Urban One, Inc. Q1 FY2025 Earnings Call

Ladies and gentlemen, thank you for standing by, and welcome to the Urban One 2025 First Quarter Earnings Call. As a reminder, this conference is being recorded. We will begin this call with the following safe harbor statement. During this conference call, Urban One 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 May 13, 2025. 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.urban1.com. A replay of the conference call will be available from 2:00 P.M. Eastern Daylight Time, May 13, 2025, until 11:59 P.M. Eastern Daylight Time, May 20, 2025. Callers may access the replay by calling (1) 800-770-2030. International callers may dial direct (1) 609-800-9909. The replay access code is 7968738. Access to live audio and a replay of the conference will also be available on Urban One's corporate website at www.urban1.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 Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter Thompson, Chief Financial Officer. Mr. Liggins, please go ahead.

Thank you very much, operator, and welcome, everybody, to our first quarter 2025 results conference call. As usual, joined with Peter and I are Jody Drewer, who's our TV One Chief Financial Officer for any TV questions; Karen Wishart, our Chief Administrative Officer; and also Christopher Simpson, who is our General Counsel. You've seen the earnings release, Q1 results largely in-line with the guidance that we gave. Q2 radio pacings have weakened since our last conference call. They're roughly down about 9% now. However, as I said on the conference call last quarter, our TV ratings seem to have stabilized in Q1 and Q2 and are in line with what we budgeted. So with that, we're continuing to reaffirm the guidance that we gave of $75 million of EBITDA. Something again to note on our 2024 EBITDA, which was about $103 million, almost $10 million of that was a non-cash adjustment for the TV One award associated with my contract. So if you're looking at apples-to-apples comparison, it's roughly about $92 million of cash EBITDA down to $75 million. Still not a stellar year-over-year performance, going backwards, but what we expected. So with that, we have said that we're going to continue to focus on our cost controls, managing our leverage, and maintaining a strong liquidity position. One of the things that came up in the last conference call is what were we going to do with our $137 million of year-end cash, and since that conference call, we've actually bought back in the open market $88.6 million of our debt at an average price of about 53.9%, and we've reduced our gross debt down to $495.9 million, and we're still sitting on about $80 million of cash on hand at present with an undrawn revolver. So we continue to be focused on deleveraging and maintaining the liquidity position. And so in a difficult environment, you got to make sure that you're prudent and you make moves that keep you in the best possible position of flexibility in terms of leverage and expense control, and that's what we're really focused on. So with that, I'm going to turn it over to Peter to get into the specific details of the numbers, and then we'll come back.

