Alfred Liggins; President, Chief Executive Officer, Treasurer, Director; Urban One Inc
Peter Thompson; Chief Financial Officer, Executive Vice President; Urban One Inc
Presentation
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Urban One 2024 third quarter earnings call. As a reminder, this conference is being recorded. We will begin the 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 November 12, 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 www.urban1.com. A replay of this conference call will be available from 1:00 PM Eastern Time, November 12, 2024, until 12:00 AM Eastern Time, November 19, 2024. Callers may access the replay by calling 1 (866) 207-1041. International callers may dial direct at 1 (402) 970-0847. The replay access code is 3607803. 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.
Alfred Liggins
Thank you, operator, very much. Also joining us is Kris Simpson, who's our General Counsel; Karen Wishart, our Chief Administrative Officer; and Jody Drewer, our Chief Financial Officer at TV One. Thanks, and welcome to the Q3 earnings call. As you've seen in the press release, we released our numbers this morning for Q3. We've continued to experience advertising headwinds in Q3 as we've expected. So the company has continued to reduce its indebtedness. In the quarter, we repurchased $14.5 million of our outstanding bonds at $0.75 on the dollar. Q4, excuse me, revenues are forecasting at this point to be almost about flat because of a robust political spending of approximately $20.5 million net. That's in comparison to about $22.5 million in 2020. So not quite as good but not bad. However, there is continuing weakness in our cable TV segment. That's going to require us to modify our year-end EBITDA guide from $110 million to a range of $102 million to $105 million. We expect to have a year-end cash balance of $140 million by 12/31 of this year. And we'll continue to manage through this in a prudent manner and march towards our continued debt reduction. With that, I'm going to turn it over to Peter Thompson to go through the details of the quarter, and then we'll open it up for Q&A. Peter?
Peter Thompson
Thank you, Alfred. And just to clarify, those are full-year political numbers, not just Q4. Obviously, the bulk is in Q4, but they were full-year numbers that Alfred gave and full year comps for 2020. Just going through the numbers, consolidated net revenues was down 6.3% year over year for the three months ended September 30, 2024, at approximately $110.4 million. Net revenue for the radio broadcasting segment was $39.7 million, a decrease of 1.1% year over year, but down 3.6% on a same-station basis. Excluding political, net revenue was down 4.8% year over year, down 7.7% on a same-station basis. According to Miller Kaplan, our local advertising sales were down 4.7% against our markets that were down 5.7%. And national advertising sales were down 6.2% against our markets that were down 0.6%. Net revenue for the reach media segment was $10.2 million in the third quarter, down 8.2% from the prior year, and adjusted EBITDA was $3.7 million for the quarter, up from $3.4 million last year. Net revenues for the digital segment were flat in Q3 at $20.4 million direct national sales were down, driven by decreased advertiser demand, but connected TV and broadcast revenue showed growth compared to last year. Adjusted EBITDA for that segment was $6.4 million, down 13.5%. We recognized approximately $40.7 million of revenue from our cable television segment during the quarter, which was a decrease of 13%. Cable TV advertising revenue was down 13.3%. Delivery erosion continued down 29% in total day P25-54, resulting in a rate decrease impact approximately $4.7 million, which was partially offset by slightly higher volume and sponsorships. Cable TV affiliate revenue was down by 12.8% with contractual rate increases of approximately $700,000 being more than offset by approximately $3.5 million in net subscriber revenue churn. Churn is trending at about 11% per annum. Cable subscribers for TV One as measured by Nielsen finished Q3 '24 at $39.1 million compared to $39.8 million at the end of Q2 and CLEO TV had 37.3 million Nielsen subscribers. Operating expenses, excluding depreciation and amortization, stock-based compensation, and impairments of goodwill, intangible assets and long-lived assets, increased to approximately $87.4 million for the quarter ended September 30, 2024, up 3.5% from the prior year. The overall increase in operating expense was primarily due to higher expenses in the Houston radio market as a result of our acquisition we made in August of 2023, and also higher third-party professional fees and cloud-based software licenses. Radio operating expenses were up 4.8% or $1.5 million, driven by the Houston acquisition and also an unfavorable adjustment to the bad debt reserve in the quarter. Reach operating expenses were down by 24.8%, driven by reduced affiliate station fees, also a favorable adjustment to the bad debt reserve in the quarter. Operating expenses in the digital segment were up by 2.4%, driven by third-party cost of sales and traffic acquisition costs. Operating expenses in the cable TV segment were up 4.4% year over year, driven by increased rating service costs and some higher employee compensation and benefit costs. Operating expenses in the corporate and eliminations segment were up by approximately $2 million primarily as a result of higher outside professional fees and cloud-based software license fees. Consolidated adjusted EBITDA was $25.4 million for the third quarter, down 26.7% and consolidated broadcast and digital operating income was approximately $35.4 million, a decrease of 19.2%. Interest income was approximately $1.1 million in the third quarter compared to $2.3 million last year, decrease was due to lower cash balances in interest-bearing investment accounts. Interest expense decreased to approximately $11.6 million for Q3, down from $14 million last year due to the lower overall debt balances as (inaudible) debt reduction strategy. Company made cash interest payments of approximately $22.7 million in the quarter, including the semiannual debt service payment on the 2028 notes. During the quarter, the company repurchased $14.5 million of its 2028 notes at 75% of par, bringing the outstanding balance to $599.975 million. $46.8 millions in noncash impairments were recorded in the third quarter for broadcasting licenses in the radio segment and the TV One trade name. The primary factors leading to the impairments was an increase in the discount rate, continued decline of projected gross market revenues and a projected decline in operating profit margin. Benefit from income taxes was approximately $1.8 million for the third quarter and the company paid cash income taxes in the amount of $201,000. Capital expenditures for the quarter were approximately $1.6 million. Net loss was approximately $31.8 million or $0.68 per share compared to a net loss of $54.4 million or $1.20 per share for the third quarter of 2023. During the three months ended September 30, '24, the company repurchased 1,015,023 shares of Class A common stock in the amount of approximately $2 million at an average price of $2.01 per share and repurchased 586,989 shares of Class D common stock in the amount of approximately $800,000 at an average price of $1.31 per share. As of September 30, 2024, total gross debt was approximately $600 million, ending unrestricted cash was $115 million, resulting in net debt of approximately $485 million compared to $103.7 million of LTM reported adjusted EBITDA for a total net leverage ratio of 4.68 times. And with that, I'll hand back to Alfred.
Alfred Liggins
Thank you very much, Peter. Operator, could you open it up for questions, please?
Question and Answer Session
Operator
(Operator Instructions) And at this time, there are no questions.
Alfred Liggins
Thank you very much, operator, and thank you all for joining our Q3 conference call. Please feel free to reach out to Peter or I off-line if you have any additional questions that you forgot to ask or didn't get a chance to ask. We look forward to talking to you next quarter.
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.
