Urban One, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Urban One's second quarter earnings call. All participants are in a listen-only mode and this call is being recorded. 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 of certain factors, including risks and uncertainties referred to in the 10Ks, 10Qs, and other reports if periodically filed, that 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 August 8, 2024. 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 .urbanone.com. A replay of this conference call will be available from 5 p.m. Eastern time today, August 8, 2024 until 1159 or midnight on August 15, 2024. Callers may access the replay by calling -207-1041 from the U.S. International Callers call direct at 402-9700847. The replay access code is 1733886. Access to live audio and a replay of the conference call will also be available on Urban One's corporate website at .urbanone.com, and 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. This time I'll turn the call over to Alfred Liggins, Chief Executive Officer of Urban One, who is also joined by Peter D. Thompson, Chief Financial Officer. Please go ahead.

Thank you very much, Operator, and welcome everybody to our Q2 results conference call. Also joining Peter and I are Karen Wishart, Chief Administrative Officer, Jody Drewer, the Chief Financial Officer at TV1, and Christopher Simpson, who is our General Counsel. We've sent out the press release on our Q2 results largely in line with how we've guided in terms of the different segments. Radio coming in at minus three with political, minus 5.6. Now on a same station basis, ex-political, that's not including the acquisitions that we made with Houston, Texas. It's been a challenging environment in our cable television segment, mostly because of churn and audience delivery. Something that's happening throughout the pay TV ecosystem. Peter's going to go into more detail about those results in Q2 in his comments. Q3 radio currently is pacing down .9% on a same station basis. It's going to be up 7% as reported. If you include political, it's pacing down .9% on the same station basis. It's going to be up .9% on mid-single digits. However, we are feeling pretty optimistic about the strength of political, and we're starting to see registrations and orders coming in on hold. We actually think it's going to be much more robust than we have currently forecasted. It's real-time action right now in terms of getting it laid in. The new political landscape and the closeness of the current race I think is going to bode well for us given our audience. That is yet to be determined. We're not forecasting a big beat in the next week on our political budget as of yet, but we're very optimistic. Even with the optimism in political ad spend coming, there's still softness in our cable television segment, which we have to address. Ultimately, we've got to find more impressions to offset the churn that we're experiencing. We've got upside coming in terms of our connected TV offerings as we switch ad servers that will allow us to better monetize the CTV inventory that we have on some of the new -the-top platforms. That's not in place yet. We haven't had the benefit of that so far this year, but we will in the second half of this year. Given the softness in the cable TV segment, I think that we are more likely to finish 2024 at the lower end of our EBITDA guidance, which was 110 to 120. Again, we're not sure exactly what we think the upside on political is yet. We think there is some, but we just want to give an indication that we feel at this point that we're more likely to finish on the lower end of the guidance than the upper end of the guidance. We can talk more about that during the Q&A. At this point, I'd like to turn it over to Peter to go into the details of the numbers and then we can switch to Q&A. Peter?

