Urban One, Inc. ($UONEK)

Ladies and gentlemen, thank you for standing by, and welcome to the Urban One 2026 First Quarter Earnings Call. As a reminder, this conference is being recorded. We will begin this call with the following safe harbor statement. During this conference call, Urban One will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance. Urban One cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs and other reports it periodically files with the Securities and Exchange Commission could cause the company's actual results to differ materially from those indicated by its projections or forward-looking statements. This call will present information as of May 14, 2026. Please note that Urban One disclaims any duty to update any forward-looking statements made in the presentation. In this call, Urban One may also discuss some non-GAAP financial measures in talking about its performance. These measures will be reconciled to GAAP either during the course of this call or in the company's press release, which can be found on its website at www.urbanone.com. A replay of the conference call will be available from 2:00 p.m. Eastern Daylight Time, May 14, 2026, until 11:59 p.m. Eastern Daylight Time, May 21, 2026. Callers may access the replay by calling 1 (800) 770-2030. International callers may dial direct 1-609-800-9909. The replay access code is 3438559. Access to live audio and a replay of the conference will also be available on Urban One's corporate website at www.urban1.com. The replay will be made available on the website for 7 days after the call. No other recordings or copies of this call are authorized or may be relied upon. I will now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter Thompson, Chief Financial Officer. Mr. Liggins, please go ahead.

Thank you very much, operator, and welcome to our first quarter results conference call. Also joining Peter and I are Jody Drewer, the Chief Financial Officer at TV One; and Kris Simpson, who is our General Counsel. The press release came out this morning. I think that we had warned, inferred, other people have also reported already. But first quarter was a very tough quarter. We were budgeted to be down, but things -- the marketplace was softer than anticipated due to continued declines in the traditional ad marketplace. Peter will give you more specifics and details on the numbers in a moment. But with a slow start to the year, we've been focused on balance sheet management and debt reduction and deleveraging opportunities. Since the beginning of the year, we spent approximately $25 million to reduce our debt balance by another $60 million or so approximately, just to over $300 million of gross debt. We've also announced some delevering and accretive M&A with the acquisition of Service Broadcasting in Dallas -- Dallas, Texas, 2 radio stations there in the marketplace for an in-market consolidation opportunity for an announced purchase price of just about $22 million. But net of dispositions of 1 station in Dallas and 2 stations in Charlotte, we will spend approximately -- and by the way, those dispositions don't contribute any cash flow currently. We'll invest approximately $11 million and pick up about $5 million in pro forma EBITDA. And with that, we are also giving out a new -- as I said in the last conference call, we're going to wait until after we got through the first quarter to look at what we wanted to do about updating guidance for 2026. So with that, we're actually updating the 2026 guide to approximately $60 million of EBITDA, and we expect year-end leverage to be below 5x by year-end with these acquisitions and dispositions. Another bright spot on this is with these numbers, we'll generate about $40 million of free cash flow this year. Peter is going to have more details on that in his comments. So I'm going to let Peter go into details, and then we can open it up for Q&A and answer any more detailed questions about the business.

