Q3 2023 Urban One Inc Earnings Call
Presentation
Operator
Ladies and gentlemen, thank you for standing by during this conference call. Urban One will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance Urban One cautions you that certain factors, including risks and uncertainties referred to in the 10-K's, 10-Q's and other reports it periodically files with the Securities and Exchange Commission could cause the Company's actual results to differ materially from those indicated by its projections or forward-looking statements. This call will present and information as of January 11th, 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 w. w. w. dot Urban One.com. A replay of this conference call will be available from 1 P.M. Eastern time January 11th, 2024 until 11.59 p.m. January 18th, 2024. Callers may access the replay by calling eight six six two zero seven one zero four one. Our International callers may dial direct four zero two nine seven zero zero eight four seven The replay access code is two three one eight six eight five Access to live audio and a replay of the conference call will also be available on Urban One's corporate website at w. w. w. dot Urban One.com. The replay will may 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. Please go ahead.
Thank you, operator. Also joining Peter and I are joined by our Chief Administrative Officer, Karen Wishart, our General Counsel, Kris Simpson, the Chief Financial Officer, for TV One, Jody, Dror, we have we released our third quarter results did so down before the end of the year. So that's been out there and are obviously doing the conference call. Now I'll say a little bit of of news that's already out there. I think we kind of guided as to where we were going to be for the year end of third quarter for, as you know, as well as the rest of the radio sector?
Yes, but not awful quarter on.
Yes, ours, ours wasn't any different.
Well, fourth quarter out of we had huge political now that's kind of same station.
Yes, ex-political kind of in line with third quarter as well. But yes, net-net, we still are affirming our year-end guidance of $125 million to almost $128 million go on.
Yes, we're still on top of that comfortable with that as we go finish time out from the year end results.
Good news going into 24 on the radio sector, Q1, clearly your pacings are are substantially better, bolstered a lot by improving local currently for us were pacing up low single digits today. It said it bounces around, but today it's minus one for Q1. We'll see how that looks and holds, but we're optimistic as we go into 24, four a bottoming, if you will, and in radio advertising performance and in an upswing due to political.
So with that, I'm going to turn it over to Peter and let him get into the detail of the numbers and then I'll come back for Q&A.
Thank you, Alfred. Offered at net revenue was down by 2.8% year over year for the quarter ended September 30, 2023, at approximately $117.8 million. Our net revenue for the radio segment was $40.2 million, a decrease of 0.6% year over year and we're down by 14.4%, same station and minus 12% same-station ex-political, which as Albert said, is broadly in line with what we discussed on our last earnings call. According to Miller Kaplan, our local ad sales were down 8.4% against a market that was down 5.7% for the quarter. And our national ad sales were down 7% against a market that was down 10.5%. Our Q4 23 radio segment is expected to be down approximately 14% or less on a same-station basis. Q4 is expected to be down approximately 23% and then ex-political down about 13%. So broadly kind of in line with our Q. three same station as well. And Q1 pacings on a same-station basis, currently down very low single digits. Local is pacing plus 4%. National is down about 20%. Net revenue for Reach Media was $11.2 million in the third quarter, up 10.8% over prior year, and adjusted EBITDA was $3.4 million, down 6.7% for the quarter. Net revenues for our digital segment decreased by 3% in Q3 to $20.4 million. Direct sales were down while local radio, streaming and podcast revenues were all up. Adjusted EBITDA was down $7.4 million, down 2.9% year-on-year. We recognized approximately 46.8 million of revenue from our cable television segment during the quarter, a decrease of 7.6%. Cable TV advertising revenue was down 5.9%, where we had a favorable rate impact of $1.1 million, unfavorable volume impact of 1.2 million, a 5 million unfavorable audience deficiency units and an $850,000 reclass of VOD revenue to our digital sites related to C. TV cable TV affiliate revenue was down by 9.3% with favorable rate increases of 1 million to be an offset by 3.4 million of net churn. Cable subscribers for TV One as measured by Nielsen, finished Q3 2023 of 44 million compared to 45.1 million at the end of Q2. Cleo TV had 41.4 million Nielsen subs operating expenses, excluding depreciation and amortization, stock-based compensation and impairments of long-lived assets increased to approximately $84.5 million for the quarter, up 5.3% from the approximately 8.2 million incurred for the comparable period in 2022. Radio operating expenses were up 14.1% or $2.9 million. And the Houston radio acquisition, which was effective August first, 2023, that added approximately $2.2 million to expense and also the Indianapolis radio acquisition, which we did back in September of 2022, added approximately $2 million of incremental expense on a same-station basis, sales commission expenses were down and event expenses were down from last year for the quarter due to the timing difference between the two of the largest radio events for the Company reach.