Peter Coughlin, CEO, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV, CTV. I'll just go to the numbers here. Let's go ahead and switch to the numbers. We're going to start with the numbers. The first one is the number of people who are not on the page were down .5% against a market that was down 7.1%. National ad sales were down .6% against a market that was up 7%. Net revenue for the reached media segment was $18.9 million in the second quarter, down .6% from the prior year. And adjusted EBITDA was $3.7 million for the quarter, down from $4.6 million last year. Net revenues for the digital segment decreased by 16% in second quarter to $15.9 million. Direct national sales were down, driven by decreased advertiser demand, but connected TV and podcast revenues show growth compared to last year. Adjusted EBITDA was $2.9 million, down 52.5%. We recognized approximately $41.5 million of revenue from our cable television segment during the quarter, a decrease of 20.9%. Cable TV advertising revenue was down 26.7%. Delivery erosion continued, down 30% in total day, persons 25, 54, resulting in an increase of $4.7 million to our audience deficiency reserve. Increased volume through promo conversions, partially offset the delivery shortfall. Cable TV affiliate revenue was down by 12.9%, with contractual rate increases being offset by approximately $3.3 million in net subscriber churn impact. Cable subscribers for TV1, as measured by Nielsen, finished second quarter at 39.8 million, compared to 40.7 million at the end of Q1. And Cleo TV had 38 million Nielsen subscribers. Operating expenses, excluding depreciation and amortization, stock-based compensation, and impairment of goodwill, intangible assets, and long-life assets, decreased to approximately $93.3 million for the quarter-end June 30th, 2024, down .4% from the prior year. Radio operating expenses were up 6.4%, or $1.9 million. The Houston radio acquisition, which was effective August 1st, 2023, added approximately $2 million expense year over year. On the same station basis, event expenses were up $700,000, driven by two of the company's tent pole events, which Birthday Bash in Atlanta, and Women's Empowerment in Raleigh. While variable expenses related to revenue, such as sales commissions, bonus compensation, bad debt, and national rent fees were all down, the marketing costs were also down. Reach operating expenses were down by 1.3%, driven by reduced talent compensation and affiliate station fees. Operating expenses in the digital segment were up 1.5%, driven by increased cross-platform marketing expenses, and third-party cost of sales on audience extension revenue for digital audio. Operating expenses in the cable TV segment were down .7% year over year, driven by about a $800,000 favorable programming expense related to acquisitions that expired in 2023, and reduced sales and marketing expense, which was offset by increased operations costs associated with connected TV and VOD support. Operating expenses in the corporate and elimination segment were down by approximately $900,000, primarily as a result of a $4.5 million decrease for the CEO's TV1 award, offset by a $3 million increase in third-party consulting and audit expenses. For adjusted EBITDA, we added back $4.1 million for non-recurring professional fees related to the mediation and audit efforts. However, the $6.3 million non-cash benefit for the TV1 award is not added back for the current year when assessing adjusted EBITDA. Consolidated adjusted EBITDA was $28.4 million for the second quarter, down 24.2%. Consolidated broadcast and digital operating income was approximately $34.2 million, decrease of 27.7%. Interest income was approximately $1.8 million in the second quarter compared to $1.9 million last year. Decrease was due to lower cash balances in interest-bearing investment accounts. Interest expense decreased to approximately $12.4 million for Q2, down from $14 million last year due to lower overall debt balances. As a result of the company's debt reduction strategy, company-made cash interest payments of approximately $1 million in the quarter related to the repurchase of the notes. During the quarter, the company repurchased $35.5 million of its 2028 notes at a price of 78 cents a pass. An impairment charge of $80.8 million, which was non-cash, was recorded in Q2 entirely from the broadcasting licenses in nine of the 13 radio markets in the broadcast segment. The primary factors leading to the impairments were decline in projected gross market revenues and operating profits and an increase in the discount rate. The benefit from income taxes was approximately $18.5 million for the second quarter. And the company paid cash income tax in the amount of $600,000. Net loss was approximately $45.4 million, or 94 cents per share, compared to net income of $70.4 million, or $1.48 per share for the second quarter of 2023. During the second quarter, the company repurchased 449,277 shares of Class A common stock in the amount of approximately $900,000 at an average price of $2.06 per share. And 113,283 shares of Class D common stock in the amount of approximately $200,000, an average price of $1.57 per share. Capital expenditures were approximately $2.2 million in the second quarter. As of June 30th, 2024, total gross debt was $614.5 million. The ending unrestricted cash balance was $131.9 million, resulting in net debt of approximately $482.6 million, compared to $110.5 million of LTM reported adjusted EBITDA, for a total net leverage ratio of 4.37 times. And finally, we'll be filing, timely filing the 10-Q tomorrow at some point. So good that we're back on track in terms of meeting our deadlines and filing timely. And with that, I will hand back to

Alfred. Thank you, Peter. Operator, we can go to the lines for Q&A.

Ladies and gentlemen, if you'd like to ask a question, please press one, then zero on your phone's keypad. You'll hear an indication that you've been placed in Q. And I'm repeating that one, zero process will remove you from the Q. Once again, if you have questions, please press one, then zero. And at this time, we do not have any callers queuing up. Oh, take that back, take that back. We're just a little bit late. All right, we'll go first to Dominic Leaba with Staple. You go ahead, please.