Thank you, Alfred. So consolidated net revenue for the quarter was approximately $77.7 million, down by 15.8% year-over-year. Net revenue for the Radio Broadcasting segment was $30.5 million, which is a decrease of 6.4% year-over-year. Excluding political revenue, net revenue for radio was down 8.7% year-over-year. And according to Miller Kaplan, our local ad sales were down 5.5% against the market that was down 7.1% and national ad sales were down 8.2% against the market that was down 6.7%. Our largest ad category was services, which was up 14.5%, primarily due to legal services. And the government and public category was up 23.6% due to political spending. But all the other major categories were let down. Net revenue for the Reach Media segment was $4.9 million, down 17% from the prior year and adjusted EBITDA was a loss of $0.5 million for the quarter. This decrease was primarily driven by a decrease in the network marketplace revenue and key client attrition. Net revenues for the digital segment were down 33.5% in the first quarter at $6.8 million. The decrease was driven by the decrease in national direct revenue streams as a result of a reduction of DEI-focused spending, ad budgets being pushed to second quarter and second half and a general pullback in advertiser spending due to macroeconomic concerns. Local digital revenue was up 10.9% for the quarter as we continue to focus on expanding and improving our local digital sales. We recognized approximately $36 million of revenue from our cable television segment during the quarter, a decrease of 18.5%. Cable television advertising revenue was down 24.9%. Prime delivery declined 24% year-over-year for persons 25-54. The integration of Nielsen DASH data gave a boost to linear inventory. And this, along with a weak scatter market led to more commercial units being allocated to direct response, which has a lower average unit rate. Cable television affiliate revenue was down by 9.8%, driven by a decrease in subscribers as linear cable continues to decline and that was partially offset by an increase in subscriber rates. Cable subscribers for TV One, as measured by Nielsen, finished the first quarter at 29.1 million compared to 30.2 million at the end of Q4. The decline is a result of the combination of churn and a conversion of virtual MVPDs has been sold as connected television and therefore, pulled out of the Nielsen numbers. Cleo TV had 28.6 million Nielsen subscribers. Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of goodwill and intangible assets was approximately $73.5 million compared to approximately $80.7 million for the comparable period of 2025. Decrease was mainly driven by sales and marketing expense decreases in the operating segments. Radio expenses were down 3.8% or $1.1 million, driven primarily by lower costs associated with revenue, lower facility and rental costs, lower national rep fees and lower bank charges. Reach operating expenses were down by 16.2% or $1.1 million, primarily due to lower bad debt reserve, lower bank charges and lower revenue-related expenses. Operating expenses in the digital segment were down 19.7%, driven by a decrease in traffic acquisition costs, commissions, headcount-related savings and third-party ad serving costs. Operating expenses in Cable Television segment were down 9.8%, driven by lower marketing expense, lower programming content amortization and research costs. Operating expenses at corporate were down approximately 6.1%, driven by lower professional service fees and payroll-related costs. Consolidated adjusted EBITDA was $4.7 million for the first quarter, down 63.8% Consolidated broadcast and digital operating income was approximately $14.9 million, a decrease of 35.4%. Interest expense was down to approximately $4.4 million, down from $10.9 million last year. The company made cash interest payments of approximately $700,000 in the quarter on the outstanding 2028 notes. Semiannual cash interest payments for the 2030 and 2031 notes were made on April 1 for 102 days of accrued interest from the transaction date of December 18, 2025. And the next payment on those notes is now due October 1 for the full 180 days of accrued interest. During the first quarter, the company repurchased $43 million of its -- sorry, $4.3 million of its 2028 notes at an average price of 51% of par for a $2.1 million gain and approximately $32.4 million of its 2031 second lien notes at a weighted average price of approximately 40.7% of par. The discounted debt repurchases in the first quarter reduced the outstanding long-term debt balance to $326.7 million as of March 31, 2026. The company repurchased an additional $23.5 million of its 2031 notes in Q2 at 42% of par. And so as Alfred said, year-to-date, a total reduction in long-term debt of $60.2 million, which will give us an annual interest saving of $4.6 million. Under the troubled debt restructuring accounting, the long-term debt on the balance sheet includes a premium, which amortizes over the remaining term. And on the ABL, we drew $10 million in the fourth quarter and repaid that in the first quarter. And then on March 31, we drew another $10 million with the 6-month maturity, which was outstanding as of March 31, 2026. We drew a further $10 million in the second quarter of 2026 to help us do the long-term debt repurchase. And so we have a current outstanding balance today of $20 million on the ABL. And we have incremental borrowing capacity of approximately $22 million today. No impairment losses were recognized for the 3 months ended March 31, 2026. We recorded amortization expense of approximately $6.2 million, including $5.6 million for the radio broadcast license and TV One trade name for the 3 months ended March 31, 2026. Benefit from income taxes was approximately $1.4 million for the first quarter. The company paid cash income taxes net of refunds in the amount of approximately $0.1 million. Capital expenditures were approximately $3.4 million in the quarter, which included the Indianapolis studio refurbishment, which is why that's higher than you would normally expect to see. So that will normalize over time. Net loss was approximately $3.1 million or $0.69 a share compared to a net loss of $11.7 million or $2.64 per share for the first quarter of 2025. During the 3 months, the company did not repurchase any shares of Class A common stock, and we executed stock best tax repurchases of 2,187 shares of Class D common stock at a price of $5.73 per share. As we previously announced, in March, the company agreed to sell its WMXG and also WLNK radio broadcast licenses in Charlotte, North Carolina to unrelated third parties for approximately $0.7 million and $4.2 million, respectively. We anticipate to close on the sale by the end of Q2. In April, the company entered into an agreement to acquire Service Broadcasting Group in Dallas, Texas, including radio stations KKDA and KRNB for $22 million. At the same time, we also entered into an agreement to sell radio station KZMJ to Fuzion Dallas for $6 million. Pending FCC approval, the Dallas transactions are expected to close in Q3. So the net of all of that radio M&A is roughly $11 million of outflow. And on a pro forma basis, we think the incremental cash flows from that will be around about $5 million. As of March 31, 2026, current contractually outstanding debt balance was approximately $336 million and the ending unrestricted cash balance of $27.2 million, resulting in net debt of approximately $309.5 million compared to $48.5 million of LTM reported adjusted EBITDA for a total net leverage ratio of 6.39x. Cash flow from operations is expected to be around $40 million for the year, and we do anticipate repaying the $20 million ABL balance in the second half of the year. And based on the guidance that we gave, we anticipate net leverage being below 5x at year-end. And with that, I'll hand it back.