Operating expenses were up by 21.4% closing, that was driven by increased from each net station compensation expenses, given the addition of four new networks as well as event expenses and talent compensation.
Operating expenses in the digital segment were down 3%, driven predominantly by variable sales expenses tied to lower direct advertising revenues Cable TV expenses were down 4.4% year-over-year and content amortization expense was up by $1.7 million, driven by an increase of $2.2 million or original programming. That increases offset slightly by a reduction in promotional media spend, actually $3.1 million, considering that we had a greater number of premier hours that we promoted in prior year. Operating expenses in the Corporate and Eliminations segment were up by approximately $520,000, primarily as a result of higher third-party consulting and audit expenses. Consolidated adjusted EBITDA was $34.1 million for the quarter, down 23% for the third quarter. Consolidated broadcast and digital operating income was approximately $43.8 million a decrease of 13.9%.
Interest expense decreased to approximately $14 million for Q3, down from $15.3 million last year due to lower overall debt balances. Company made cash interest payments of approximately 26.9 million in the quarter. And the next semiannual debt service payment is to be in Q1 and $85.4 million impairment of goodwill intangible and long-lived assets was recorded across 10 of our 13 radio markets. The benefit from income taxes was approximately $16.8 million for the quarter the Company paid cash income taxes in the amount of approximately $1.6 million. Net loss was approximately $54.4 million or $1.14 per share compared to net income of $3.5 million or $0.07 per share for the third quarter of 2022. Capital expenditures were approximately $2.5 million for the quarter.
And as of September 30th, 2023, total gross debt was $725 million. Our ending unrestricted cash was $195.7 million, resulting in net debt of approximately $529.3 million, which we compare to $133.3 million of LTM reported adjusted EBITDA for a total net leverage ratio of 3.97 times pro forma for the Indiana, Indianapolis and Houston radio acquisitions, total net leverage was 3.92 times.
And with that, I'll hand back to you, Alfred.
Thank you, Peter. Operator, could you open it up to the callers for [units please].
Question and Answer Session
Operator
(Operator Instructions)
Tal Steiner from BNP Paribas. Please go ahead.
Hey, guys. Congratulations on the quarter and coming in line with expectations. Great to see the affirmation of the guide for the year.
I guess the one thing that really stuck out to me was I thought the Q1 pacings for radio for were much stronger than I would have expected. Can you speak to local being stronger, which is fantastic? Is that really just a reflection of the economy improving and people are stepping back in and being willing to advertise again. And I guess my little two-parter on that is just sort of for the year with sort of that pacing. Do you think should we be thinking that overall radio revenue should be up year over year with political.
And the answer to that is yes, on and off. And look, I would yes, I definitely feel like we've gone through an ad recession, 23. I mean, we felt that we felt bid I mean, you could really see it national, right, Yelp advertisers pull and pull in that we saw it across all of our businesses. So not one of them. It was not affected from television to radio to digital. So just because there's an ad recession doesn't necessarily mean there is indeed a macro economic recession on. So the recession that come that never materializes or a soft landing or or whatever you want to call it on node. So like I'm not yes, I'm not good at sort of you're predicting why economic advertising trends move in one direction or another, but it definitely does feel like you kind of bottomed out in the third and fourth quarter. I'm hearing it from other operators that come of that business in in Q1 looks better. And yes, I think the tenor go on around the country it seems much more optimistic in terms of whether or not we're going to have a soft landing now. So my guess is yes. Yes, things are now bottomed out and are improving and done, and that's indicative of what's happening with our radio patients right now. Again, that's my opinion feel on, but that's what it feels like.
I had a conversation with one of our OEM, our of our sales managers who handles the national political on stuff for us, we're starting to see more political avails, yes, coming in, those should U.S. So if there's not a ton of political money in that Q1 number right now?
Yes. On the math, that is maybe $150,000 or something like that.
Yes, but we're starting to see it, you see it heat up. So hopefully, I'm again, that's a good sign for things to come for the year.
Yes, great note that absolutely. I mean that is fantastic. I mean that the data itself is certainly irrefutable. So anyway, I guess moving on to my next question is, I mean, with all of that, I guess I would think than that, it would it would be right of it. And I know you're not putting out any guidance yet for 2024, but sort of With that backdrop, I mean, certainly there probably will still be some some pressure on TV. But overall, I mean, when you guys sort of maybe be disappointed at this point, if EBITDA was flat for the year in '24. I would think that there'd probably be some room for a little bit improvement year over year.