Hey, hey guys, thanks for taking the questions. Yeah, I just had two things, a couple of things for me. One, could you just comment on digital's kind of been trending a week or for a couple quarter now. Can you just kind of offer some guidance on what that market's looking like? Are you guys expecting that to pick up versus kind of like a national local area or kind of just put your thoughts on that?

Yeah, yeah, digital, there's been weaker demand in digital associated with the pullback in national advertising, but also a pullback in DE, diversity and inclusion, ad dollars that we felt that way was ultimately gonna crest and be affected by the national ad pullback. However, the second half is looking better and we're also optimistic there that we're gonna see more political ad dollars than we had budgeted. So, yeah, to date, we are still forecasting our digital segment to meet its budget, which is off of last year, but that's not the case. But not that far off, so we're feeling decent about digital. Our TV business is really what's hurting us.

Okay, thank you. And based off the backdrop of you guys keeping your EBITDA guidance, I think you gave range of like 110 to 120 last call, is that sort of still in line?

Yeah, yeah, as I said at the top of the call, we're more likely to be on the lower end of that guidance, but yes, we're maintaining our current guidance.

Okay, sorry, I joined a little late here. Couple more things, with that buyback, do you guys continue kind of continuing a similar cadence in terms of repurchases, if prices kind of?

I don't wanna commit to the cadence, cause the cadence really kind of depends on the, the cadence depends on where we see the debt trading, but you can rest assured that our primary focus is to make sure that we're managing our leverage and looking to march that down, and it's challenging right now with EBITDA falling, right? So quite frankly, being able to buy debt back opportunistically at attractive prices is important. So very high priority for us, that's the reason you saw us buy $35 million worth of debt right before our window closed. That ended up being a negotiation, you know, to buy that piece of debt at $35 million was probably a week long negotiation that only closed right before the window was happening. So, you know, we're trying to be opportunistic and smart about it.

Okay, got it, that makes sense. Yeah, and then just last, and I think you guys mentioned, maybe you might have commented this, but last quarter you guys mentioned you were under NDA to potentially purchase bounce from EW scripts, so the effect you can offer any commentary, is there any update regarding those? No,

there's a process going on, you know, we're involved in it, and, you know, no update at this point in time. Okay, got it, okay,

appreciate the answer to the questions, that's it for me. Thank you.

All right, this question comes from Hal Steiner with BNP, please go ahead.

Hey guys, good morning, thank you for taking the questions. So my first one was, I was just, do you have any early thoughts on some of the things you could try to do in TV to sort of improve audience and audience delivery? Is maybe like changing measurement providers a possible solution? And I think you also commented on sort of CTV ad upside, could you just share a little more color or help quantify that at all, that would be very helpful. Thank you.

Yeah, so we are looking at, at different measurement solutions, and we're in the middle of the upfront right now, so I don't wanna have a, you know, public, a public adjudication of our upfront strategy and our audience measurement strategy, but suffice it to say, yes, we are, we are engaged in those kinds of conversations and looking at several different alternatives, one of which has more of a positive impact than others, right, so, but that's an active negotiation right now, because it's not just us switching audience measurement, it's getting, yeah, the advertising holding companies and the clients to actually, you know, accept a discurrency too, and so that's a real time negotiation as we speak, but the answer to your question is yes, we're looking at that. Second, on CTV, we basically were on a, an ad server that didn't allow us to transact on a programmatic level and had some, you know, other limitations that really severely limited our ability to monetize that inventory. It has taken us, you know, don't ask me all of the why, so it has taken six months actually for us to identify, negotiate, and then ultimately get activated a new ad server that will allow us to more effectively monetize it, and we're at the, yeah, we're almost at the end of that road, I think it goes live within the next, you know, 30 days or so. Jody, do you know when, you know, the new CTV ad server goes live by, I'll say it. This month. This month. Okay. This month, yeah. So, you know, people, you know, advertisers like CTV a lot because they can do it programmatically, and the ad server that we were on didn't allow us to do that. You know, so that's just, you know, that's real, you just keep, just moving to, you know, a system that allows us to monetize it the way the majority of advertisers wanna do business, you know, is tangible upside just because we haven't been able to participate in that marketplace. So, you know, that's the elaboration on it, and obviously more and more ad dollars are moving to connected television too.

