Urban One, Inc. Reports Second Quarter Results

Urban One, Inc. (NASDAQ: UONEK and UONE) today reported its results for the quarter ended June 30, 2017.  Net revenue was approximately $117.6 million, a decrease of 4.1% from the same period in 2016. Broadcast and digital operating income1 was approximately $41.8 million, a decrease of 14.6% from the same period in 2016. The Company reported operating income of approximately $12.1 million for the three months ended June 30, 2017, compared to $27.7 million for the same period in 2016. Net income was $802,000 or $0.02 per share (basic) compared to net income of approximately $7.3 million or $0.15 per share (basic) for the same period in 2016.

Alfred C. Liggins, III, Urban One's CEO and President stated, "Our radio broadcasting revenues improved sequentially from Q1, and also within the quarter itself with June being up 2.3% vs 2017. According to Miller Kaplan, we outperformed our markets by 190Bps in June, which is encouraging. This sequential improvement looks likely to continue for Q3, which is currently pacing (–2.9%). Reach Media continued to experience a soft marketplace for multi-cultural network advertising spend, which was somewhat offset by the success of their Tom Joyner Fantastic Voyage cruise. TV One experienced soft ratings, which resulted in a 5.9% decline in net advertising revenues for the quarter. We still believe that TV One will achieve the Adjusted EBITDA guidance of $82-84 million provided on the last earnings call, driven by improved affiliate revenues projected for H2. Our digital segment revenues benefitted from the acquisition of the Bossip and Madame Noire brands, and we have continued to invest in short-form video and data analytics which should help drive long-term growth for our digital businesses."

Cautionary Note Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements represent management's current expectations and are based upon information available to Urban One at the time of this release. These forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond Urban One's control, that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.  Important factors that could cause actual results to differ materially are described in Urban One's reports on Forms 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission (the "SEC"). Urban One does not undertake any duty to update any forward-looking statements.

Net revenue consists of gross revenue, net of local and national agency and outside sales representative commissions. Agency and outside sales representative commissions are calculated based on a stated percentage applied to gross billing.

Net revenue decreased to approximately $117.6 million for the quarter ended June 30, 2017, from approximately $122.7 million for the same period in 2016, a decrease of 4.1%. Net revenues from our radio broadcasting segment decreased 5.0% compared to the same period in 2016. We experienced net revenue declines most significantly in our Cincinnati, Dallas, Houston, Philadelphia, and Washington DC markets. We recognized approximately $45.4 million of revenue from our cable television segment during the three months ended June 30, 2017, compared to approximately $47.6 million for the same period in 2016, with a decrease primarily in advertising and affiliate sales.  Net revenue from our Reach Media segment decreased $920,000 for the quarter ended June 30, 2017, compared to the same period in 2016 due primarily to weaker demand. The "Tom Joyner Fantastic Voyage" took place during the second quarters of 2017 and 2016 and generated revenue of approximately $9.4 million and $8.8 million, respectively for Reach Media. Finally, net revenues for our digital segment increased $675,000 for the three months ended June 30, 2017, compared to the same period in 2016.

Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of long-lived assets, decreased to approximately $84.2 million for the quarter ended June 30, 2017, down 1.7% from the approximately $85.7 million incurred for the comparable quarter in 2016. The operating expense decrease was primarily driven by lower corporate selling, general and administrative expenses at our cable television segment due to a decrease in incentive-based payroll costs.  This decrease was partially offset by higher programming and technical expenses at our digital segment due to its increased investment in video content, primarily related to increased headcount contributing to higher payroll costs.

Depreciation and amortization expense decreased to approximately $8.4 million compared to approximately $8.6 million for the quarter ended June 30, 2016. The decrease was due to the completion of useful lives for certain assets.

Interest expense decreased to approximately $19.9 million for the quarter ended June 30, 2017, compared to approximately $20.5 million for the same period in 2016. The Company made cash interest payments of approximately $18.2 million on its outstanding debt for the quarter ended June 30, 2017, compared to cash interest payments of approximately $18.6 million on all outstanding instruments for the quarter ended June 30, 2016. As previously announced, on April 18, 2017, the Company closed on a new senior secured credit facility (the "2017 Credit Facility"). The proceeds from the 2017 Credit Facility were used to prepay in full the Company's previously existing senior secured credit facility and the agreement governing such credit facility was terminated on April 18, 2017.

The loss on retirement of debt of approximately $7.1 million for the three months ended June 30, 2017, was due to the retirement of the 2015 Credit Facility. This amount included a write-off of previously capitalized debt financing costs and original issue discount associated with the 2015 Credit Facility, and costs associated with the financing transactions. The gain on retirement of debt for the three months ended June 30, 2016, was due to the redemption of approximately $20 million of our 2020 Notes at a discount.

The impairment of long-lived assets for the three months ended June 30, 2017, of approximately $12.8 million, was related to a non-cash impairment charge recorded to reduce the carrying value of our Houston radio broadcasting licenses.

The gain on sale-leaseback for the three months ended June 30, 2017, was due to the Company closing on its previously announced sale of certain land, towers and equipment to a third party.  The Company is leasing certain of the assets back from the buyer as a part of its normal operations. The Company received proceeds of approximately $25.0 million, resulting in an overall net gain on sale of approximately $22.5 million, of which approximately $14.4 million was recognized immediately during the second quarter, and approximately $8.1 million which was deferred and will be recognized into income over the lease term of ten years.

