Urban One, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited interim results; comparisons are with the corresponding 2020 periods. Urban One operates radio broadcasting, syndicated programming through Reach Media, digital media, and cable television, primarily serving African-American and urban audiences.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net revenue | $111.5 million | $91.9 million | $310.5 million | $262.8 million |
| Operating income (loss) | $34.5 million | $4.0 million | $96.2 million | $(2.9) million |
| Net income (loss) attributable to common stockholders | $13.9 million | $(12.8) million | $31.7 million | $(34.5) million |
| Basic EPS | $0.27 | $(0.29) | $0.64 | $(0.77) |
| Adjusted EBITDA (non-GAAP) | $42.7 million | $39.6 million | $117.7 million | $96.4 million |
| Operating cash flow | Not presented separately for Q3 | Not presented separately for Q3 | $36.3 million | $64.4 million |
Revenue increased 21.3% in Q3 and 18.2% for the nine-month period. Digital advertising was a major growth driver: up 84.5% in Q3 and 96.7% year to date. Radio advertising rose 23.4% in Q3 and 20.6% year to date; cable advertising and affiliate fees also increased. Political advertising fell from the prior-year periods.
Q3 operating income improved substantially, in part because the prior-year quarter included a $29.1 million impairment charge; the prior-year nine-month period included $82.7 million of impairment charges. Excluding depreciation, amortization and other specified items, management’s non-GAAP broadcast and digital operating income margin was 44.1% in Q3 2021 versus 48.1% a year earlier, and 43.5% for nine months versus 42.6%. Adjusted EBITDA and these margins are non-GAAP measures and may not be comparable to similarly named measures at other companies.
Cash from operations declined year over year, which management attributed primarily to timing of payments involving other assets, accrued interest, receivables and content assets. Nine-month capital expenditures were $4.2 million. Operating cash flow less capital expenditures was approximately $32.1 million, calculated from the reported figures.
Balance sheet, debt and liquidity
- At September 30, 2021, cash and cash equivalents were $111.4 million, with another $0.5 million of restricted cash. Current assets were $271.6 million and current liabilities were $88.0 million.
- Total debt principal was $832.5 million: $825.0 million of 7.375% senior secured notes due February 2028 and a $7.5 million PPP loan due June 2026. Debt carrying value, net of discounts and issuance costs, was $818.2 million. The company had no borrowings outstanding under its $50 million asset-backed revolving facility, subject to borrowing-base limits; $0.9 million of letters of credit were outstanding.
- In January, Urban One issued the $825 million 2028 notes and used proceeds together with cash to repay or redeem its prior credit facilities and notes, including the MGM National Harbor loan. The refinancing resulted in a $6.9 million loss on debt retirement. Nine-month interest expense fell 10.7% to $49.8 million.
- Cash increased by $38.0 million from year-end 2020 to $111.4 million. Financing cash flows included the refinancing, $33.3 million of net proceeds from Class A share issuance, and $7.5 million of PPP loan proceeds.
Changes, outlook and risks
- Management attributed revenue recovery primarily to easing of the economic effects of COVID-19. It reported improvements in radio markets other than Philadelphia and Raleigh in Q3; year-to-date radio revenue improved across existing markets.
- Operating expenses increased alongside the recovery, including higher compensation, talent, event, traffic-acquisition, marketing and content costs. Cable television expenses also rose, including content amortization. The company recorded approximately $1.4 million of content impairment and additional amortization expense during the three- and nine-month periods.
- Management said it expected operating cash flows and available liquidity to meet foreseeable requirements and reported sufficient capacity to meet financing obligations. The filing gives no numerical revenue or earnings guidance.
- Urban One was selected to develop a Richmond casino resort, but a city referendum on November 2, 2021 narrowly defeated the proposal, after the reporting date. The company said it was considering next steps to pursue similar opportunities; potential development and construction risks remain relevant.
- Key risks include high leverage and debt-service commitments; COVID-19 resurgence, variants and local economic weakness affecting advertising, events and MGM distributions; competition and content costs; broadcast-license renewals and potential impairment; and regulatory and gaming-related risks. The company said it had no business-interruption insurance.
- Management reported no impairment indicators for the first nine months of 2021, but noted some broadcast licenses have limited fair-value cushion, so adverse assumptions or conditions could lead to future impairment. The company also judged its deferred tax assets more likely than not to be realizable, a conclusion dependent on future taxable income.
- Management stated ordinary-course legal claims were not expected to have a material adverse effect. A possible reduction of up to approximately $1.0 million in unrecognized state-tax benefits within 12 months was described as reasonably possible. Reach Media minority owners have an annual put right; timing and potential cost of any future exercise are uncertain.
Important facts for investors to verify
- Whether revenue growth and digital advertising gains persist, and whether expense growth pressures margins.
- Cash conversion: operating cash flow fell despite higher earnings; monitor working-capital movements and content payments.
- Debt burden and refinancing economics, including the 7.375% secured notes, PPP loan forgiveness status, covenant terms and actual borrowing availability under the asset-backed facility.
- Potential dilution: Class A share sales generated net proceeds during the period, and additional equity issuance remains possible under the company’s disclosed programs.
- Outcome of any follow-on Richmond gaming plans, and any related development spending or commitments.
- Results of annual impairment testing and the assumptions supporting broadcast-license and goodwill valuations, as well as realizability of deferred tax assets.