Thanks, Peter. Operator, could you please open up the lines for questions?

[Operator Instructions] our first question will come from the line of Ben Briggs with StoneX Financial.

So I wanted to touch on one thing here. So first of all, congratulations on the acquisitions that you made this quarter. I know kind of moving some of the chips on the board is an important strategy for you guys. Can you give us some clarity on the thought process behind these? Is it more attractive formats that you think are going to make the difference? Or is it better geographies or a combination of both? Any clarity there would be great.

They aren't different formats. They are similar formats in the marketplace. So we're really looking to expand our reach and our service of the African-American community in Dallas, Texas. So I think it's going to help us all the way around in terms of serving local advertisers. It's the economics of putting those clusters together and also selling off our one station are going to create a much larger cluster that has more revenue scale. And with those economies of scale, you're producing significantly more EBITDA. So it makes a lot of sense. It's an acquisition that we've been -- I've been trying to do for almost 30 years. I think we -- actually, so we went public in May of '99. That's when we bought our first Dabl Station and trying to make a deal with the owner operator there, Mr. Henry Childs, who's a wonderful broadcaster and has been in this business for a long time. And we've always stayed in touch. And we finally were able to do something. What really helps it is again the disposition of the one station that we have that I think does maybe a couple of million dollars of revenue, but really no cash flow contribution. Those 2 stations in Charlotte that we're selling will probably do just about $1 million of revenue this year and also contribute no cash flow. The 2 stations in Charlotte became salable because we moved our news talk format off of WBT-AM, and we put it on -- what was WLNK-FM, which is a full market signal there because these spoken word formats have to move to the FM band. So we finally did that. And then we moved the adult contemporary format to these stations, which one is a Class A in Charlotte. The other one is a C3 that's just south of Charlotte. And so we're really positioning that Charlotte cluster for the future, and -- but there was no cash flow associated with it. It also actually frees up the land associated with the tower sites for WBT-AM and also for our old WFNZ-AM, which we also moved to the FM band. So something I didn't talk about is that we've got significant value in those land assets in Charlotte, and there is a process going on as we speak to monetize those parcels. So all in the vein of how do we look or be accretive in delevering M&A. So you got to get it at the right price. It's got to be an operational fit such that 1 plus 1 equals 3 in terms of profitability. And so we think what we did in Dallas and what we're doing in Charlotte is -- are significant -- going to be significant plays in our effort to continue to delever.

Okay. That's great color. And I appreciate the information about the land that some AM towers are on that frees up. Can you give any more clarity on the monetization process? Is it going to be -- are you going to lease? Are you going to sell? Are you not sure yet?

We can't. We're -- the land is listed with JLL right now, and there's a process going on to bring in offers and to evaluate and to -- eventually to sell it.

And our next question will come from the line of Dennis Pannullo with Lapan Partners.

I know the first quarter seasonality is the weakest quarter of the year, but to see TV down double digits. And did I hear Mr. Thompson right? Did you say digital -- your digital broadcast was up?

Q2. No, look, so super soft Q1, but a bunch of campaigns got pushed into Q2 and the back half. So Q2 and digital is actually up. So yes, sorry, of all of the other divisions, I think that the digital folks are optimistic and confident about making their numbers for the year, right? So we have a weak Q2, but a weak Q1, but a stronger Q2.

Maybe because a lot of your peers are transitioning to digital and digital sales have been pretty strong. So I'm sure that we're probably trying to head in that same direction, I would imagine. Margins are better. Sales numbers are better, are we on market applying that division?