Thank you, Alfred. So consolidated net revenue was approximately $92.2 million, down 11.7% year-over-year. Net revenue for the Radio Broadcasting segment was $32.6 million, a decrease of 10.3% year-over-year. Excluding political, net revenue was down 7.7% year-over-year. According to Miller Kaplan, our local ad sales were down 12.8% against our markets that were down 13.2%. Our national ad sales were down 14.6% against our markets being down 11.6%. Our largest radio ad category was services, which was up 11%, driven by legal services. Travel and transportation was up 17%, but that's our smallest category. Telecom, financial categories were up low-single digits. All of the other major categories were down, including health care, entertainment, retail, government, auto, food, and beverage. Net revenue for each Media segment was $5.9 million in the first quarter, which is down 30.9% from the prior year. And adjusted EBITDA at each was a loss of $600,000 for the quarter. A combination of client attrition and lower average unit rates drove that decline. Net revenues for the Digital segment were down 16.2% in Q1 at $10.2 million. Audio streaming revenue was down by $2.1 million in the quarter due to the renegotiation of an exclusive third-party deal, and that impacted adjusted EBITDA, which was $58,000 compared to $2.3 million in the prior year. We recognized approximately $44.2 million of revenue from our cable television segment during the quarter, a decrease of 7.9%. Cable TV advertising revenue was down 6.3%. TV One delivery declined 18% in total day persons 25-54, which is partially offset by an increase in CLEO TV, which was up 29% in total day persons 25-54 delivery and also favorable AVOD and FAST revenue of $1.1 million, which resulted in a net ad revenue decline of $1.7 million. Cable TV affiliate revenue was down by 10%, driven by subscriber churn, which is about $3.3 million, partially offset by $1.3 million, which is a combination of subscriber rate increases and the launch of NOW TV. Cable subscribers for TV One, as measured by Nielsen, finished Q1 at 35.6 million compared to 37.2 million at the end of Q4. CLEO TV had 35 million Nielsen subs. Operating expenses, excluding depreciation and amortization, stock-based compensation, and impairment of goodwill, intangible assets, and long-lived assets, decreased to approximately $80.7 million for the quarter, a decrease of 8.6% from the prior year. The overall decrease in operating expense was primarily due to lower third-party professional fees in the corporate segment, lower content expenses for cable television, and lower employee compensation as a result of recent cost savings measures. Radio operating expenses were down 2.9% or approximately $0.9 million, driven by lower employee compensation costs. Reach operating expenses were down 1.7%, again, driven by lower employee compensation costs. Operating expenses in the Digital segment were up 3.2%, and that was driven by higher traffic acquisition costs, partially offset by lower employee compensation. Operating expenses in the Cable TV segment were down 10.8% year-over-year, driven by lower programming content expense, on-air promotions, and employee compensation costs. Operating expenses in the Corporate and Eliminations segment were down by approximately $3.8 million, driven by lower third-party professional fees. Consolidated adjusted EBITDA was approximately $12.9 million, down 42.2%. Consolidated broadcast and digital operating income was approximately $23 million, a decrease of 28.1%. Interest and investment income was approximately $1 million in the first quarter compared to $2 million last year. The decrease was due to lower cash balances and interest-bearing investment accounts. Interest expense decreased to approximately $10.9 million for Q1, down from $13 million last year, due to the lower overall debt balances as a result of the company's debt reduction strategy. The company made cash interest payments of approximately $21.6 million in the quarter. During the quarter, the company repurchased $28.2 million of its 2028 notes at an average price of 58% of par, bringing the balance at quarter end to $556.348 million. In April, the company repurchased an additional $60.4 million in notes at an average price of 51.9%. And as Alfred said, that brings the current balance on the debt to $495.93 million. We recorded $6.4 million in noncash impairments in Q1 against the carrying value of our FCC licenses in five of our radio markets, which are Dallas, Indianapolis, Raleigh, Philadelphia, and Cleveland. The provision for income taxes was approximately $15.7 million for the first quarter, as we booked an additional $14.6 million valuation allowance against our NOL balances. The company paid cash income taxes in the amount of $33,000. Capital expenditures were approximately $2.5 million. Net loss was approximately $11.7 million or $0.26 per share compared to net income of $7.5 million or $0.15 per share for the first quarter of 2024. During the three months ended March 31, 2025, the company repurchased 449,252 shares of Class A common stock in the amount of approximately $700,000 at an average price of $1.48 per share. And we also repurchased 303,622 shares of Class D common stock in the amount of approximately $300,000 at an average price of $0.87 per share. As of March 31, total gross debt was approximately $556.3 million. Ending unrestricted cash was $115.1 million, resulting in net debt of approximately $441.3 million compared to $94.1 million of LTM reported adjusted EBITDA for a total net leverage ratio of 4.69 times. And finally, we recast the comparable periods for 2024 to reflect the move of $7.9 million of CTV revenue from digital to TV and also the reapportionment of cross-platform sales and marketing expenses. We talked about that on the last earnings call. A number of questions came up, so we thought we'd just give you the comps from prior quarters with those recast numbers. And with that, I'll hand back to Alfred.

Thank you very much. Operator, we can go to the lines for Q&A.

We will now begin the question-and-answer session. Our first question will come from Ben Briggs with StoneX Financial Inc. Please go ahead.

Hi. Good morning, guys. Thank you for taking the call.

Absolutely.

So a couple here. So first of all, I do notice that you guys did some cost-cutting during the quarter. Both the programming and technical expense line and the SG&A and corporate line, I think, were down a little bit. What other levers do you have that you can pull to kind of control costs as the year goes on and in the future?

Yeah. I mean I said last conference call that we did a bunch of year-end last year cost-cutting measures, and I think it saved us about $5 million. We are focused on taking another look at that for this year. We haven't got there yet, probably we'll focus on that so that it's done by the middle of the year. So really focused on kind of like an end of June execution date on that. And so look, I don't want to go into specifics. Quite frankly, I don't have all of the opportunities off the top of my head. And even if I did, I certainly wouldn't want to announce them on the conference call. Yeah. Let's say, we do believe that there are other opportunities and plan to take advantage of them. But we're really managing to our guidance and then looking to see if we're doing better. Our guidance of $75 million does not include any back half cost cuts that we might find.

Got it. That's helpful. Thank you. So that's a great segue into my next question, which is, I feel like you had indicated that we should expect the majority of EBITDA to come in the second half of 2025. Am I...

We didn't catch that. Repeat that.

Sorry, I apologize. I said I feel like you had indicated that you're expecting the majority of EBITDA this year to come in the second half of the year. Do I remember correctly? Is that accurate?

Yeah. So more than half for sure.

Right. Can you give any guidance for what you think the second quarter has in store as far as EBITDA expectations?