Gotcha. Gotcha. Okay, that's helpful. And then I guess, just on, you know, financial policy, you know, with the operating environment being a little bit weaker, you know, do you sort of feel like it's more prudent to maybe hoard more cash, or is like sort of the minimum cash you wanna hold in the business maybe higher than it was before? And I heard your comments on debt buybacks, but I maybe also just wonder, you know, how do you deal with that? We view M&A in the current environment. I know Paul did.

We view M&A, and I think I've said it before, look, in the current environment, you can't count on top line growth, right? Not in the media business, right? If we were a software company, you know, maybe. So, M&A has gotta be, you know, not only highly accretive, it's gotta be de-levering, and Peter and I were actually talking about it this morning before the call, and any M&A deal that you do that's de-levering out the box, you've gotta assume that there's gonna continue to be downward top line pressure, you know, in the industry, right? You know, whether it's radio or television, and so you gotta take that into account, you know, when you're figuring out what that M&A does to you from a de-levering standpoint. So, very comfortable with our Houston acquisition, you know, last year in our Indianapolis acquisition and radio, and so that's how we think about it, you know? You know, you can expect us not to do anything, you know, that is contrary to that, because that would be way too risky, and we are, again, conscious of the fact that it's not just, it's something de-levering day one, you know, is it gonna continue to be de-levering, you know, with the downward trend, you know, from an industry standpoint. Finding those deals is hard, but my sense is they will come about, because everybody's kinda got the same problem, and, you know, I mean, we're substantially free cash flow, you know, positive, you know, to date, the thing that reducing debt, particularly reducing debt at a discount does is it also increases our free cash flow, right? And so, we don't really have a cash flow problem such that we have to hoard a bunch of cash, and if we are looking for a deal that is substantially de-levering, you know, particularly at the levels, you know, that we're trying to get down to, let's say, I think, you know, our leverage level we just reported was 4.37 times, right? 4.37, so let's say we were looking for something that, you know, de-levers us, you know, a turn, right? So, it gets us down to 3.3, you know, if the synergies are really there and it does that, then that's probably in the strike zone is something that you can finance, you know? So, the point is I don't think we have to hoard cash for an M&A situation, the kind of M&A that we're looking for, you know, should produce, you know, a financeable scenario in and of itself, and we can, you know, look at that cash, you know, to de-lever, you know, and buy, you know, debt opportunistically. Does that make sense?

Yes, it does, it does, thank you, Alfred. Okay, that's all my questions for now, thank you guys so much. Yeah.

And once again, for additional questions, please press one then zero at this time on your phone's keypad. We have a question now from Marlene Piero with BOA, please go ahead.

Thank you for taking the question, hi Alfred, hi Peter. Hi, just wanted to do a quick vanity check on free cash flow, just kind of given the commentary you've given this quarter versus, you know, last quarter. So I think, you know, it kind of worked out to roughly around $40 million, given, you know, kind of some one-offs related to, you know, PV1, you know, cash taxes around 3 million, I think cap backs around 9 million. So just wanted to just sanity check if, you know, kind of the ballpark in that my inputs are correct.

Yeah, I think, look, Alfred guided towards the lower end of the guidance, so you probably need to take, if we were coming off of the midpoint, right, you'd probably take 5 million off of that number and be in the mid 30s. And then obviously the other comment he made at the top of the call was we don't know where political is gonna come out, it feels good, right? It feels like the developments on the democratic side are gonna be really helpful to us. So yeah, maybe there's some upside on that. To the downside, you know, we're still going through all the remediation of the material, and there's gonna be incremental effort there from a consultant standpoint and also from an audit standpoint. So our old 2 million audit fee, you know, isn't coming back this year. So there's some incremental one-time remediation and audit costs. So, you know, I think we're somewhere in the 30s depending on where political comes out, I would say.

Got it, but the cash taxes in CAFAC, that's still roughly that much, part of 3 million in dollars, effectively.

Yeah, and the other lever that's in there, I say lever, the other interesting thing that's in there is how much cash program we spend versus what we're amortizing. At the moment we have a 10 million dollar cash usage in the numbers I just gave you. So if we can, if we end up saving some of that, then that would also boost free cash. Free cash flow.

