Urban One, Inc. — Q1 2021 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2021, compared with the same period in 2020. Urban One is a multimedia company focused on African-American and urban audiences, operating radio, syndicated programming, digital, and cable television businesses, as well as holding a minority investment in MGM National Harbor.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net revenue | $91.4 million | $94.9 million |
| Operating income (loss) | $23.8 million | $(27.3) million |
| Net income (loss) attributable to common stockholders | $7,000 | $(23.2) million |
| Adjusted EBITDA | $28.8 million | $32.3 million |
| Operating cash flow | $14.3 million | $22.0 million |
- Broadcast and digital operating income, a company-defined non-GAAP measure, was $36.4 million, down 3.3%; its reported margin increased slightly to 39.8% from 39.7%.
- Cash and cash equivalents were $56.8 million at quarter-end, plus $0.5 million restricted cash. Current assets were $203.9 million and current liabilities $78.0 million.
- Long-term debt was $809.9 million net of discount and issuance costs ($825 million principal). The debt was principally 7.375% senior secured notes due February 2028. The company also had an undrawn asset-backed revolving facility with up to $50 million capacity, subject to borrowing-base limits; letters of credit totaled $0.9 million.
- Investing cash outflow was $0.8 million; financing cash outflow was $30.1 million. Cash, cash equivalents, and restricted cash declined $16.6 million during the quarter.
Material changes versus the prior comparable period
- Revenue fell 3.6%. Radio advertising declined 13.2% and political advertising declined 67.6%; digital advertising rose 64.6%. Cable advertising and affiliate fees decreased modestly.
- Management attributed radio weakness mainly to pandemic-related advertiser reductions. Radio segment revenue fell 20.4%; Charlotte benefited from additional stations operated under the Entercom transaction arrangements. Reach Media revenue rose 16.9%, and digital revenue increased approximately $4.1 million.
- Operating results improved sharply from the prior-year loss, primarily because Q1 2020 included $53.7 million of non-cash impairments: $47.7 million for radio licenses and $5.9 million for goodwill. No impairment was recorded in Q1 2021.
- Q1 2021 included a $6.9 million loss on debt retirement. Interest expense declined 5.7% to $18.0 million.
- On January 25, 2021, the company issued $825 million of 7.375% secured notes due 2028 and used proceeds, together with cash, to repay or redeem prior credit facilities, the MGM National Harbor loan, and existing notes. It also established a new $50 million ABL facility in February.
- Stock issuance generated $12.1 million net cash during the quarter, including sales under the company’s at-the-market programs. A separate $0.9 million Class D share repurchase related to employee tax withholding.
Outlook, commentary, risks, and unusual items
- The company gave no specific financial guidance in the provided filing text. Management said it expected cash flows, cash on hand, and available liquidity to meet foreseeable requirements and concluded it had sufficient capacity to meet financing obligations.
- Management nevertheless cited substantial uncertainty around COVID-19, including possible variants, renewed restrictions, advertising demand, event activity, and the impact on MGM National Harbor income. The company said it does not carry business-interruption insurance for these losses.
- Risks include high leverage and debt service, local-market economic weakness, covenant and refinancing exposure, competition for advertising and content, FCC and gaming regulation, key-personnel changes, technology disruption, and potential future impairment of licenses or goodwill. Licenses and goodwill totaled $707.5 million, about 60.5% of total assets; some licenses have limited or no fair-value cushion.
- The Entercom station exchange and related WFUN asset sale closed April 20, 2021, after quarter-end. Assets held for sale were $32.9 million at March 31.
- Management assessed deferred tax assets as more likely than not realizable, but stated realization depends on future taxable income and is not assured. It also noted a possible decrease of up to approximately $1.0 million in unrecognized state tax benefits within 12 months.
- Routine legal proceedings were not expected by management to have a material adverse effect. Reach Media noncontrolling shareholders did not exercise their annual put right in January 2021; future exercise timing is uncertain.
Important facts for investors to verify
- Confirm post-refinancing debt terms, interest burden, collateral and guarantee structure, and compliance with applicable covenants; assess whether ABL availability is sufficient under borrowing-base restrictions.
- Track radio advertising recovery, especially in local markets, and whether digital and Reach Media growth can offset weakness in radio and cable.
- Review subsequent results for COVID-19 effects, cash generation, and the actual proceeds and financial impact of the April 20 station transactions.
- Assess the sensitivity of broadcasting-license and goodwill values to revenue, market-share, margin, and discount-rate assumptions.
- Note that the filing’s MD&A contains apparent inconsistencies in certain segment operating-income comparisons; verify segment figures against the financial statements and future filings.