We're not there yet, but use that you look, you said, Yum, you called out the single biggest 10 win and now and that's the Pay TV ecosystem and churn and double digit. You have sub declines?
No, yes, those are difficult to deal with it so that we're not prepared to give a 20 crore number yet. We're still working through budgets on point.
Yes, honestly, EVO, you see in this momentum in the radio business. The outcome is helpful to our mindset better, but we're not ready to plant a stake in the ground as to now to where we're going to ourselves.
Al that makes sense for that, definitely prudent. And I appreciate the conservatism, but respect the strong performance. And I'll just say one last question, and I guess I'll go back into the queue and thank you, guys, of course, for the time. But I guess I just want to say so for the debt paydown, we have been talking about that before and I think on the last call, you had said you're pretty much restricted from doing anything until the last 10 Q was posted. I mean, so now that that's done, have you started to buy back any of the bonds yet in the open market in 4Q and 1Q. I'm just asking that. And then just any idea and if there's any update on the size of the buyback or what you think you'll target?
Yes. The answer is yes, we are active in the market now.
That's great.
Yes.
Great, any update on the overall sizing of what you think you're going to organize?
I think I've said I think I've said on the call before that you go on, you know Did I think -- I think we talked about it right?
We did.
Yes, we can. We tend to look at like your bond buybacks and kind of $25 million tranches on we know, I think we got an authorization from our board for $75 million just because we kind of like the round number of 650 in terms of face amount of debt to go down to go to next. And so know that's what we did. We've got that authorization. We kind of look at it, $25 million tranches and then kind of pause and see where we're at and now and that's been our that's kind of been our game plan and up, and that's what we're done.
So.
Great. Thank you, guys.So much for the questions and congratulations again.
You're welcome. Thanks.
Operator
(Operator Instructions)
Brad Kern, a private investor.
Hi. Thanks for taking my call. First of all, I wanted to wanted to see if there was any update on the way you're thinking about capital deployment in terms of strategic investments. And I don't know if you can maybe share what you're seeing out there in terms of opportunities that you're vetting and for other uses of the cash on balance sheet there?
I'll start with that. Yes, there's no strategic investment decisions currently being vetted at the company right now. We've got we know we've gotten nothing on the table. We know we're not exploring. We're not working on an acquisition now. We come I know we still are active in trying to figure out on a future gaming opportunities, but there's nothing actionable today, um, and so the number one use of capital right now is what I just described to the last caller's question and net debt.
No, no, no, really boring, yes, delevering and operating and strategically trying to figure out what to do we do with these businesses, how where do we take our cable television business? We have what our next distribution opportunities that stuff changes so fast on.
Yes, like I feel good that we're sitting back and we and we have now we have breathing room to have to figure out where the puck's going and trying to skate there and continue to we work on delivering at the same time, so.
Okay, that's helpful. And then there was some news in December about around Paramount, potentially selling in talks to LDT. two. Is there a management-led buyout team? And you had said on a previous call that you were around?
Yes, kind of the WHO, they're not off the I guess I saw I saw you guys saw that news report.
I don't feel I don't know how real it is now I think now a number of people on time have reached out when they saw that news report and said, hey, we're still interested and look, it looks like Paramount didn't really respond to that. They seem like they're working on some sort of larger yellow on solution now on. So I don't know anymore. I mean, we were out we were we were there with a bid that was booked now well lower than the $3 billion that they're now kind of said that they were looking now for we had a great private equity partner now lined up and and ready to go.
And we had a couple of banks lined up and ready to go to underwrite it. So our bid was real size saying all that is that they know that we were there and we were credible and we could we could be actionable on. So it would be surprising to me now if they and again, and this is just my opinion, yes, I'll go out and do kind of like a one-off deal without at least calling people that they know that we're credible there to create some tension if they if they were, they're going to decide to sell for a lower number than three and come down to kind of where everybody was that?
Yes, it would be surprising if we didn't get a call to reengage and we have it now. And so I don't know what's going on there yet on but it feels like they've got bigger fish to fry.
Right. I think I just saw something yesterday or the day before about the Sky dance in Redbird trying to take out National Amusements now seems like a larger discussion than whether or not you're going to spin out GET.
Yes, absolutely. All right, thanks for the time.
Sure.
Operator
(Operator Instructions) And at this time, there are no further questions.
Great. Well, thank you, everybody. We look forward to speaking with you again on our year-end conference call.
Operator
Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.