I don't think we're going to give specific guidance. I think from the pacings, Alfred said that radio has weakened, right, relative to where we were last time. So we should expect that to be down. Digital, almost all of that profit is forecast to be in the back half of the year. So we're not going to be strongly profitable in the second quarter. And then TV, TV One ratings down a little down a bit, being compensated for by CLEO. We're hitting our budgeted numbers in terms of delivery. And so there might be some upside in the back half of the year. But looking at where radio is at, that might need to wash against radio. So I think Q2 will be a little bit better than Q1, but similarly weak, and then we got to deliver in the back half of the year then.

Got it. And then finally, obviously, there have been additional debt repurchases. I know the market likes to see those. Should we expect further debt repurchases as the year goes on or is it more?

As I've been told many times before, the best predictor of the future is the actions of the past. You've heard that, too? We deliberately take advantage of opportunities. We don't appreciate it when we announce that we're entering the market, and everyone sees that as a chance for our debt to increase in value and expects us to pay more. So we're in and we're out, aiming for a specific price. It's nothing personal against debt holders, but buying back debt at a discount from those looking to sell ultimately benefits the company. We will continue to do that. Almost every time we enter the market, the price increases because we are the most motivated buyer. At the end of the last conference call, the debt was trading at around 49.5%. When we entered the market either that same day or shortly after, our cumulative purchases during that time were nearly at 52. We're okay with that because we had significant trades from people wanting to exit and see some increase. It's beneficial for everyone. As you can see, the vast majority of our capital is directed towards this. We have eliminated tens of millions of dollars in debt since the last call, and unfortunately, we still have the opportunity to make an impact in that area.

Okay. If you were to draw the revolver, I don't think that would limit you at all in terms of debt buybacks, would it?

No. I mean, most of the people on this call are investors and smart investors. It shouldn't be lost on anyone that we have an undrawn revolver, which means that capital is available for various needs, including using our cash to buy back debt if we require operating funds to do that. Our liquidity position remains very solid and provides us with options.

Okay. All right. I think that’s going to be off from me, right now. I’ll give some other people the chance to ask questions. Thanks, again.

Thank you very much. Next question, operator.

Our next question will come from the line of Aaron Watts with Deutsche Bank. Please go ahead.

Hey, Aaron.

Hey, guys. Thank you for having me. A couple of questions around the ad environment on the radio side. I think you noted additional weakness crept in between your last call and today. To the extent we continue to get positive headlines out of D.C. like, what happened this week, do you think advertising can flip back positive as quickly as it softened? What do you think your ad partners need to see or hear to start ramping spend back up?

I think they need to understand their future expense profile. With tariffs changing weekly, forecasting is challenging. Unfortunately, Procter & Gamble and General Motors do not share their advertising strategies with us. I've had some discussions with large advertisers, and many do not want to reveal their advertising budgets, as that information is considered proprietary. The core strategies that drive advertising spending in different sectors are not easily accessible to us, and I understand why; for them, it’s a trade secret. However, we can observe when their advertising budgets are cut or put on hold, and they often attribute this to uncertainty. There have been reports indicating that consumer spending is slowing down, which contributes to this uncertainty. Regardless of where tariffs end up, they will likely be higher than before. Recently, I saw a forecast suggesting that companies might absorb the additional tariff costs by increasing prices, which could lead to inflation and might have repercussions in a recession. I'm not an economist, so I can't definitively predict what will trigger a recession or its effects on the advertising market. Currently, the outlook is not positive. In my view, I don't believe we'll see a rebound in advertising this year, as once companies cut expenses, they tend to keep them reduced for the rest of the budget cycle.

Yeah. No, that all makes sense. So more a hope of stabilization than any real positive significant bounce this year. Okay. And I did hear you talk about national being a driver of the weakness right now. How have your more local SMBs you work with been behaving comparatively, and what's your split between national and local these days?

What is it? Peter, is it 75-25 or...

It's more 75-25. That's sort of excluding the digital piece.

I went through with the radio guys, and I have a weekly call with them now. And look, they were growing. Local is actually not doing that bad, right? Like, I think they were telling me that our local was only down is like less than 2%, like 1.5%. We were looking at pacings about a week ago or two weeks ago. The driver for us is national. And also, we're having digital issues for a couple of reasons, and I articulated them, changes in our podcast and streaming deals that are out there, and also the fact that we're underpenetrated in our local digital efforts. And so the answer to your question is local in the radio business, it's down, but it's not down double digits, it's not down as dramatically. It's down low-single digits. So I would say that, that's a positive sign. We're going to lap our digital issues, and we're looking to improve our digital efforts. And so, one would think that you've got two things that drive national ads, right? You've got the market sentiment, okay? And when I say market, consumer sentiment, what advertisers think about consumer activity, and their prospects for business. But you also have the continued digital transition away from analog into digital platforms. And so, national definitely is the negative spot right now. And I hope that abates at some point in time after stability comes into play.