And sorry if I might've missed this sooner, but have you disclosed if you've bought any bonds back, you know, post the quarter? I'm

sorry, Marlene, I couldn't hear the question. It's a bit faint.

Sorry, I was just curious and apologies if I missed this, but have you, has there been any bonds repurchased post-requeue?

No, the last ones we did were the 35 and a half in Q2. We haven't done any more since then.

Got it, thank you very much. So I have.

We have a question next from Kevin Chapman with PRV. Please go ahead.

Yes, hi, thank you. I would like for you to expand if you can on the political advertising. I know you're very optimistic about it. Are you seeing interest with both parties? And is this happening at historic levels when you look at what you're seeing so far?

The answer is yes, we're seeing interest from both parties. However, you know, the ratio of what Dems spend against our audience to what Rs spend, you know, is very, very, very, very wide, right? So, you know, an increase in interest from the Rs is not a move the needle, right? But it's, you know, on a percentage-wise off a low base, I think it's a substantial increase, you know what I mean? But it still doesn't compare to what the Dems spend between the campaigns and the PACs and all that because the primary audience that we have is obviously critical to, you know, democratic success. We also got some significant exposure in some key markets, you know, so we got a big Atlanta, you know, position Georgia, you know, has been our most robust political market, you know, over the last, you know, you know, two cycles. You know, we are in Charlotte and Raleigh, so North Carolina's in play. Pennsylvania's in play, we're in Philadelphia. And so, you know, we've got some decent, you know, exposure. And then, you know, we've got a, you know, we've got a big digital business, right? And I would say over half of the spend that's gonna come from the Dems this year is gonna be in digital. So, you know, in comparison to others, other cycle, Peter, what was the big year that we had, you know? Yeah, we've had two,

right? So the high water mark was, in 2020 we did, in radio alone, we did $18.8 million in 2020. So that was the biggest. And then in 22, we did about 13 million in radio. So they were our two biggest.

Yeah, and Peter, if you wanna elaborate, yeah, well, Yeah,

I mean, I think you covered it, but yeah, it's not just the presidential race was the only point I was gonna make. There was some races in the market. In the markets you mentioned, you know, the North Carolina government race, the Maryland Senate and the Ohio Senate, and then some other, you know, other issues, redistricting issues. So it's not all gonna be presidential money. There are other things that we're participating in as well. Yeah, but obviously that change on the Democratic side is gonna help us in some of those markets that will probably may not have been in play that now are like Georgia and Pennsylvania where we're well positioned.

Just one follow-up. Will you update as these bins come in?

I'm sorry, will we update as what comes in? As you get buys, advertising buys. I mean, we'll

give an update when we do our next earnings call, you know, just as we have here, and it'll flow into whatever our guidance is. You know, our next, yeah, we'll give the market, you know, a view of, we always give a view on where we're pacing. And, you know, the last couple years we've given, you know, we've given guidance and, you know, we feel we'll have an obligation to continue to update that guidance, you know, as we report.

Okay, thank you.

Yep. For additional questions, press one then zero. And we're going now to Ben Briggs from StoneX. Go ahead.

Hi, this is James Godman on for Ben Briggs. Thank you guys for taking the questions. I was wondering, can you provide any clarity on what the revenue and EBITDA impact TV1 and Clio joining the Xfinity lineup will be?

Actually, it's not the Xfinity lineup. It's, you know, it's TVNOW, which is their -the-top skinny bundle. It's a $20 a month service. And it will be positive, although we just launched, I think, Jody, we just launched, you know, in August, right? Beginning August? In July. We launched in July. And it's a growing service. So, you know, it's a small number of subs now that we think will ultimately grow, you know, larger. So it's a positive impact, but it's not a hugely positive impact, you know, to our numbers. Awesome. Thank you, yes.

For additional questions, please press one and zero. We have no more questions in queue.

All right. Thank you, everyone. And we look forward to talking with you next quarter. And as usual, we're available offline. Thank you very much.

Ladies and gentlemen, once again, a replay for this conference call will be available through midnight on August 15th to access the replay from the US, dial -970-0847. Use access code 1733886 International Participants. Use for, scratch that, International Callers use -970-0847. Domestic Callers use 866-2071041. And again, that access code is 1737886. That does conclude your conference call for today. You may now disconnect.