The Company began using the estimated annual effective tax rate method under ASC 740-270, "Interim Reporting" to calculate the provision for income taxes at the beginning of 2017. For the three months ended June 30, 2017, we recorded a provision for income taxes of $182,000 on pre-tax income from continuing operations of approximately $1.2 million. The provision for income taxes for the three months ended June 30, 2016 of approximately $2.2 million was primarily attributable to the deferred tax liability for indefinite-lived intangible assets, based on a discrete tax provision. The Company paid $396,000 and $352,000 in taxes for the quarters ended June 30, 2017 and 2016, respectively.  

Other income, net increased to approximately $1.6 million for the three months ended June 30, 2017, compared to $43,000 for the same period in 2016. The primary driver of the increase in other income was from our investment in MGM.

The decrease in noncontrolling interests in income of subsidiaries was due primarily to lower net income recognized by Reach Media during the three months ended June 30, 2017, versus the same period in 2016.

Other pertinent financial information includes capital expenditures of approximately $2.3 million and $1.1 million for the quarters ended June 30, 2017 and 2016, respectively.  As of June 30, 2017, the Company had total debt (net of cash and restricted cash balances and original issue discount) of approximately $945.4 million. During the three months ended June 30, 2017, the Company did not repurchase any Class A common stock and repurchased 1,054,290 shares of Class D common stock in the amount of approximately $2.1 million. During the three months ended June 30, 2016, the Company did not repurchase any Class A common stock and repurchased 575,608 shares of Class D common stock in the amount of approximately $1.1 million. The Company, in connection with its 2009 stock plan, is authorized to purchase shares of Class D common stock to satisfy employee tax obligations in connection with the vesting of share grants under the plan.  During three months ended June 30, 2017, the Company repurchased 7,699 shares of Class D Common Stock, to satisfy employee tax obligations, in the amount of $23,000.  Comparatively, during the three months ended June 30, 2016, the Company did not execute a Stock Vest Tax Repurchase.

As previously announced, effective January 1, 2017, the Company changed its reportable segment disclosures. Along with the results of Interactive One, all digital components from our reportable segments will now be part of a newly formed reportable segment called "Digital". This new reportable segment will better reflect the manner in which we manage our business and better reflect our operational structure. Segment data for the three and six months ended June 30, 2016 has been reclassified to conform to the current period presentation. These reclassifications occurred among all segments.

The Company previously presented the reclassified first quarter 2016 results in the press release dated May 4, 2017.  The reclassified results for the third and fourth quarters of 2016, as well as results for full year 2016 is presented at the end of this press release.

Supplemental Financial Information:

For comparative purposes, the following more detailed, unaudited statements of operations for the three and six months ended June 30, 2017 and 2016 are included. These detailed, unaudited and adjusted statements of operations include certain reclassifications.  These reclassifications had no effect on previously reported net income or loss, or any other previously reported statements of operations, balance sheet or cash flow amounts.

Urban One, Inc. will hold a conference call to discuss its results for second fiscal quarter of 2017. The conference call is scheduled for Wednesday, August 02, 2017 at 10:00 a.m. EDT. To participate on this call, U.S. callers may dial toll-free 1-800-230-1085; international callers may dial direct (+1) 612-288-0329.

A replay of the conference call will be available from 12:00 p.m. EDT August 02, 2017 until 11:59 p.m. EDT August 05, 2017. Callers may access the replay by calling 1-800-475-6701; international callers may dial direct (+1) 320-365-3844. The replay Access Code is 425426. 

Access to live audio and a replay of the conference call will also be available on Urban One's corporate website at www.urban1.com. The replay will be made available on the website for seven days after the call.

Urban One, Inc. (urban1.com), formerly known as Radio One, Inc., together with its subsidiaries, is the largest diversified media company that primarily targets Black Americans and urban consumers in the United States. The Company owns TV One, LLC (tvone.tv), a television network serving more than 59 million households, offering a broad range of original programming, classic series and movies designed to entertain, inform and inspire a diverse audience of adult Black viewers. As one of the nation's largest radio broadcasting companies, Urban One currently owns and/or operates 57 broadcast stations in 15 urban markets in the United States. Through its controlling interest in Reach Media, Inc. (blackamericaweb.com), the Company also operates syndicated programming including the Tom Joyner Morning Show, Russ Parr Morning Show, Rickey Smiley Morning Show, Get up Morning! with Erica Campbell, DL Hughley Show, Ed Lover Show, Willie Moore Jr Show, Nightly Spirit with Darlene McCoy, Reverend Al Sharpton Show. In addition to its radio and television broadcast assets, Urban One owns Interactive One, LLC (ionedigital.com), the largest digital resource for urban enthusiasts and Blacks, reaching millions each month through its Cassius and BHM Digital platforms. Additionally, One Solution, the Company's branded content agency and studio combines the dynamics of Urban One's holdings to provide brands with an integrated and effectively engaging marketing approach that reaches 82% of Black Americans throughout the country.