And just to clarify, just in terms of national dollars and radio dollars for radio, it's 2:1. So for every dollar of national, we do roughly $2 of local. And the difference in the 75-25 is digital and other, right? So, as a percentage of the total, it's a different number. But relative to each other, it's 2:1.

Okay. And Alfred, just one last one on what you were saying there at the end around digital. Once you iron out your kind of issues that you highlighted, do you still see growth opportunity across podcast? And I know digital means different things to different radio groups, but what podcast, local digital, whatever it means for you, market services.

Yeah. Look, our growth area for us is we have not played in the local digital area. We've had all of our efforts focused on our national digital. I don't want to say all of our efforts because we do have a local digital business, but we're probably doing high-single digits of revenue when our competitors are having it be 20% of their revenue. And so, yeah, I do think that there are areas of growth for us in that area, doing a better job there. We don't cross-pollinate our national products into the hands of our local sellers intentionally at this point in time. iHeart does. Audacy has started to do it as well. And we've got a lot of national products that would give local sellers some great tools to go out and help local advertisers. So that's something that we're focused on and will create a growth opportunity as well.

All right. Great. Appreciate all the time. Thanks, again.

And our next question comes from the line of Ken Silver with Stifel. Please go ahead. Ken, your line might be unmuted.

Hey. I’m here. Thanks. Sorry about that. Hi, Alfred and Peter. Thanks for the time. I guess a few questions. One is, if we look at the cable TV revenue, can you break it out between carriage fees and advertising?

Sure. For the quarter, you can find that information on page 5 of the press release.

Okay. I missed that. Okay.

Yeah. So you can see that if we go to Page 7 I don't know if you have it in front of you, but you...

I do. I apologize, if you broke it out, I will go.

No. That's okay. But it's there. And if you need to know roughly what we think it's going to be for the year, you can just reach out and I'll...

Sure. And on the carriage side, do you have like, what is your renewal schedule with all the large cable and other MVPDs?

Charter is up in the fourth quarter. October, is it? Charter is up at the end of the year. And Verizon is up, but they've got an option. And then, we have NCTC, which is in September. So we have NCTC, Verizon, and Charter up this year.

And then what about next year, is it heavy or light next year?

Comcast comes a year later, right?

DIRECTV, AT&T and Comcast.

Okay. Got it. And then, you mentioned in your prepared remarks that ratings were down at TV One. Can you just help us understand that a little bit better?

I said they stabilized, right?

Okay. I’m sorry.

Yeah. They were down a lot last year, what, 20%-ish. And they bounced up off of their lows of fourth quarter. And I think we budgeted what our ratings were in fourth quarter for all of '25, and fourth quarter was kind of a low, and we're actually exceeding that year-to-date, exceeding that budgeted number. So, we're averaging higher than our fourth quarter low, which is good.

And CLEO, especially.

And on our second network, CLEO, especially.

Okay. And then, I mean, obviously, you're using a lot of cash flow for bond buybacks, which I think we all think is a good use of capital. But in terms of programming spend, is it sort of steady as she goes or is the potential to grow it a lot?

No, it's actually down a bit. I wouldn't say majorly. We'd say maybe down 10%. Programming spend?

The biggest drop quarter-over-quarter was indiscernible.

Yes. So we have an annual award show that we didn't do. And then for the year, yes, 10% about 10% for the year, we're thinking about.

And I mean, obviously, there's a lot of content out there. Are there no plans to sort of try to reinvigorate the business and spend a lot of money on programming?

Well, the problem. No, there's not a plan. Look, we are thinking through now what our options are to grow our TV business because we have to get more delivery, right? But you need the idea that you go spend more money just to put it on your linear networks when the universe is shrinking on its own means that you're just going to lose. You're going to lose on those content investments because you're going to lose audience regardless of any way you look at it. However, there are multiple new ways of delivering content. We continue to expand our FAST channel distribution. We're looking at other ad-supported distribution opportunities and potential business models. And so, I think that is critical that we invest and move in that area. So you will not see us just investing in content just to put it on this existing platform. You will potentially see us investing in content in combination with an expansion of new distribution opportunities in the FAST and AVOD environment because we need other places to be able to monetize that content. And so we're formulating those strategies right now. And you got to approach that. At the same time, you're continuing to manage your balance sheet, etc., right? Now...

And Ken, just going back to your original question, I was just looking at the relative breakout for the year, a little over 50% of TV One's revenue will be ad dollars and a little under 50% will be affiliate. And that's flipped from a few years ago where we used to be like 55% affiliate, 45%, obviously, as attrition has reduced the affiliate line.

Okay. Great. Okay. Thanks so much. Appreciate it.

And that will conclude our question-and-answer session. I'll turn the call back over to Alfred Liggins for any final comments.

Thank you, everybody for your support and continued interest in the story, and we'll talk to you next quarter.

That concludes today's call. Thank you all for joining. You may now disconnect.