Urban One, Inc. (UONEK) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Urban One 2026 Second 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 periodically filed 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 August 4, 2026. 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 Time, August 4, 2026, until 11:59 p.m. Eastern Time on Tuesday, August 11, 2026. 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 3701023. Access to live audio and the 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 7 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.

[Audio Gap] Also joining us as usual is Jody Drewer, our Chief Financial Officer of TV One; Chris Simpson, our General Counsel; and Karen Wishart, Administrative Officer. As you've seen in the press release and the results that have come out, we have seen sequential improvements over Q1, but still we are in a rate of decline, less decline than Q1, but however, still a tough first half of the year. We are expecting things to pick up as we go into -- move into Q3 as political starts to become more and more of a factor in our numbers. We -- even though it's an unknown, we're hopeful because of competitive races in Ohio, Texas, Georgia, North Carolina, and Indiana. During the quarter, we have continued to reduce our leverage with market repurchases of our debt. We spent about $23.5 million purchasing our 2031 second lien notes at an average price of approximately 42 cents on the dollar. That's about a $60.2 million long-term debt reduction and an annual interest savings of $4.6 million. However, because of the weak first half of the year, we have decided to adjust our guidance down from 60 to the mid-50s, even though we still don't know exactly where political is going to come out. And also, we closed on our Dallas acquisition. I believe that was on August 17. And that's off to a good start. That's going to contribute significantly to the last 5.5 months. There's potential upside there, but still out of an abundance of caution and trying to be more accurate, we elected to bring the guide down. That could change. But at this point in time, we're seeing mid-50s. I'm going to turn it over to Peter to go into the details of the numbers, and then we can open it up for Q&A. Peter?

