Urban One, Inc.

Welcome to Urban One's first quarter conference call. 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, refer to in the 10-K, 10-Q, 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 June 10 2024 please note that urban one disclaims any duty to update any forward looking statements made in this 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.urbanone.com. A replay of the conference will be available from 5.30 p.m. Eastern Time 6-10-24 until 11-59 p.m. 6-17-24. Callers may access the replay by calling 866-207-1041. International is 402-970-0847. Callers may dial direct. The replay access code is 1372 800. Access to live audio and a replay of the conference call will also be available on Urban One's corporate website at www.urbanone.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 Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter D. Thompson, Chief Financial Officer.

Thank you very much, Operator, and also joining Peter and I, as usual, Jody Drewer, our Chief Financial Officer at TV One in Clio, Chris Simpson, our General Counsel at and Karen Wishart, who is our EBP administration. And thank you. We haven't, you know, done a call in a while because we've, you know, been going through a long and arduous audit, you know, with a new audit firm. You know, but as you have seen from the filings and the press release, you know, we are finally completed. with the year end 2023 audit and also our first quarter 2024 audit results as well. And so, you know, we're officially back in compliance with NASDAQ and so, you know, very happy about that. And in time to, you know, keep our eyes, you know, moving forward in terms of, you know, of filings to come. And you saw from the year-end results, we were right in our range. The guidance that we've been giving all along came in at $128.4 million of the year-end adjusted EBITDA. Something that we've been, yeah, asked on a consistent basis and we haven't, yeah, been in a position to do or haven't been willing to do at that point in time is talk about what we think 2024 is going to look like. But, you know, at almost the six-month mark, we want to provide 2024 EBITDA guidance And we expect, depending on how robust political is, to do 110 million to 120 million of EBITDA in the 2024 calendar year. So with that, you can triangulate where you think we're going to be in terms of leverage ratios, et cetera. The political landscape is yet to play out. We're hopeful about it, but it's starting now. For us, the primary season wasn't as robust as we would have liked it to be, but we think that the presidential landscape will be quite robust, and we're having really good conversations. So with that, I will turn it over to Peter to get into the specifics of the numbers. We've got more than usual because we're dealing with two reporting periods.

