‘Great Start’ To 2020 Clobbered By COVID-19 For Urban One

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We’ve heard this song before. Now, it’s being told by Alfred Liggins III, President/CEO of Urban One, the media company superserving African American consumers.


“We got off to a great start to the year,” he said in prepared comments that accompanied Urban One’s Q1 2020 results. “Then the impact of COVID-19 hit our radio markets.”

While the novel coronavirus slammed the company’s radio properties, Urban One’s digital segment and its TV One MVPD-distributed cable channel “are not as impacted to the same extent as radio.”

Nevertheless, the carnage of COVID-19 on Urban One’s quarterly financial statement is as plain as day.

There was one blip of brightness: Adjusted EBITDA rose to $32.26 million from $27.72 million.

However, there is one clear reason as to why: Urban One took a $53.65 million impairment charge in Q1.

Specifically, a non-cash impairment charge of approximately $6 million was recorded “to reduce the carrying value of our Atlanta and Indianapolis market goodwill balances,” while a charge of approximately $47.7 million was taken and is associated with Urban One’s radio stations in the Atlanta, Cincinnati, Dallas, Houston, Indianapolis, Philadelphia, Raleigh, Richmond and St. Louis markets.

The other reason: Urban One logged a $21.86 million income tax benefit.

In his prepared comments, Liggins said the double-digit adjusted EBITDA growth “is a testament to both our diversified mix of assets and the dedication and skill of our employees.”

Minus the impairment charge, Urban One’s Q1 was downbeat. Net revenue fell to $94.88 million, from $98.45 million.

And, due to the COVID-19 pandemic, expenses — subtracting the impairment charge — were down.

Still, that wasn’t enough to prevent a wider net loss for Urban One in Q1, moving to $23.19 million (51 cents per share), from $3.1 million (7 cents).

AN EXPECTED Q2 CRUSH

On the Q1 call, Liggins was joined by EVP/CFO Peter Thompson.

“There’s not a ton of new information” other than what was in the press release, Liggins said, reiterating how Q1 started off “great” in January and February for the company’s radio properties.

In his prepared remarks, “robust political advertising” pushed same station revenues to 3.2% and 13.2% for January and February, respectively. Then the impact of COVID-19 hit Urban One’s radio markets. “March rapidly turned from positive to finish down 14.1%,” Liggins noted.

What about Q2? “It is coming out where we thought it was going to be … down, in the high 50s,” Liggins said on the call.

Yes, he said high 50s

On a same station basis, radio advertising for April was down 58.3%. Second quarter pacings are down 58.1%. “In order to combat the steep and steady revenue decline, the company has made actions to assure liquidity,” Thompson said on the call.

This includes Urban One’s draw of $27.5 million from its asset-backed credit facility, revealed March 30. Postponed, but nevertheless largely impacting Urban One’s Q2, is the annual Tom Joyner Fantastic Voyage cruise. Liggins noted in an SEC filing made on April 30 that this was projected to bring in $10 million in revenue, and $1.2 million in profit, for the second quarter.

With that, Liggins is squarely focused on Q3, and what lies ahead for Urban One. “Now it is really what the bounce from the bottom is in the recovery, which, as to when, we don’t really know.”

While radio advertising revenue today dwarfs the combined total of cable TV advertising and TV affiliate fees, with fees collected higher than ad dollars, Urban One’s MGM National Harbor hotel and casino offered “zero contribution” starting from mid-March. It remains closed today.

However, casinos are starting to open up in various locales across the U.S. On California’s Central Coast, the Chumash Casino plans to reopen at noon on Wednesday, June 10, KSBY-6 in San Luis Obispo, Calif., reports — with physical distancing measures in place.

This gives MGM visitors perhaps a sneak preview of what to expect, as Chumash is moving ahead with reduced seating on the gaming floor, and plastic protective barriers between slot machines and at tables to separate dealers and players. Bingo will not resume, and it is believed the poker room, hotel spa and dine-in and buffet eateries will remain closed.

If Liggins were to guess when MGM would reopen, he believes it will be “sometime in June and at a somewhat reduced capacity.”

Even with the lights out for the MGM property through much of March, income in the amount of approximately $1.5 million was seen, dipping by just $200,000 year-over-year. Q2 could be ugly. But, with gaming revenue immediately accretive, any opening during the first half of 2020 can only accelerate Urban One’s fiscal recovery. And, Liggins is confident that will occur.

“We will climb out of this,” he declared on the earnings call. “We just don’t know at what rate.”

And, it may not be fueled by digital: net revenues for the digital segment dipped to $6.29 million from $7.44 million, primarily due to a decrease in direct revenues.

YEAR-END ‘OPPORTUNITIES’?

With net revenues from radio off 5% year-over-year, to $38.42 million, liquidity, cost control and “grabbing the kinds of revenue shares that we are used to, even in a declining market” are core priorities for Urban One.

In Q1, the radio stations Urban One owns and operates in Baltimore, Cleveland, Indianapolis, and St. Louis were down. So was Detroit, but that was largely driven by the sale of WDMK-FM in that market.

And, there was growth — Charlotte, Columbus and Philadelphia were up in the first quarter, even with the horrific March.

This will serve as a foundation for Urban One’s second half recovery efforts, as the C-Suite begins to ponder opportunities “to create value or EBTIDA through any kinds of consolidations.”

While Liggins doesn’t think any of that is on the table right now, come December 31, there could be an opening for “expense synergies” with its competitors. He noted that Urban One is “exploring options” for the MVPD-distributed Cleo cable TV network.

“There should be some opportunity there,” Liggins said. “Certainly people are going to be worse off at the end of the year then they thought they would be.”

While cable TV ad revenue inched ahead to $21.03 million, from $20.19 million, cable TV affiliate fees — a subject of scorn among MVPDs — slipped to $26.21 million, from $27.48 million.

Later on the call, Liggins believed TV “will be oversold like never before,” and that typically pushes money to radio.

This could help the Reach Media national arm. Net revenue for the subsegment fell 4.1% in Q1; no specific break-out of the dollars Reach Media contributes to radio advertising was provided in the quarterly results.

Speaking of radio, and the economic uncertainty still ahead in the coming months, Liggins reiterated his call for more radio consolidation — perhaps something more apt for these times as the entire industry, he says, is levered higher than it had been in the past, even after two high-profile bankruptcy restructurings.

“People should take a harder look at which combinations yieled the highest synergies,” he said.


While Urban One’s UONE stock was unchanged at $1.33 as of 10:15am Eastern, its UONEK issues were off by $0.0087 to $0.735.