Thanks, Alfred. So consolidated net revenues for the 3 months ended June 30, '26, was approximately $85.8 million, which was a 6.4% decrease year-over-year. Net revenue for the Radio Broadcasting segment was $35.3 million, a decrease of 3.9% year-over-year. Excluding political, net revenue for Radio was down 6.6% year-over-year. According to Miller Kaplan, our local ad sales were down 10.1% if the market was down 7.8% and our national advertising sales were down 1.5% against the market that was down 4.6%. So we outperformed on national and underperformed a little on local. Our largest ad category was services, which was down approximately 0.7%, primarily due to legal services. Government public category was up 14.5% as a result of political spending and telecommunications category was up 16.9%. All the other major categories were down in the quarter. Net revenue for Reach Media was $4.8 million in the second quarter, a decline of 10.6% from the prior year. Adjusted EBITDA Reach was a loss of $1 million. And we just continue to see declines in network revenue available for us to participate in. Net revenue for Digital segment was down 8.4% at $9.4 million. The decrease was driven by a decrease in national direct revenue streams as a result of reductions in DEI-focused spending and lower client spending in general due to macroeconomic concerns. We recognized approximately $37.1 million of revenue from our Cable Television segment during the quarter, a decrease of 7.4%. Cable Television advertising sales were down 9.6% against strong competition from the NBA playoffs and that contributed to Prime delivery declines of 21% year-over-year versus 25-54. And this, along with a continued weak scatter market led to more commercial units continuing to be allocated to direct response at lower average unit rate. Cable Television affiliate revenue was down by 4.5%, driven by subscriber churn as linear cable continues to decline, and that was partially offset by an increase in subscriber rates. Traditional linear cable TV subscribers at TV One, as measured by Nielsen, finished Q2 at 27.3 million compared to 34.3 million at the end of Q2 '25. Inclusive of virtual subscribers, TV One finished with 30.5 million Nielsen subscribers compared to 35.4 million in the second quarter of 2025, decline obviously being driven by linear churn. CLEO TV had 27.2 million traditional linear Nielsen subs and 31.1 million inclusive of virtual subscribers. Through the first 4 weeks of Q3 2026, TV One is up by 4% in Prime versus 25-54 delivery compared to Q2 2026 and only down 3% compared to Q3 2025. Operating expenses, excluding depreciation, amortization, stock-based compensation and impairment charges were approximately $75 million for the few months, compared to approximately $78.1 million for the comparable period in 2025. This decrease was mainly driven by sales and marketing expense decreases in the operating segments. Radio expenses were down by 1.6% or $0.5 million, driven primarily by lower revenue and lower bad debt reserves, so lower expenses that connected to revenue, sales commission, et cetera. Reach operating expenses were down 17% or $1.2 million, primarily due to lower bad debt reserves. Operating expenses in the Digital segment were down 8.7%, driven by a decrease in traffic acquisition costs, commissions, headcount savings and bad debt reserves. Operating expenses in the Cable Television segment were up 4.1%, driven by a combination of programming expenses and accounting for new executive agreements at TV One. Operating expenses in corporate down by approximately 16.7%, driven by lower professional service fees and other compensation-related costs. Consolidated adjusted EBITDA was $11.7 million, down 16%. Consolidated broadcast and digital operating income was approximately $22.2 million, a decrease of 13.7% year-over-year. Interest expense in the P&L was down to approximately $2.1 million, down from $9.7 million last year, reflecting the debt repurchase accounting and lower effective interest rates under the Troubled Debt Restructuring laws. We made cash interest payments of approximately $5 million during the quarter. Semiannual cash interest payment for the 2030 and 2031 notes was made on April 1. And the next payment is due on October 1 for the full 180 days of accrued interest, which is approximately $12.1 million. During the 3 months ended June 30, we repurchased approximately $23.5 million of our 2031 second lien notes at a weighted average price of 42% of par debt repurchase of the 2031 second lien notes in the second quarter reduced the outstanding long-term debt balance to $303.2 million. Year-to-date, it's a total reduction in long-term debt of $60.2 million and an annualized interest saving of $4.6 million. Under the troubled debt restructuring accounting and the long-term debt on the balance sheet includes a premium, which amortizes over the remaining term, and we separated that out in the press release, so you can see what that is. We drew an additional $10 million in the second quarter under the asset-backed facility, which resulted in total outstanding balance there of $20 million. We made a further additional draw of $7 million and then during the quarter, and then we just repaid this week $5 million in the third quarter. So we're at $22 million drawn there, and we have current borrowing capacity of an incremental $24.1 million. We recognized approximately $13.9 million of goodwill impairment charge and approximately $300,000 of long-lived asset impairment charges related to Reach Media. We recorded depreciation and amortization expense of approximately $6.2 million, which includes $4.4 million of amortization for the Radio Broadcasting license and TV One trade name. Benefit from income taxes was approximately $1.7 million. We paid cash taxes net of refunds in the amount of approximately $500,000 and capital expenditures for the quarter were approximately $1.7 million. Net loss was approximately $7 million or $1.58 per share compared to a net loss of $77.9 million or $17.41 per share for the second quarter of 2025. During the 3 months, we did not repurchase any shares of Class A common stock, and we repurchased 129,543 shares of Class D common stock for approximately $600,000 at an average price of $4.50. That was under the annual repurchase program for employee stock. We also executed stock vest tax repurchase of 145,513 shares of Class B common stock, which was approximately $700,000 at an average price of $4.52 during the quarter. As of June 30, the current contracted outstanding debt balance was approximately $323.2 million, including the ABL draw. Ended unrestricted cash -- ending unrestricted cash was $15.4 million, resulting in net debt of approximately $307.9 million compared to $46.2 million of LTM reported adjusted EBITDA for a total leverage ratio of 6.66x. As we previously announced in March, we agreed to sell WMXG and WLNK Radio broadcast licenses in Charlotte, North Carolina, to unrelated third parties for approximately $0.7 million and $4.2 million, respectively. We completed both sales on June 1, 2026, and recognized a gain of $4.7 million. In April, we entered into an agreement to acquire Service Broadcasting Group in Dallas, Texas, including radio stations KKDA and KRNB for $22 million. At the same time, we also entered into agreement to sell radio station KZMJ to Fusion Dallas LLC for $6 million. We completed on the sale of KZMJ on July 6 and recognized a gain of $3.2 million in the third quarter. We also completed the acquisition of Service Broadcasting Group on July 17, 2026. With that, I'll hand back to Alfred.

Thank you, Peter. Operator, can you go to the lines for Q&A, please?

[Operator Instructions] Our first question will come from the line of Ben Briggs with StoneX Financial.

