Urban One, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also reports fourth-quarter results. Amounts are in U.S. dollars; financial amounts are in millions unless noted.
Business context
Urban One is a multi-media company primarily serving African-American and urban audiences. Its four reportable segments are radio broadcasting, Reach Media, digital, and cable television (TV One and CLEO TV). It also has a minority investment in MGM National Harbor Casino. At year-end, it owned or operated 63 independently formatted revenue-producing broadcast stations, including low-power television stations, in 13 markets.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Net revenue | $376.3 | $436.9 |
| Operating income | $31.6 | $87.1 |
| Net income (loss) attributable to common stockholders | $(8.1) | $0.9 |
| Broadcast and digital operating income (non-GAAP) | $163.9 | $156.4 |
| Broadcast and digital operating income margin (non-GAAP) | 43.5% | 35.8% |
| Adjusted EBITDA (non-GAAP) | $138.0 | $133.5 |
| Net cash provided by operating activities | $73.9 | $58.5 |
At December 31, 2020, cash and cash equivalents were $73.4 million, total current assets were $223.0 million, and current liabilities were $106.9 million. Debt totaled $855.2 million before discounts and issuance costs ($818.9 million long-term, net of those items, plus $23.4 million current debt); no ABL borrowings were outstanding. Interest expense was $74.5 million. Capital expenditures were $3.8 million.
Fourth-quarter 2020 revenue was $113.5 million, operating income $34.5 million, and net income attributable to common stockholders $26.4 million. Fourth-quarter 2019 figures were $105.9 million, $12.1 million, and a $7.9 million loss, respectively.
Changes versus the prior year
- Full-year revenue fell 13.9%, principally reflecting COVID-related advertising weakness and the postponement or cancellation of events. Radio segment revenue declined 26.4%; Reach Media revenue declined 30.6%; cable television revenue was $181.6 million versus $185.0 million; digital revenue increased.
- Political advertising rose to $22.5 million from $1.4 million, partially offsetting declines elsewhere. Event revenue and other fell to $2.7 million from $25.4 million.
- Operating expenses declined, including through furloughs, layoffs, salary reductions, and reduced event, marketing, travel, and programming costs. Despite the revenue decline, non-GAAP broadcast and digital operating income and margin increased.
- Non-cash impairment charges rose to $84.4 million from $10.6 million, including $68.5 million for radio broadcasting licenses and $15.9 million for goodwill. This contributed to the sharp decline in GAAP operating income and net income.
- Operating cash flow increased to $73.9 million from $58.5 million. Cash at year-end rose to $73.4 million from $33.1 million.
Debt, outlook, risks, and notable items
- Debt refinancing after year-end: In January 2021, Urban One issued $825 million of 7.375% senior secured notes due 2028 and used proceeds plus cash on hand to repay or redeem its 2017 and 2018 credit facilities, MGM National Harbor loan, and remaining 2022 notes. The prior facilities and note indentures were terminated or discharged. In February 2021, it established a new ABL facility with up to $50 million of revolving capacity, including a $5 million letter-of-credit subfacility.
- Management outlook and liquidity: Management anticipated continued COVID-related revenue pressure, but concluded that cash, operating forecasts, and potential cost and capital-spending actions provided sufficient liquidity and projected covenant compliance for at least 12 months from issuance of the financial statements. Management described the assessment as subject to substantial uncertainty, particularly the pandemic’s duration and effects in major markets. The company had drawn $27.5 million on its prior ABL in March 2020, repaid it in December, and reported no balance at year-end.
- High leverage and covenants: The company’s debt, interest burden, refinancing needs, and covenant compliance remain important risks. At year-end, reported covenant ratios showed limited cushion in places; the subsequent refinancing materially changed the capital structure, so current terms should be reviewed in the later agreements.
- COVID and concentration: Advertising, local-market economies, events, and casino distributions were affected. Urban One has no business-interruption insurance for these losses. Four radio markets generated about 55% of radio-station revenue; radio and syndicated programming remain exposed to local advertising conditions and audience changes.
- Asset valuation: Goodwill and radio licenses totaled about $707.5 million at year-end, roughly 59% of total assets. Impairment estimates depend on projected market revenues, margins, growth, and discount rates; further impairments could occur if assumptions worsen.
- Other items: An Entercom station exchange was pending customary conditions and FCC approval at filing; related assets were classified as held for sale. The company applied for a second-round PPP loan, but receipt was not assured. Its $25 million 2020 at-the-market stock program generated about $14.7 million net proceeds by year-end; sales continued into January 2021.
- Governance and controls: The chairperson and CEO together held more than 85% of voting power at year-end. Management reported that internal-control material weaknesses identified in 2019 had been remediated during 2020 and concluded controls were effective; the auditor did not attest to internal control effectiveness. The financial-statement audit opinion was unqualified.
Most important facts for investors to verify
- Post-refinancing debt balances, interest costs, maturities, collateral, covenants, and available borrowing capacity under the 2028 notes and new ABL facility.
- Actual recovery in advertising and event revenue, particularly radio and Reach Media, and whether digital growth and cost savings can persist.
- Cash conversion and liquidity after debt service, required content payments, lease commitments, and any PPP borrowing.
- Assumptions and valuation cushions underlying radio-license and goodwill impairment tests, given the $84.4 million 2020 charge.
- Closing and final economics of the Entercom asset exchange and related station dispositions, plus any share issuance under the ATM programs.