The -- well, the division has grown from I mean we created Interaction One and for a long time, it was a breakeven division. And then I think revenue went from like low-30s to $75 million after sort of the George Floyd DEI and it was wildly profitable. When I say wildly, went up to, call it, $20 million. Now there's pressure on digital publishers, of which they are. You can see BuzzFeed had its challenge, et cetera. But even with all of that, advertisers are moving more towards digital. So it will still be not a $20 million profitable division, but from $6 million of course. But a misnomer that you just mentioned is that the margins aren't better in digital. The margins are actually worse, particularly on local digital because a lot of the campaigns that you sell require you to, a, do specialized individual custom content; and b, oftentimes, you need impressions that are not owned and operated impressions to build scale, and those impressions are very expensive to buy. And so you have TAC, which is traffic acquisition cost. And the radio business, local radio has been moving in that direction, but it is a lower-margin business. But as I -- and our local radio stations have been behind the curve in local digital, and we're pushing and improving in that area because I tell my guys and ladies that low margin is better than no margin, right? So...

Yes. And Dennis, on the local -- to Alfred's point, on local digital revenue, I mentioned in my sort of prepared remarks, we were up 10.9% for the quarter. The marketplace was up 20%. So local digital is where the growth is in radio. And we're sort of trailing that curve, but we're working hard to catch up.

Yes. More scale in our markets will help us be a better local digital marketing partner for our advertisers. So we're focused on that.

And let me just take a quick second to thank you and management for working so hard. I mean, my God, that refinancing you guys did in December was awesome. You didn't any of the company. There was no dilution to shareholders. And unfortunately, the market didn't reward you in any way, shape or form for that. And now with this additional debt repurchase and another $1.1 million in interest savings plus the premium savings, it's looking like, if I'm not mistaken, your quarterly interest cost on your P&L was going to be under $3 million. Does that sound about right to Thompson?

Yes. It's -- look, that's the weirdness of having to amortize the premium, but it reduces the effective interest rate. I think the way to think about the interest burden going forward is the cash interest expense. Yes. So $24.8 million is the pro forma cash interest expense moving forward, which is obviously way down on where we've been historically. And to your point, helps us generate more free cash flow, right?

Yes. Look, you're in -- we're in tougher businesses, right? And so it really -- it's going to be a threading of the needle of how do you manage the balance sheet, get your interest burden down, get your debt down, find the places where you can create more cash flow. And look, you got to deal with the reality is that at least the assumptions that we make, like when we did this Dallas acquisition, our model has the Dallas market going down in spot revenue and digital going up with lower margins. But net-net, the market coming down, right? And I don't have a crystal ball as to what happens to the media ecosystem in terms of technology and who's competing and what it means. And I don't think anybody does, but you just got to manage that debt down and stay ahead of it. And so that's what we've been doing. That's what we plan. I mean, it's actually -- the fact that in February of '21, we had $825 million of debt. 5 years later, we've got $303 million of debt. Now we have less cash flow, too. But that's...

Well, even looking at January of 2024, you had $725 million. So in just a few years, you guys took off over $400 million of debt without diluting shareholders a single share.

Yes. I mean, that's all fine and good, but the -- and I appreciate that. But the stock trades basically as an option level because what's the value, right? Like can you value stuff -- we're like, hey, we're going to be below 5x -- somebody could argue that your assets, cable and radio are worth 5x. So there's no equity value, right? Right now, because it certainly benchmarks, whether it's AMC Networks or whether it's worsened or like have seen multiples, below 5x, right? So -- but we sold drawn. That's the reason you got to get your debt down to 3x, right? And that's what we're focusing on.

We even your free cash flow that you just mentioned, you're going to do $40 million, your current market cap is $26 million this morning. I mean, how many companies are trading under 1x free cash flow? I don't know, I mean, I don't know what your peers typically trade at. But when I took a look, they typically trade at 5 to 8x free cash flow. You guys are less than 1.

Well, look, I think the market has got to get comfortable that our company, these companies are going to make it through the curve, right, because a number of folks that have not made it. Cumulus is in BK again, Spanish broadcasting just went to BK. And so they got to believe that you're going to make it, and then they'll buy your argument.

Well, you don't have any liquidity issues either, any near-term debt issues. You just push them out to 2030 and 2031, and you eradicate and you're eliminating that debt at a rapid pace. So how do you not get re-rated and have your stock trading at literally bankruptcy prices?

And something on the call, I'm sure they I hope you're making...

I hope you guys get rewarded share price-wise very soon.

[Operator Instructions] This concludes our question-and-answer session. I'll hand the call back to Alfred for any closing comments.

Operator, thank you very much. And also, thank you, everybody, for your support. And again, I always say this, it's not like a broken record, but Peter and I pride ourselves on being accessible. And so if there are any follow-up questions, please feel free to reach out to us. Thank you very much.

This concludes our call. Thank you all for joining. You may now disconnect.