of cash out of that.

Net and down our debt.

One option to consider also in the future is.

<unk>.

The prepayment of of some of our debt that's not off the table.

And so.

We're in the middle going through.

Just starting.

Starting our budget process and going through our budget process now.

Hi.

I am focused on us coming up with our strategic plan.

Now during this period of time going into the next year, So I feel.

Very.

Bummed out.

The.

The casino boat, however, I feel great about where the company is and how our team has has operated we've had an extraordinary amount of support from from our team for all of our efforts including.

The regiment effort.

And all the while we're pursuing that our guys are just our guys and women.

Have.

Just been hitting on all cylinders to make sure that that we perform as we still exist in a in a choppy environment.

So operator with that I'd like to open the line up for questions from.

The folks that have them.

Suddenly ladies.

Ladies and gentlemen, if you wish to ask a question. Please press one then zero on your telephone keypad you may withdraw your question at anytime by repeating the one zero command, we ask if you're using a speaker phone. 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 of all line of Patrick Wang with Boy investments. Please go ahead.

Yeah, Hi could you maybe just talk about what the borders concerns were on the boat down the referendum, where was the the reason behind that yeah I mean.

People have myriad of concerns when you talk about gaming referendums everybody has their reasons why they're either for them or against them.

A lot of the.

A lot of the reasons and the themes are consistent across the.

These referendums across the country. So.

On the four side people want jobs, they want tax revenue for the city some people actually.

The casino gaming experience.

Something new and exciting to do in their city on the against.

Some people are just against gambling.

They feel that it's scale.

It's got a moral tinge to it.

Despite the fact that it's illegal across.

The country and the Supreme Court said, it's okay for sports betting some people have issues with it some people think casinos bring crime, which you know.

Is not the case, there probably the most secure busy.

Business institutions.

To banks.

In the country.

And this referendum.

Some people.

Distrust government right.

Don't want to give whatever their local municipality is.

In or pass it anyway, because they don't think that they don't believe the tax revenue number because they don't think that the government is going to spend it.

In the right way.

I think that anybody who is politically.

Plugged in.

Where of the Virginia gubernatorial race and what's going on in Virginia is a bellwether I think that we got caught.

In.

A significant.

Republican surge conservative Serge.

Yeah as.

Is played out.

And the Governor's race and.

And a basically a sweep of all the high level offices, so governor Lieutenant Governor.

Don't know if they call the attorney General's ratio.

But it looked like it was heading that direction and a flip of the of the Virginia House of delegates.

Conservative voters conservative Republican voters.

Generally are not favorable to gaming referendums.

And there was absolutely a surge of more Republican Republican Conservative voters in the city of Richmond.

And the city of regiment election.

So.

Everybody's got their reasons those are kind of some of the highlights.

As to why people would be against it.

But in the end there were probably 8000, new voters that came into the Virginia into the Richmond City electorate and.

And that was a lot of new voters.

And most of those came to vote for the Republican ticket and can probably 70% of those voted.

No against the casino referendum.

Our polling show that's how.

Republicans felt about it anyway.

So.

So it's sort of a casino.

You will not be billed ever enrichment, what what would happen.

The proposal to the to that.

You are able to then there will be a casino in Virginia, a new casino, while I look at it.

Well well well there's already for that have been approved in different locales right, So Norfolk, Portsmith Danville and.

Importunate, obviously, Norfolk, Portsmouth Danville in Bristol. So those are approved those referendums all past.

<unk>.

Mid sixties high sixties, I think Bristol past at 70, the Richmond electorate is very different.

Richmond electorate does have.

A.

A number of these.

Conservative Republicans in there, but that's about 15% it surged to 20 plus percent.

And this and their selection, but it also has a progressive liberal Democratic.

Democratic Liberal.

Part to it and they were anti casino as.

As well and you can see how the progressive Liberal politics plays out on the national stage.

So as to what happens.

It's gonna be I mean, I do think.

People in the city is probably figuring out their options now they probably have.

An option to go at it again, but they got to decide if they.

If they want to do that.

Yeah, I believe there'll be a casino in central Virginia, but that's going to be.

An act.

By the General Assembly.

Which is.

This is changing over so there's a lot of moving pieces as to what happens next alright, and again, it's 24 hours old. So I don't think anybody in the city knows what do we do next.

Actually I know nobody in the city now is because I'm talking to them.

And.

And we're just we're really just starting to think about what are.

Our our options are.

Four.

Other locations et cetera, and again that's ultimately.

Something that has to be discussed with the general Assembly.

But.

That will decide.