So, Peter? Thank you, Alfred. Just a couple of clarifications. We got audited results for 23. Q1 would technically be unaudited, although it's been reviewed by EY and signed off. It's not actually audited until I finish out the annual audit. And then the guidance number that Alfred referred to would be adjusted EBITDA in the 110, 120 range. And with that, consolidated net revenue was down by 9.2% year-over-year for quarter-ended December 31st, 2023 at approximately $120.3 million. Net revenue for the radio segment was $41.7 million, decrease of 12.4% year-over-year by 23% on the same station basis. According to Miller Kaplan, our local ad sales were down 6.8% against a market that was down 7.2%. National ad sales were down 37.2% against a market down 24.5%. And political advertising was the largest driver of that decline in Q4, down $6.6 million in the radio division, or 76% year over year, which was expected. That is not unexpected. Net revenue for the REIT segment was $10.8 million in the fourth quarter, down 9.7% from the prior year. Adjusted EBITDA was $3.4 million, up 10.6% for the quarter. Net revenues for the digital segment decreased by 12.5% in Q4 to $21.2 million. Direct national sales were down, while local radio, streaming, and podcast revenue were all up. Adjusted EBITDA was $3.5%. $5 million, which was up 82%. We recognized approximately $47.3 million of revenue from our cable television segment during the quarter, a decrease of 4.9%. Cable TV advertising revenue was up 1.9%. An updated rate card reflecting current delivery drove the overall rate down, but increased volume along with additional units applied towards ADU helped mitigate the rate impact. Cable TV affiliate revenue was down by 13.4%. The favorable rate increases offset by net churn. Cable subscribers to TV1, as measured by Nielsen, finished Q4 23 at 42.9 million dollars, sorry, 42.9 million subs compared to 44.0 million at the end of Q3. And Clio TV had 41 0.4 million Nielsen subs. Moving on to the Q1 revenues consolidated, net revenue was down by 5% year over year at approximately $104.4 million. Net revenue for the radio segment was $36.4 million, an increase of 3.3% year over year, but a decrease of 7.9% on a same station basis. According to Miller Kaplan, our local ad sales were down 1.9%, against the market that was down 7.9%. And our national ad sales were down 18% against a market that was down 4.3%. Net revenue for the REIT segment was $8.5 million the first quarter, down 22.4% from the prior year. Just the debit dial was $1.8 million, down 47.7% for the quarter. Net revenues for the digital segment decreased by 7.3% for Q1, to $14 million. Direct national sales were down, while CTV, local radio, streaming, and podcast revenues were all up for the quarter. Just to leave it there, it was $3 million, down 20.1%. We recognized approximately $46.2 million of revenue from our cable television segment during the quarter, decreased to 6.9%. Cable TV advertising revenue was down 1.8%. An updated rate card reflecting current delivery drove average unit rates down. The increased volume and increased urban want honors sponsorships helped mitigate the rate impact. Cable T affiliate revenue was down by 12.8%, with favorable rate increases of $1 million offset by negative $4 million of churn. Cable subscribers for TV1, as measured by Nielsen, finished Q1 2024 at 40.7 million compared to 42.9 million at the end of Q4. And Clio TV had 38.5 million Nielsen Sons. Turn into operating expenses for Q4. Operating expenses excluding depreciation and amortization, stock-based compensation, and impairment of long-lived assets increased to approximately $105.6 million for the quarter, up 1.6% from the prior year. Radio operating expenses were up 6.5%, or $2.1 million. The Houston radio acquisition, which was effective August 1, 2023, added approximately $3.1 million of expense. So if you normalize for that, expenses were actually down. On a same station basis, variable expenses relative to revenue such as sales commission, bonus compensation, bad debt, and national rep fees were all down. REACH operating expenses were down by 15.1%, driven by reduced variable expenses tied to revenue such as talent compensation, sales commissions, and bonus compensation. Operating expenses in the digital segment were down 17.2%. driven predominantly by variable traffic acquisition and sales expenses tied to lower direct advertising revenue. Cable TV expenses were down 4.5% year-over-year. Content amortization was up by $1.5 million, driven by an increase of $600,000 for 2023 originals and $1 million for pre-2023 write-offs related to programming tax credits. That was non-cash and that was added back to adjusted EBITDA. This increase was offset by a reduction in promotional media spend of $1.7 million due to the timing of return in series. $900,000 driven by reduced bonuses and $200,000 of reduced travel and expenses in the quarter. Operating expenses in corporate elimination segments were up approximately $5.9 million primarily as a result of a higher non-cash expense for the CEO's TV1 award and higher third-party consulting and audit expenses. For adjusted EBITDA, we added back $2.8 million for the non-cash TV1 award expense and $2.6 million for non-recurring professional fees related to the audit expenses. and $1.7 million for prior period balance sheet adjustments, including a write-off for computer hardware losses. For the first quarter, operating expenses excluded in depreciation, amortization, stock-based comp, and impairment of long-lived assets increased to approximately $88.3 million, up 11.6% from approximately $79.1 million incurred in the first quarter of 2023. Radio operating expenses were up 13.1%, or $3.5 million. The Houston radio acquisition added approximately $3.2 million of expense, so the bulk of the expense increase related to the Houston acquisition. Reach operating expenses were down 10.9%, driven by decreased affiliate station compensation expense and lower programming talent costs. Operating expenses in the digital segment were down 3.1%, driven predominantly by lower traffic acquisition costs, which related to lower direct revenues. Cable TV expenses were down 1.5% year-over-year. Content amortization expense was down $2.1 million, driven by an increase of $800,000 for originals, which was incremental hours, offset by $2.9 million of acquisitions gone out of license. A million dollars increase in marketing and promotion expense was due to timing of campaigns. And there was a half million dollar increase in travel to the Urban One Honors event. Operating expenses in corporate elimination segment up by approximately $7.3 million, primarily as a result of higher third-party professional fees. We had a $5 million increase non-recurring professional fee related to the prolonged audit and remediation of controls, which was added back to adjusted EBITDA. Consolidated adjusted EBITDA was $26.4 million for the fourth quarter, down 30.5%. Consolidated broadcast and digital operating income was approximately $38 million, a decrease of 19.6%. Consolidated adjusted EBITDA was $21.5 million for the first quarter, down 28.9%. Consolidated broadcast and digital operating income was approximately $32 million, a decrease of 18.5%. Interest income for Q4 increased to $2.5 million compared to half a million dollars in the prior year. Interest expense decreased to approximately $14.2 million for the fourth quarter, down from $14.6 million in the prior year. due to the lower overall debt balances, and the company made cash interest payments of approximately $121,000 in the quarter. Interest income increased to $2 million in the first quarter from $300,000 last year. Interest expense decreased to approximately $13 million for Q1, down from $14.1 million last year. Due to the lower overall debt balances, the company made cash interest payments of approximately $26.8 million in the quarter. And during the quarter, the company repurchased $75 million of its 2028 notes at an average price of 88.3% par. The next semiannual debt service payment is due on August 1st. A $5 million impairment charge was recorded in Q4, primarily for our Washington, D.C. radio market, and there were no impairments recorded in first quarter 2024. Provision for income taxes was approximately $2.7 million for the fourth quarter, and the company paid cash income taxes in the amount of $337,000. Provision for income taxes was approximately $2.5 million for the first quarter, and the company paid cash taxes of approximately $1.6 million. Net loss was approximately $11 million or $0.23 per share compared to a net loss of $1.9 million or $0.04 per share for the fourth quarter of 2022. And for the first quarter, net income was approximately $7.5 million or $0.15 per share compared to a net loss of $2.9 million or $0.06 per share for the first quarter of 2023. During the fourth quarter, the company repurchased approximately 396,000 shares of Class D common stock in the amount of $1.4 million. During the first quarter, the company repurchased approximately 256,000 shares of Class D common stock in the amount of approximately $1.3 million. And that related to the employee stock pool. Capital expenditures for the quarter were approximately $1.8 million. And as at December 31st, 2023, total gross debt was $725 million. Ending unrestricted cash was $233.1 million, resulting in net debt of approximately $491.9 million, which we compared to $128.4 million of LTM adjusted EBITDA for a total net leverage ratio of 3.83 times. Pro forma for the Houston radio acquisition total net leverage was 3.74 times. As of March 31st, 2024, total gross debt was $650 million, ending unrestricted cash was $155.3 million, resulting in net debt of approximately $494.7 million, which we compared to $119.6 million of LTM reported adjusted EBITDA for a total net leverage ratio of 4.14 times. And pro forma for the Houston radio acquisition, total net leverage was 4.08 times. Phew.