URBAN ONE, INC. Q4 FY2022 earnings call

Management Statement and Operational Highlights

• MGM National Harbor: Monetized MGM National Harbor investment, received $136.8 million proceeds. Invested $40 million, pulled out $40 million in dividends, equity investment now worth $137 million, earning ~$8.8 million in dividends (6.4% return).
• Radio Acquisition: Acquired four Houston radio stations from Cox Media Group for $27.5 million, expect at least $5 million EBITDA after spin-off of two stations. Anticipate closing transaction late Q2 or early Q3 2023.
• BET Media Group: Involved in process of Paramount selling BET Media Group, see complementary assets with TV One and CLEO assets.
• 2023 Guidance: Expect 2023 EBITDA better than 2019 pre-pandemic EBITDA ex-MGM dividends. Leverage to be below 4 times, ~3.7 times by end of 2023.
• Delayed Filing: Delayed due to reclassification of MGM investment, revenue recognition issues, and internal control testing.

Segment Performance

• Radio Segment: Fourth quarter net revenue up 1.6% year-over-year. Indianapolis radio acquisition added approximately $4.2 million. Net revenue for the radio segment increased 23.8% year-over-year and by 14.1% on a same-station basis. Q1 2023 Radio revenue, excluding digital, was up 2% on a same-station basis or up 3.1% same-station, excluding political. Q2 is currently pacing down 5% excluding digital on a same-station basis, or down 0.9% excluding political.
• Cable Television Segment: Q4 revenue was approximately $49.7 million, a decrease of 8.2%. Cable TV advertising revenue was down 8.4% with a favorable rate volume impact offset by unfavorable timing variance and AVU burn-off. Cable TV affiliate revenue was down by 7.4% with a favorable rate increase offset by net churn and increased financial support.
• Digital Segment: Q4 net revenue increased by 24.1% to $24.2 million. Adjusted EBITDA was $1.9 million for the quarter and $21.8 million for the year, up 24.1% year-over-year.
• Reach Media: Q4 net revenue was $11.9 million compared to $12.3 million last year, excluding the Reach cruise event.

Guidance

• 2023 EBITDA expected to be better than 2019 pre-pandemic EBITDA excluding MGM dividends.
• Leverage to remain below 4 times, projected to be ~3.7 times by end of 2023.
• Anticipate closing Houston radio acquisition late in the second quarter or early in the third quarter of 2023.

Risks

• Macro-economic uncertainties impacting advertising spend and consumer behavior.
• Uncertainty around outcome of Paramount selling BET Media Group and potential impact on strategic positioning.
• Challenges in pay-TV ecosystem affecting cable television segment performance.
• Risk of unfavorable vote in Richmond casino referendum and associated financial implications.

Question and Answer

Q: On radio same-station core advertising performance in 4Q, 1Q, and 2Q pacing?

A: Peter D. Thompson said Q1 2023 radio segment excluding digital was up 2% same-station, excluding political up 3.1%; Q2 pacing down 5% same-station excluding political.

Q: Multiple paid for Houston radio stations purchase?

A: Alfred C. Liggins said paid $27.5 million, expect at least $5 million EBITDA with add backs.

Q: Churchill Downs casino operations involvement?

A: Alfred C. Liggins said Churchill Downs will be operator, 50-50 partnership with Urban One, relying on Churchill Downs for operation.

Q: Timing of 10-Q filing?

A: Peter D. Thompson said will know more next week, extension to 09/27/2023 from NASDAQ.

Q: MGM tax leakage?

A: Peter D. Thompson said minimal due to NOLs, accelerates federal taxpayer status from 2027 to 2026.

Q: Richmond casino referendum likelihood?

A: Alfred C. Liggins said 50-50 partnership, need to improve voter communication on casino benefits.

Q: Radio consumption trends vs competitors?

A: Peter D. Thompson said radio revenue and EBITDA above pre-pandemic levels despite listener decline.

Q: Digital traffic acquisition costs?

A: Peter D. Thompson said higher due to increased traffic acquisition costs, content, and ad production costs.

Q: BET Media Group process?

A: Alfred C. Liggins said engaged in process, under NDA, unable to disclose further details.

Q: Leverage outlook?

A: Alfred C. Liggins said like leverage below 4 times, may increase with Richmond casino investment if unfavorable vote, but 50-50 partnership with Churchill Downs could mitigate risks.