Use that cash to pay down the first lien I mean is there a timeline that you can point to it.

We hadn't I mean.

We hadn't thought through that right.

And so but look I brought it up in my comments for a reason right.

There's.

No sense of our sitting around.

<unk> almost $200 million cash.

Yeah.

We like reporting.

Leverage ratios, but we realize that as a net of cash leverage ratio right.

We've had a we were stockpiling cash for this particular opportunity now by the way we're going to continue to build cash right. So even if we do decide.

By the end of the year are you know I think we got a window or something like that that we've got to do it by an.

Early or mid January even if we pay down.

Some that it doesn't preclude us from continuing to pursue this or other things because we.

We have a revolver, we're going to be building cash.

I think that will be prudent.

Stewart's of.

Of the resources here and.

And do the right thing to make sure the company stays healthy in.

Increase our free cash flow.

Alright.

Ah No question regarding your comment on good market and I am sorry.

I think I think I answered your question and hopefully that.

We've got to make a decision by the beginning mid January basically whatever the anniversary was on our own.

On the issuance of our first lien debt.

Got it.

Thanks for that.

It's going to take you guys need to comment on the market consolidation radio.

What are you thinking in terms of either buying or selling.

From the radio segment.

We are open to.

Buying selling or swapping now.

I just you know.

Know that this is a better business when you've got scale.

Inside markets and and because our company has historically been focused on.

Urban formats in urban audiences.

We're not at the full complement of stations and most of our markets.

And so there is there are M&A opportunities.

And market from that perspective.

It all depends on what you end up paying for those opportunities.

You want to.

You want to make sure at the end of the day, you're you're creating value in reducing leverage right now and.

And so we we continue to look at these things and.

Now.

Them as options.

Yeah.

But if they're not if they're not at a at a price that makes sense, we won't do and we'll just take our cash and pay down our our existing debt and keep it moving.

Alright.

Is there a radio.

Revenue level is the past 2019 are.

Your comment about the patients.

The teams, but that's overall advertising for the company that.

Yeah, no where.

And we have not surpassed 2019 levels, but.

You really got to think about business.

Because we segment that we have the radio segment, we have the reach segment and we have the digital segment. When you look at our competitors.

Put in all of those together and that's why I called out in my script when you look at.

Radio plus reach plus digital.

That were actually ahead of.

2000.

19.

So yeah, even even in fourth quarter. The revenues of when you combine those three elements will actually be ahead, but if you just looked at a straight radio segment that doesn't have the digital growth.

You're not going to be surpassed in 2019 levels.

Does that does that makes sense.

Yes, yes.

The political I'm always a little bit too early to look of 2022, but I still at the peak level, you'll have $20 million political.

2000, 22022 will be at the same level or slightly better.

Based on what we just saw down in Virginia, We think it's.

That's going to bode well for next year's political revenues for US Yeah, Virginia, I think there was $150 million spent on that raise the governor's race.

Alright.

Great. Thank you. Thank you.

And ladies and gentlemen, just quick reminder, if you do have a question. Please press one then zero at this time.

And the next one line of <unk> around with more debit. Please go ahead.

Yes, Hi, I just wanted to follow up on that consolidation question.

If you are looking to consolidate or.

We could talk about any transaction having too.

Makes sense from a valuation perspective, how does that put it in perspective of your levers reduction goals will you want these transactions towards will be delevering or would would you mind taking leverage up.

If the transaction this company.

Yeah, I mean, I think I just.

Said that we'd like it to be.

Levering.

In addition to creating value I guess that does start to present a challenge once you.

Leverage falls below a certain level right now.

And so.

I got to give that some more thought.

Wow.

But generally generally speaking.

We we haven't done we haven't really been in a position to done transactions transactions that.

Brought on leverage you know I mean not.

Not that long ago, our leverage was a couple of turns higher right. So.

Darn leveraging transactions when your lever to close to seven times, it's difficult.

And obviously doesn't make sense.

So I just got to think about it.

More we like sitting in.

In this position now.

But look if we had done.

If the casino opportunity passed we were going to send a $100 million out the door into.

Basically a project financed go start off with a two two year buildout time or leverage was going to go up but I think that the marketplace would say that's a good thing because you're going to create a lot of value right now so.

You know.

That's that's kind of how we would look at any.

Transaction.

The radio businesses is different because.

And and the reason I talked about and market is because and market you can really kind of quantify what you're.

Immediate cost synergies are and you can rely less if not at all.

On revenue synergies.

Which is a good place to be right, let revenue synergies, which are hard to quantify and may or may not happen, let those be the gravy alright.

