Urban One, Inc.: A Diversified Media Company
Company Overview
Urban One, Inc. is a diversified media company that has been serving the African-American and urban communities for over three decades. Founded in 1980 as Radio One, the company has since expanded its reach beyond traditional radio broadcasting to include digital platforms, cable television, and syndicated programming, solidifying its position as a leading multi-media entertainment and information content provider targeting African-American and urban consumers.
History and Growth
The company’s history is one of steady growth and adaptation. Originally launched as a single radio station in Washington, D.C., Urban One has since grown to own and/or operate 72 independently formatted, revenue-producing broadcast stations, including 57 FM or AM stations, 13 HD stations, and 2 low-power television stations, located in 13 of the most populous African-American markets in the United States. In 2003, the company made a strategic move to diversify its business by acquiring TV One, a cable television network targeting African-American viewers, followed by the launch of CLEO TV, a sister network, in 2019.
Over the next two decades following its founding, the company expanded its radio broadcasting operations, acquiring stations in several major urban markets across the United States. In 1999, the company changed its name from R&B Radio Network to Radio One, Inc. to better reflect its growth into a multi-market broadcasting company. The expansion into cable television continued with the acquisition of TV One in 2004, aimed at broadening the company’s reach and revenue streams beyond its core radio business. Urban One has also developed a significant digital media presence through interactive one (iOne Digital), which operates a portfolio of websites and digital platforms serving the African-American community. This digital segment has become an increasingly important part of Urban One’s business, complementing its traditional radio and cable television operations.
Financials
Urban One’s financial performance has been impacted by the broader media industry’s challenges in recent years. For the fiscal year ended December 31, 2023, the company reported net revenues of $477.69 million, a decrease of 1.4% compared to the prior year. Net income from continuing operations, net of minority interest, was $2.05 million, compared to $34.34 million in 2022. The company’s adjusted EBITDA, a non-GAAP financial measure, was $145.24 million in 2023, down from $181.49 million in 2022.
The decrease in financial performance can be attributed to several factors, including the ongoing shift in advertising dollars away from traditional media towards digital platforms, as well as the continued erosion of cable television subscribers. The company’s Radio Broadcasting segment, which historically has been the core of its business, saw net revenues decline by 1.1% year-over-year in the third quarter of 2024, with a 4.8% decrease in net revenues excluding political advertising. The Reach Media segment, which operates the company’s syndicated programming assets, also experienced an 8.2% decline in net revenues during the same period.
For the third quarter of 2024, Urban One reported total net revenues of $110.39 million, down 6.3% from $117.83 million in the same period in 2023. The company’s broadcast and digital operating income, a key metric, decreased to $35.37 million in Q3 2024 from $43.78 million in Q3 2023, a decline of 19.2%. This was driven by lower operating performance across most segments except Reach Media. The company also reported a net loss to common stockholders of $31.80 million in Q3 2024, compared to a net loss of $54.41 million in the prior year period.
Urban One’s operating cash flow (OCF) for the fiscal year 2023 was $64.64 million, with free cash flow (FCF) of $29.47 million. However, in the third quarter of 2024, the company reported negative OCF of $1.83 million, compared to positive $10.85 million in Q3 2023, and negative FCF of $3.46 million, compared to positive $8.39 million in Q3 2023.
Liquidity
As of September 30, 2024, Urban One’s liquidity position showed a debt-to-equity ratio of 2.90 and a cash balance of $115.01 million. The company has a $50 million asset-backed credit facility, with no borrowings outstanding as of the same date. Urban One’s current ratio and quick ratio both stood at 2.91, indicating a strong ability to meet short-term obligations.
To address the decline in its core radio business, Urban One has been pursuing strategic acquisitions and partnerships, such as the acquisition of a radio cluster in Houston in 2023. The company has also been focused on reducing its debt burden, repurchasing $125 million of its 2028 Notes during the first nine months of 2024 at an average price of 83.8% of par, resulting in a net gain on retirement of debt of $18.8 million.
Challenges and Strategies
In response to these challenges, Urban One has been actively working to diversify its revenue streams and optimize its operations. The company’s digital segment, which includes its iONE Digital platform, has shown resilience, with net revenues remaining flat year-over-year in the third quarter of 2024. Additionally, the company’s cable television segment, which includes TV One and CLEO TV, has continued to generate significant revenue, contributing $40.7 million in the third quarter of 2024, although this represented a 13% decrease compared to the prior year.
Radio Broadcasting
Urban One’s Radio Broadcasting segment remains a significant part of its business, despite facing challenges in recent years. The company continues to focus on optimizing its radio station portfolio and adapting to changing listener preferences. In the three months ended September 30, 2024, the Radio Broadcasting segment recognized approximately $39.72 million in net revenues, a slight decrease from $40.15 million in the same period in 2023. The decrease was primarily due to a decline in national advertising, offset by an increase from the acquisition of Houston radio stations completed in August 2023.
Cable Television
The cable television segment, including TV One and CLEO TV, continues to be an important revenue generator for Urban One. The company is working to address the challenges posed by cord-cutting and shifting viewer habits. For the three months ended September 30, 2024, this segment recognized approximately $40.69 million in net revenues, down from $46.79 million in the prior year period. The decrease was primarily due to lower audience viewership affecting advertising sales and continued subscriber churn.
Digital Media
Urban One’s digital media presence, primarily through iOne Digital, has become increasingly important as the company seeks to adapt to the changing media landscape. This segment has shown resilience in the face of industry-wide challenges. In the three months ended September 30, 2024, the Digital segment generated approximately $20.40 million in net revenues, relatively flat compared to the same period in 2023. The slight decrease was primarily driven by lower national digital sales and weaker demand from advertisers.
Reach Media
The Reach Media segment primarily derives its revenue from the sale of advertising in connection with its syndicated radio shows, including the Rickey Smiley Morning Show and the DL Hughley Show. In the three months ended September 30, 2024, Reach Media recognized approximately $10.25 million in net revenues, down from $11.16 million in the prior year period, due to decreased overall demand and advertiser attrition.
Future Outlook
Despite the challenges faced by the company, Urban One remains committed to serving its target audiences and delivering value to its shareholders. The company’s diversified business model, which spans multiple media platforms, positions it well to navigate the evolving media landscape. Additionally, Urban One’s strong brand recognition and deep roots within the African-American and urban communities provide a solid foundation for future growth and innovation.
Urban One has revised its full-year 2024 EBITDA guidance from $110 million to a range of $102 million to $105 million, primarily due to continuing weakness in the Cable TV segment. The company is forecasting Q4 2024 revenues to be almost flat compared to the prior year, bolstered by robust political spending of approximately $20.5 million, down from $22.5 million in 2020. Urban One expects to have a year-end 2024 cash balance of $140 million.
As the media industry continues to evolve, Urban One’s ability to adapt and innovate will be crucial to its long-term success. The company’s management team has demonstrated its commitment to navigating these challenges, and investors will be closely watching the company’s progress in the coming years as it seeks to leverage its unique position in the market and drive sustainable growth.
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