URBAN ONE, INC. Q2 FY2023 earnings call

Management Statement and Operational Highlights

• Radio showed softness in the second half, cable TV stabilized post-first half, digital moving as planned with upside in Q4.
• Reaffirmed full year EBITDA guidance of $125 million to $128 million.
• MGM investment fully monetized, affecting cash balance. Considering debt paydown as a top consideration.
• Indianapolis radio acquisition added ~$7.6 million in net revenue, Reach cruise event generated $10.1 million in Q2. Operating expenses increased due to various factors including Reach's cruise, cable TV content amortization, and employee compensation.

Segment Performance

• Radio Segment: Net revenue increased 8.3% year-over-year. Same-station net revenue decreased 1.3%, excluding political it increased 1%. Local ad sales down 4.6% vs. market down 2.7%, national ad sales down 2.4% vs. market down 7.7%. Q4 pacing down 11.6% all in, 21.2% same-station, 10.1% same-station ex political.
• Cable Television Segment: Net revenue was $102.1 million for the first half, down 6.8%. Advertising revenue down 5.8%, affiliate revenue down 7.8%. P25-54 Prime delivery down in Q1 and Q2.
• Digital Segment: Net revenue increased 1.8% for the first half. Streaming revenue up but offset by increased traffic acquisition costs. Adjusted EBITDA was $9.9 million for the first half, down from $12.3 million last year.
• Consolidated: Consolidated net revenue up 3.8% YOY. Consolidated adjusted EBITDA was $67.8 million for the six months ended June 2023, down $21.7 million from last year.

Guidance

• Reaffirmed full year EBITDA guidance of $125 million to $128 million.
• Political advertising in radio expected to be lower than 2022, with an estimated $10 million of revenue projected for 2024, compared to ~$18 million in 2022.
• Pending budgets for 2024, with consideration of market softness and economic factors.

Risks

• Political process for gaming licenses, with uncertainties and potential impacts on returns.
• Economic uncertainties affecting ad sales in radio and cable TV segments.
• Leverage changes and the need to manage debt levels in a changing economic environment. Potential execution risks in diversifying into new businesses without a competitive advantage or skill set.

Question and Answer

Q: How do you think about the IRR on open market debt purchases versus other use of cash proceeds?

A: Historically looked at yield to worst, but currently earning ~5% on cash vs. 12% on debt purchases. Finding 20% IRR investments is hard, but focus on debt paydown and seeking 20%-plus returns.

Q: How committed are you to the media business versus other diversifying ventures?

A: Look for businesses tangential to existing assets with competitive advantage. Open to other businesses but want to avoid execution risk. Core businesses focus on fortifying through synergies and scale advantages.

Q: Where would you like your leverage to be?

A: Like leverage with a 3 handle, aiming to get into the low-3s, but no interest in levering up for risky ventures.

Q: Is the casino idea dead?

A: Not dead, would look at other gaming opportunities. Gaming licenses are political, and interest rates and market conditions affect returns. Virginia's fifth license and iGaming in Maryland are potential areas to explore.

Q: Thoughts on asset sales in the industry?

A: Got approached for asset sales, but declined as it may weaken position in markets or not provide sufficient return. Prefer to keep assets for potential future growth and competitive advantage.