But if you've got cost synergies in the market.

And market acquisition.

At least gives you a floor.

Of profitability that you could expect and then you can figure out how you want to price that right.

And that's what you're willing to pay.

Got it and just going back to Ya.

Comment about making a decision in January.

It doesn't look like there's another you'll have plenty, but it doesn't seem like anything is out there at this point and if you're still kind of evaluating your emanate strategy doesn't it just makes sense too.

Known sooner rather than later because.

Doesn't seem like there's a.

There's another ultimate use for that cash right away.

I don't know again like I said, it's 24 hours old one of the things I love about people as soon as they get news, they're like Okay. What are we going to do next.

I mean.

I don't know I'm still kind of thinking through that now.

We we.

In any event.

Whether we had made the casino investment or not we were going to contemplate whether or not it made sense to pay down.

Any of our debt.

By the January timeline, we negotiated for that feature in our that for a reason because we wanted to have the ability to delever and so.

Yeah, I don't think it makes a difference whether or not we decided to do it by November 15th or whether or not we do it by January 2nd.

I think we need to spend the time figure it out.

What's the right path with a company.

And again, we got a lot of fresh information.

That that we're dealing with and we need some time to.

To focus and strategize.

Thank you.

But but to your point, if we don't pay down debt by.

January we can't do it again for another year. So that's the reason.

I got to ask the timeline question.

Income.

I.

Ah specifically talked about that particular day.

Date.

Got it.

Yeah, that'd be a lost opportunity for a year.

Our next question from Matthew essentially free with the miserable. Please go ahead.

Hi, I am wanting guys.

I was I was wondering could you remind us of your of the seasonality and the business is just doing the math here, obviously, there's a sequential slipped down.

In EBITDA in the fourth quarter embedded in the guidance and I'm just wondering it's obviously been a chaotic 18 months.

Yeah. So.

I called out.

The political numbers, that's the biggest driver right. So fourth quarter last year, we had $15 for my own political we're on anticipating about a million and a half so we're missing.

It almost $14 million, a political revenues campaigning against last year, hence the.

The step down in queue for.

Yeah. So.

Alright, I guess.

My <unk> My question is more about third quarter versus <unk>.

Compared to what sorry to queue to them or.

Third quarter.

EBITDA 42, and a half million dollars versus fourthquarter embedded in the guidance seems like it somewhere in the mid to high twenties.

I guess I'm trying understand what the seasonality is there right. Okay. So.

It's.

Not all of our seasonality so.

Cable television advertising.

Is more about how much advertising program and write off.

We're going to take.

So give me a second just looking at fourth quarter.

So I mean look gone back let's go back to 2019 that might give you a better take on it if we look prepandemic fourth quarter in 2019, we did 27 and a half million dollars of EBITDA.

With a $45 million of revenue in radio $14.7 million, but.

Reached at 1 million two digital was kind of break even lost half a million dollars cable television $16.9 million of adjusted EBITDA I'm $44.8 million in revenue so.

Had 100 $106 million in revenue in 2007, and a half million dollars.

Of adjusted EBITDA, and if we just go to the bottom line and we're saying we're going to be kind of in a similar range on the bottom line in fourth quarter. This year compared to the fourth quarter of last year and so so yes, there is a seasonal.

There was a seasonal drop off.

In 2019.

And we're gonna mirror.

What is that seasonal fluctuation on the the expenses on the cable television side, because that appears to be a big part of the the the fact that you have a 2019.

Is around.

Couple of things programming Roy off.

And spend and whether we are on paying bonuses.

Pendant on on performance, probably the three expense drivers.

Okay.

Okay. Thank you.

Thanks, a lot.

And Mr. Lincoln's we have no further questions in queue.

Okay, great. Thank you operator, and thank you everybody for.

Tuning in and is always.

Offer Peter and I are available offline to answer any follow up questions.

Anybody might have thank you very much.

Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.

We're sorry your conferences ending now please hang up.

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the urban one 2021 third quarter earnings call. As a reminder, this conference is being recorded we will begin the call with the following safe Harbor statement.

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, Ks 10, Qs 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 November 4th 2021. Please note that urban one disclaims any duty to update any forward looking statements made in the presentation.

In this call ever been 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 will be made available from 12 P. M. Eastern standard time today November 4th 2021 until 11 59 P. M November eight 2021 colleagues.

Callers may access the replay by calling 18662071041 or four zero to 90 700 847 with the access code 816858 to.

Access to live audio and a replay of the conference will also be available on urban one's corporate website again at www Dot urban one dot com.

Replay will be made available on the website for seven days.