Ups and Downs: Urban One In Q4

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Alfred Liggins III, President/CEO of African American-centric media company Urban One, is pleased with the company’s Q4 adjusted EBITDA, which came in ahead of guidance. The Radio One division outperformed its markets in the quarter, and overall net revenue was on the rise.


Yet, Urban One has an issue with its operating expenses: They now top $100 million, putting a dent in its net income performance.

For the three months ending Dec. 31, 2018, Urban One net revenue jumped to $113.54 million, from $109.04 million.

But, operating expenses jumped to $104.13 million, from $88.4 million, in Q4, due primarily to a $14.7 million impairment of long-lived assets.

As such, operating income slid to $9.41 million from $20.6 million as consolidated net income slipped to $116.92 million ($2.49 per diluted share) from $121.28 million ($2.50).

Isolating “Broadcast and digital operating income” in the balance sheet shows non-movement and flat activity, with $44.56 million logged in Q4 ’18 compared to $44.23 million in the prior year.

And that Adjusted EBITDA? While it was better than what Urban One anticipated, it was nevertheless down — moving to $35.34 million from $38.74 million.

HOW THE REVENUE BREAKS DOWN

For those tracking the progression of Urban One as a multimedia company, it’s well-established that its roots in the radio industry still drive the company’s profits. In Q4, radio advertising was responsible for just shy of half of Urban One net revenue, rising 3.7% year-over-year to $53.24 million. “For the quarter, we outperformed the radio markets in which we operate by 850 basis points,” Liggins said.

Radio One net revenue growth was strongest in AtlantaBaltimoreCharlotteClevelandDetroitIndianapolisRaleighSt. Louis and Washington, D.C.

Radio One’s Richmond stations experienced a decline for the fourth quarter.

Political dollars were a big factor in the net revenue rise, with some $4.27 million logged in Q4.

While that’s a positive, investors may be deeply concerned about the negative path digital advertising is seeing. Dollars seen from digital advertising declined by a steep 22.3%, to $8.07 million.

In comments made prior to the company’s Q4 earnings call at 10am Wednesday (3/6), Liggins addressed this matter succinctly. “Our digital revenues underperformed expectations, and we have taken significant steps to remediate,” he said. “I expect improved performance from the division in 2019.”

How are TV One and the just-launched Cleo TV, which is not factored into cable TV advertising, doing? This category saw a 9.3% net revenue gain, to $20.2 million.

Cable TV affiliate fees fell by 2%, to $25.76 million.

Finally, net revenue from Reach Media decreased 5.9% for the quarter, adding to strain at that segment of Urban One’s operation.

Total debt is now $912.46 million, compared to $970.66 million in Q4 2017.

A LOOK AHEAD: PHILLY FUNK

Speaking on the company’s Q4 2018 earnings call, EVP/CFO Peter Thompson noted that Q1 is pacing up slightly.

Things will start to accelerate for Urban One come spring, as Q2 is pacing up in the high single-digits.

Taking questions from financial analysts including Noble Financial Director of Research and Senior Media & Entertainment Analyst Michael Kupinski, Liggins was candid regarding Radio One’s struggles in the City of Brotherly Love.

In Philadelphia, Urban One operates a trio of properties that compete against iHeartMedia — including heritage Urban AC WDAS-FM and Urban WUSL-FM “Power 99.” Both facilities are Class B.

Urban One has Urban AC WRNB-FM 100.3 — a Class B — and two Class As: Rhythmic AC WPHI-FM 103.9 and “Classic R&B” WPPZ-FM 107.9, formerly Gospel “Praise.” WPPZ changed formats on Dec. 10, and monetizing its Philadelphia trio is a priority for Liggins and his team.

“Philadelphia is a top 10 market, and we don’t have any cash flow there,” Liggins said. “It doesn’t make any sense.”