Urban One, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This filing reports full-year results; it does not provide a standalone fourth-quarter income statement. The company operates radio, cable television, syndicated programming and digital businesses, primarily serving African-American and urban audiences.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Net revenue | $477.7 million | $484.6 million |
| Operating income (loss) | $(31.6) million | $91.1 million |
| Net income attributable to common stockholders | $2.1 million | $34.3 million |
| Basic / diluted EPS | $0.04 / $0.04 | $0.70 / $0.66 |
| Broadcast and digital operating income (non-GAAP) | $168.4 million | $201.6 million |
| Adjusted EBITDA (non-GAAP) | $128.4 million | $165.2 million |
| Cash from operating activities | $64.6 million | $66.5 million |
Revenue declined 1.4%. The reported operating loss reflects a $129.3 million impairment charge, entirely related to radio broadcasting licenses. The company reported $96.1 million of other income, principally including a $96.8 million pretax gain on the sale of its MGM National Harbor investment. Consequently, reported net income and operating results should be considered in light of these significant items. Approximate calculated margins: operating margin was (6.6)% in 2023 versus 18.8% in 2022; net income attributable to common stockholders was 0.4% of revenue versus 7.1%; Adjusted EBITDA was 26.9% versus 34.1%.
Revenue by segment: Radio broadcasting $156.2 million (slightly lower); Reach Media $52.9 million (up from $43.1 million, mainly due to the Fantastic Voyage cruise); digital $75.5 million (down from $78.5 million); and cable television $196.2 million (down from $209.9 million). Cable television’s decline was attributed mainly to lower affiliate fees from subscriber churn, lower ratings and weaker advertising sales. The company said its radio markets collectively declined 5.5% in total revenue; new Houston and Indianapolis stations partly offset softer radio results.
Cash, debt and liquidity: Cash and cash equivalents were $233.1 million, plus $0.5 million of restricted cash, at year-end. Current assets were $422.0 million and current liabilities $132.6 million. Principal outstanding on the 7.375% senior secured notes due February 2028 was $725.0 million ($716.2 million net of discount and issuance costs); no ABL borrowings were outstanding, against a stated facility capacity of $50 million. Operating cash flow was $64.6 million. Investing activities provided $95.4 million, chiefly reflecting MGM sale proceeds; financing activities used $28.3 million. Cash interest paid was $54.8 million.
Material changes and notable transactions
- Consolidated revenue fell 1.4%; Adjusted EBITDA declined 22.3%, and broadcast and digital operating income declined 16.5% year over year.
- Radio license impairments totaled $129.3 million, versus $40.7 million of goodwill and intangible-asset impairment in 2022. Management cited lower projected market revenues and, in certain assessments, higher discount rates. At year-end, $204.9 million of licenses in eight markets had fair values less than 10% above carrying value, which the company identified as potentially vulnerable to future impairment if performance declines.
- The company sold its MGM National Harbor investment in April 2023 for approximately $136.8 million, recognizing a $96.8 million pretax gain. It also completed the $27.5 million acquisition of a Houston radio cluster in August 2023 and sold KTHT-FM for $3.1 million in November. The KROI-FM divestiture, for approximately $7.5 million, had not closed by year-end; a $5.6 million receivable was recorded, with completion anticipated in 2024.
- The company repurchased $25.0 million principal of its 2028 notes in 2023, recording a $2.4 million gain on retirement. After year-end and through the filing date, it repurchased approximately another $75.0 million principal at an average price of 88.3% of par.
- Prior-period financial statements were revised for stock-based compensation, RVAEH consolidation/accounting and other adjustments. The revised 2022 common-stockholder net income was $34.3 million, compared with $37.3 million previously reported; revised basic EPS was $0.70, compared with $0.76 previously reported.
Outlook, risks and contingencies
Management’s stated 2024 priorities are to grow market share, improve audience share in selected markets, better convert stable audience share into revenue in other markets, and diversify revenue through its multimedia strategy. The filing provides no numerical 2024 revenue, earnings or cash-flow guidance.
- Control and reporting issues: Management concluded internal control over financial reporting and disclosure controls were ineffective at December 31, 2023 due to material weaknesses involving the control environment, financial close and review, significant estimates, IT access/change controls and fixed-asset purchasing and recording. The auditor issued an adverse opinion on internal control, while giving an unqualified opinion on the 2023 financial statements. Remediation efforts were underway, but the company said it could not conclude the weaknesses were remediated until controls had operated and been tested for a sufficient period.
- Filing and listing risk: The company disclosed delayed SEC filings, multiple ABL waiver amendments and NASDAQ notices relating to periodic filing compliance. The 2023 Form 10-K was signed June 7, 2024; the filing also describes a NASDAQ notice regarding the delayed 2023 Form 10-K and first-quarter 2024 Form 10-Q, with a June 7 deadline to file or submit a compliance plan. A later ABL waiver set a June 17, 2024 deadline for the delayed reports.
- Concentration and industry exposure: Advertising is the principal revenue source and is sensitive to economic conditions, local-market trends, ratings and advertiser allocation across media. Seven key radio markets accounted for approximately 77% of radio station revenue in 2023. The company also faces competition, audience and content risks, changing distribution arrangements, potential increases in music royalties, FCC regulation, inflation and interest-rate exposure.
- Asset valuation and commitments: Radio licenses and goodwill require significant estimates and are sensitive to future market performance and discount-rate assumptions. The company disclosed $159.0 million of other operating-contract obligations, including approximately $106.0 million not recorded on the balance sheet because recognition criteria were not met, as well as $49.1 million of future operating lease payments. It has ongoing music-license negotiations; outcomes could increase fees.
- Other matters: The company reported routine legal proceedings that management did not expect to have a material adverse effect. No significant cybersecurity incident was reported for the period. In February 2024, Urban One terminated its 50/50 Richmond casino development partnership with Churchill Downs and said it would continue exploring gaming opportunities. Reach Media minority holders exercised a put right; the transaction closed in March 2024 for approximately $7.6 million, increasing Urban One’s ownership to 90%.
Key facts for investors to verify
- Review the revised comparative financial statements and the disclosed material weaknesses; confirm progress and independent testing of remediation.
- Assess the sustainability of operating cash flow and Adjusted EBITDA against the $725 million of note principal, interest costs and scheduled 2028 maturity.
- Examine assumptions behind the $129.3 million radio-license impairment and the sensitivity of the remaining license values to revenue, margins and discount rates.
- Confirm the status and proceeds of the KROI-FM divestiture and the actual effect of the post-year-end $75 million note repurchase on debt, cash and interest expense.
- Verify current NASDAQ filing compliance and any continuing ABL waiver or covenant requirements, including subsequent developments after the filing date.
- Track cable subscriber churn and ratings, performance in concentrated radio markets, music-royalty negotiations and the exercise or settlement of the remaining Reach Media put rights.