Urban One, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it also reports fourth-quarter results. Urban One operates radio stations, cable networks TV One and CLEO TV, syndicated programming through Reach Media, digital properties through Interactive One, and a minority investment in MGM National Harbor. Its media businesses primarily target African-American and urban audiences.
Financial performance
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Net revenue | $441.5 million | $376.3 million | +17.3% |
| Operating income | $118.5 million | $31.6 million | +275.2% |
| Net income (loss) attributable to common stockholders | $38.4 million | $(8.1) million | Improved by $46.5 million |
| Broadcast and digital operating income (non-GAAP) | $179.2 million | $163.9 million | +9.4% |
| Broadcast and digital operating income margin (non-GAAP) | 40.6% | 43.5% | Down 2.9 percentage points |
| Adjusted EBITDA (non-GAAP) | $150.2 million | $138.0 million | +8.8% |
| Cash flow from operations | $80.2 million | $73.9 million | +8.5% |
2021 diluted earnings per share were $0.71, versus a loss of $0.18 in 2020. The company reported no long-lived-asset impairment in 2021; 2020 included $84.4 million of impairment charges, primarily against radio licenses and goodwill. 2021 included $6.9 million of debt-retirement loss and a $6.2 million non-cash CEO employment-award expense.
Revenue mix and trends: Cable television generated $198.2 million, radio broadcasting $140.2 million, digital $59.9 million, and Reach Media $46.4 million, before corporate eliminations. Radio segment revenue rose 7.4%; Reach Media revenue rose 49.8%; digital revenue increased about $24.3 million; and cable television revenue rose to $198.2 million from $181.6 million. Management attributed the consolidated increase mainly to easing pandemic impacts and greater demand for minority-focused media. Advertising and affiliate-fee revenue improved, while political advertising declined to $3.5 million from $22.5 million.
Fourth quarter: Revenue was $131.0 million, operating income $22.4 million, and net income attributable to common stockholders $6.6 million.
Cash, debt and liquidity
- At year-end, cash and cash equivalents were $132.2 million; restricted cash was $20.0 million, for total cash and restricted cash of $152.2 million. Restricted cash included Urban One’s approximately $19.5 million share of funds escrowed for the proposed Richmond casino project.
- Reported debt was $832.5 million: $825.0 million principal of 7.375% senior secured notes due February 2028 and a $7.5 million PPP loan. The notes carry a 7.375% coupon; the PPP loan carries 1% interest and matures in 2026. The company was seeking PPP loan forgiveness.
- The notes offering refinanced and retired the prior credit facilities and notes, reducing interest expense to $65.7 million from $74.5 million. A $50 million asset-backed revolving facility was undrawn at year-end, subject to borrowing-base limits.
- Current assets were $313.3 million and current liabilities $106.5 million. Operating cash flow was $80.2 million; investing activities provided $1.7 million, including $8.0 million of asset-sale proceeds, and financing activities used $3.5 million. Capital expenditures were $6.3 million.
Outlook, risks and notable items
- Management gave no numerical 2022 forecast. Its stated priorities were growing market share, improving audience share and monetizing audience strength, and expanding and diversifying revenue through its multimedia strategy.
- Management said it expected operating cash flows, cash on hand, and access to the asset-backed facility to meet foreseeable cash requirements and debt service. It also cautioned that COVID-19, variants, advertiser demand, event attendance, and economic conditions could continue to make revenue uncertain. The company has no business-interruption insurance for pandemic losses.
- Key exposures include high leverage and debt restrictions; reliance on advertising and on a limited number of radio markets and Reach Media; competition from digital and other media; audience and content uncertainty; FCC licensing and other regulatory requirements; cybersecurity and privacy risks; and possible impairment of goodwill and broadcast licenses.
- Broadcast licenses and goodwill totaled $728.6 million, or about 57.8% of assets. No 2021 impairment was recorded, but valuation depends on forecasts and discount-rate assumptions, and management noted limited valuation cushions for some licenses.
- The November 2021 Richmond casino referendum failed. The city and Urban One pursued steps toward a possible second referendum, anticipated in November 2022 if required approvals are obtained; there is no assurance the project will proceed. The related escrow remains restricted.
- After year-end, the board authorized a share repurchase program of up to $25 million and a repurchase program of up to $50 million of the 2028 notes. Neither program requires purchases. The company also reported a four-year GMR music license settlement effective April 2022.
- Auditor BDO issued unqualified opinions on the financial statements and internal control over financial reporting. The filing describes routine legal matters as not expected to have a material adverse effect.
Most important facts for investors to verify
- Reconcile the debt disclosures and confirm the 2028 notes’ principal, carrying value, interest burden, and applicable covenants; assess the company’s capacity to service debt under weaker advertising conditions.
- Track unrestricted cash separately from restricted cash and confirm borrowing availability under the ABL borrowing base.
- Assess whether revenue recovery and growth in digital, Reach Media, and cable can offset radio-market and advertising volatility, and whether higher expenses will continue to pressure margins.
- Review the assumptions and sensitivity of the $728.6 million goodwill and broadcast-license carrying values, particularly if market growth or cash-flow forecasts weaken.
- Monitor PPP loan forgiveness, the Richmond casino approval and referendum process, and any resulting use or release of escrowed funds.
- Consider dilution from Class A share issuance in 2021 and the company’s post-year-end repurchase authorizations; confirm any actual repurchases in subsequent filings.
Broadcast and digital operating income and Adjusted EBITDA are non-GAAP measures and should be considered alongside GAAP results and cash flows.