So I've got a couple here. So a lot of puts and takes here, but obviously, we've got midterms coming up. I know that you mentioned political is going to be a tailwind. Is there any way you can quantify that or even give some, I guess, relative guidance versus what it was like previously? I know that with the Dallas acquisition, there may be some changes as far as what the political demand looks like...

Yes. That's difficult. That's like -- we don't know yet how much money people are going to spend. I mean, that's -- we won't know until we actually get into the negotiation of it. It's also going to depend on exactly how competitive people think it's going to be. I do know that we've got Radio budgeted at about $11.1 million. And in '22, we did 12 -- basically 13. And so not quite as -- we're not -- we're saying that we're not going to be quite as robust as '22, but...

There was a big...

There was a big Georgia runoff, right? So -- and it was a runoff. So you kind of got 2 bites of the apple. Georgia is expected to be competitive again, right, in the Ossoff race. But there won't be a runoff. And so you just don't know. It's like it's hard to tell. I mean, it feels like it's going to be -- I mean, fortunately, what we can tell -- we can look at polls and see where the races are close, right? Like close in Georgia. They're also -- the governor's race looks close there. Keisha Lance Bottoms, again, I forgot the Republican candidate's name. That looks close. She's supposedly kind of behind the curve on fundraising, which I don't really understand given a competitive race like that, why wouldn't people be throwing money at it. So there's all these wildcards. But anyway, let's just say it's going to be competitive. Indiana is going to be competitive on a -- I think it's a state attorney general's race. Ohio is supposedly competitive with Sherrod Brown trying to reclaim a seat in the Senate. And everybody in the country has been talking about Texas and [ Palo Rico ] versus Paxton. Anything could change, right? The gap could widen and people feel like it's less competitive. I hope that doesn't happen. And then also the other wildcard is how much do advertisers spend with radio versus spending with digital and TV, et cetera. So suffice it to say, it feels like that they're multiple competitive races in places that we have stations. And you're right, Dallas should be different for us because we've got a very strong position against the African-American audience, the Democrats looking more competitive. And so that should bode well for us. But exactly how well for it, I can't -- I can't tell you. And you can find somebody who can actually really predict what the ad dollar market is going to be in this industry. You probably can make money with them on tally sheet.

I will keep that in mind. I will keep that in mind.

But -- so those are the races that we build right now that we feel will help us, right? Yes.

Yes. Yes. I think you said you've got about $11.1 million budgeted for political in fiscal '23 --

Correct.

-- in Radio. Will anything flow through to TV from political?

Yes. I mean TV usually only gets political in a presidential. So digital should see some, but TV, no.

Got it.

That's right.

Are you expecting much in Digital?

I don't remember what the budget is. I think it's maybe a couple of $1 million or something like that or maybe $1 million. Yes, maybe it's $1 million. And so -- and Digital can obviously be geo-targeted, right, so.

Yes, yes. Okay. And then kind of moving along, so I know on the last call, you guys discussed some AM towers that might get sold. Is there anything to report there?

Nothing to report now. It's a process that's ongoing right this second. And we feel good that we're going to have a positive outcome, and we think there'll be a positive outcome this year.

Got it. Okay. And then last one for me is -- so I know you moved guidance from $60 million to mid-50s. I think on the last call, there had been a discussion of about $40 million of free cash flow expectation in 2026. Is it safe to say using the mid-50s EBITDA that it would be about $35 million of free cash flow expectation now? Am I thinking about that the right way?

Yes. There's some more puts and takes on non-cash stuff like ADU burning through that, writing off ADU balances. It's probably lower than that now just because of the composition of how we're getting to the revenue and to the EBITDA number.

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

I've got a couple, if I may, around the ad environment. I'll start on the radio side. I see the sequential improvement from first quarter, but I think 2Q came in a little weaker than you had guided us last quarter. I appreciate it's difficult to be around 1 percentage point smart in advance on radio ads. But any factors you'd call out that maybe pushed 2Q a little softer than you had originally anticipated back in May on your last call?

Yes. I mean I think local came in lighter than we thought and we underperformed the market locally. Within that, obviously, there's a whole -- it's not really one category. It was just across the board. And so yes, the pacing that we gave on the last call, we did miss those a little bit. And I think almost all of that was in local.