Urban One, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited consolidated results; amounts below are in millions of dollars unless stated otherwise. Urban One operates radio broadcasting, syndicated programming, digital media, and cable television businesses focused primarily on African-American and urban audiences.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Net revenue | $107.6 | $76.0 | $199.0 | $170.9 |
| Operating income (loss) | $37.9 | $20.4 | $61.7 | $(6.9) |
| Net income (loss) attributable to common stockholders | $17.9 | $1.4 | $17.9 | $(21.8) |
| Diluted EPS | $0.33 | $0.03 | $0.34 | $(0.48) |
| Adjusted EBITDA (non-GAAP) | $44.8 | $24.5 | $75.0 | $56.8 |
Revenue rose 41.6% in Q2 and 16.5% year to date. Management attributed the increase primarily to recovery from COVID-19-related advertising disruption in 2020. Q2 radio advertising increased 68.0%, digital advertising 146.0%, and cable television advertising 21.3%; cable affiliate fees increased 3.2%. For the first half, digital advertising increased 104.7% and radio advertising 19.1%, while political advertising declined 53.7%.
Q2 broadcast and digital operating income, a company-defined non-GAAP measure, was $49.6 million versus $30.2 million; its margin increased to 46.1% from 39.7%. For the first half, the measure was $86.0 million versus $67.8 million and margin was 43.2% versus 39.7%. Radio, Reach Media, and digital improved; cable television operating income declined, with management citing higher expenses.
Six-month operating cash flow was $51.5 million, compared with $33.3 million. Investing activities provided $5.5 million, including $8.0 million of proceeds from broadcasting-asset transactions; capital expenditures were $2.5 million. Financing activities used $1.1 million. Cash and cash equivalents were $129.3 million at June 30, up from $73.4 million at year-end; restricted cash was $0.5 million.
At June 30, 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 bearing 1% interest and due in 2026. The balance sheet reported long-term debt, net of discounts and issuance costs, of $817.8 million, with no current portion. The $50 million asset-backed revolving facility had no borrowings outstanding. Current assets were $279.7 million and current liabilities $99.2 million.
Material changes and unusual items
- In January 2021, Urban One issued $825 million of 7.375% notes and used proceeds plus cash to retire prior credit facilities and notes, including the 8.75% notes and MGM National Harbor loan. The refinancing reduced interest expense by 13.8% in Q2 and 9.7% year to date versus 2020. It also generated a $6.9 million loss on debt retirement in the first half.
- The prior-year first half included $53.7 million of noncash impairment charges—approximately $47.7 million for radio licenses and $5.9 million for goodwill—related to COVID-19 impacts. No impairment indicators were identified in the first half of 2021.
- Urban One sold Class A shares under its ATM programs, receiving approximately $33.3 million net during the first half. Class A shares outstanding increased from 4.4 million at December 31, 2020 to 8.2 million at June 30, 2021. This financing supported liquidity but increased potential equity dilution.
- Other income included approximately $3.6 million of first-half distributions from the MGM National Harbor investment, versus $1.6 million in the prior-year period. The company recorded a $0.4 million net gain on the Entercom and Gateway asset transactions.
Outlook, risks, and contingencies
The filing provides no numerical revenue or earnings guidance. Management stated that operating cash flows, cash on hand, and access to the asset-backed facility should be sufficient for foreseeable cash needs and debt service, including for one year from issuance of the statements. Management also emphasized uncertainty from COVID-19, new variants, and possible renewed effects on advertising, events, local economies, and MGM distributions. The company does not carry business interruption insurance.
Urban One was selected as Richmond’s preferred casino operator. After quarter-end, its subsidiary RVAEH was pre-certified and entered a Host Community Agreement; $26 million was placed in escrow, payable to the City if the November 2, 2021 referendum succeeds and returnable if it fails. The project remains contingent on voter approval and licensing, and carries development, financing, competition, partner-dependence, regulatory, and execution risks. The company stated that it has no history of developing or operating casinos.
Additional risks include high leverage, interest and refinancing obligations, advertising-market volatility, potential impairment of broadcast licenses and goodwill, broadcast-license renewals, and an annual put right held by Reach Media noncontrolling shareholders. Routine legal proceedings were not expected by management to have a material adverse effect. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether advertising recovery and revenue growth continued after the strong year-over-year comparisons against COVID-affected 2020 periods, and whether higher operating costs persist.
- Cash generation, debt-service requirements, covenant terms, and actual borrowing availability under the $50 million asset-backed facility; facility availability is subject to borrowing-base limits.
- PPP loan forgiveness status and the loan’s effect on leverage if it is not forgiven.
- Richmond referendum and licensing outcomes, the project’s full funding and development commitments, and the terms and execution of partner arrangements.
- Further share issuance under the ATM program and its effect on ownership and per-share results.
- Changes in the valuation assumptions and impairment cushion for broadcast licenses and goodwill, which together represented approximately 58.8% of total assets at June 30, 2021.