Executive Summary / Key Takeaways

• Focused Deleveraging and Cost Control: Urban One is aggressively prioritizing debt reduction through opportunistic buybacks, having repurchased approximately $96.7 million of its 2028 Notes in the first nine months of 2025 at an average of 53.6% of par. This strategy, coupled with annualized cost savings of $8 million from recent staff reductions, aims to achieve a target net leverage ratio in the mid-to-low 3s.
• Challenged Revenue Environment: The company faces significant top-line pressures across all segments, with Q3 2025 consolidated net revenue down 16% year-over-year. This decline is driven by political advertising headwinds, a pullback in Diversity, Equity, and Inclusion (DEI) spending, subscriber churn in Cable TV, and renegotiated streaming deals in Digital.
• Strategic Digital and TV Evolution: Urban One is reorienting its digital strategy to enhance local digital efforts and rebuild streaming partnerships, while its Cable Television segment is expanding into FAST (Free Ad-supported Streaming Television) and AVOD (Advertising-based Video On Demand) to counter linear TV declines and monetize content across new distribution channels.
• Industry Consolidation and Deregulation: Management views potential deregulation in the broadcasting sector as a net positive, anticipating opportunities for market consolidation and asset alignment to create economies of scale and strengthen local digital competitiveness, though new capital inflow remains a challenge.
• Revised 2025 Outlook: The company has adjusted its full-year 2025 Adjusted EBITDA guidance to a range of $56 million to $58 million, down from an initial $75 million, reflecting persistent market softness. Despite this, management projects approximately $25 million in free cash flow generation for the year.

Setting the Scene: A Multi-Media Powerhouse Adapts

Urban One, Inc., founded in 1979 as Radio One, has evolved into a prominent urban-oriented multi-media company, strategically targeting African-American and urban consumers across the United States. Its foundational strength lies in its radio broadcasting franchise, the largest of its kind, complemented by a diversified portfolio including cable television networks (TV One and CLEO TV), syndicated programming (Reach Media), and a robust digital platform (Interactive One). This integrated approach allows Urban One to offer advertisers a unique and powerful mechanism to connect with a highly sought-after demographic.

The company's history is one of strategic adaptation, from its initial focus on radio to a broader multi-media identity, culminating in its name change in 2017. This evolution has been crucial in an industry grappling with secular shifts, including declining traditional media listenership and viewership, the rise of digital advertising, and the increasing influence of AI in marketing. Urban One's competitive landscape is dynamic, encompassing larger, more diversified players like iHeartMedia and Audacy in audio, Paramount Global through its BET Networks in cable TV, and subscription-based services like Sirius XM (SIRI). While these competitors often boast greater scale and broader digital offerings, Urban One differentiates itself through deep cultural expertise and content specifically tailored to its target audience, fostering strong community ties and brand loyalty.

Technological Edge: Digital Platforms and Evolving Distribution

Urban One's technological differentiation is rooted in its comprehensive suite of digital platforms and its proactive embrace of evolving content distribution models. The company's Digital segment, primarily through Interactive One and its brands like iONE Digital, Cassius, Bossip, HipHopWired, and MadameNoire, serves as a critical hub for social content, news, information, and entertainment for the African-American community. These platforms offer advertisers targeted reach through banner and sponsorship advertisements, with revenue recognized as impressions are delivered.

A significant strategic shift, effective January 1, 2025, involved reclassifying Connected TV (CTV) revenue from the Digital segment to the Cable Television segment. This move aligns CTV offerings with the broader TV business, acknowledging the convergence of traditional and digital video consumption. The company is also actively exploring new distribution opportunities in the FAST (Free Ad-supported Streaming Television) and AVOD (Advertising-based Video On Demand) environments for its Cable Television content. This strategy aims to monetize content beyond shrinking linear TV universes, offering a pathway for growth and audience expansion in a fragmented media landscape. While specific quantitative benefits of these new distribution models are still emerging, the strategic intent is to enhance content accessibility and create additional revenue streams, thereby bolstering the company's competitive stance against larger, more digitally advanced rivals.

Segment Performance: Navigating Headwinds and Strategic Adjustments

Urban One's financial performance in the first nine months of 2025 reflects a challenging macroeconomic and industry environment, prompting strategic adjustments across its segments.

Radio Broadcasting: Outperforming Locally, Challenged Nationally

The core Radio Broadcasting segment, operating 74 stations in 13 key African-American markets, saw net revenue decline by 12.6% year-over-year to $34.7 million in Q3 2025 and 14.1% to $104.0 million for the nine months ended September 30, 2025. This was primarily driven by weaker overall market demand and significant political advertising headwinds, with core radio pacings facing a substantial 30% decline. However, excluding political advertising, net radio revenues were down a more modest 6.4% in Q3 2025. The company demonstrated relative strength in local ad sales, which were down 6.5% against a market decline of 10.1%, indicating market outperformance. Conversely, national ad sales underperformed, falling 29.1% against a market decline of 21.5%.

Management is proactively addressing these challenges. Initiatives include rearranging formats in Washington, D.C., to target the growing Hispanic community and beefing up sales staff. The segment also incurred increased music royalty expenses due to a retroactive 20% average rate increase from the August 2025 RMLC settlement with ASCAP and BMI. Despite the current softness, management expresses optimism for 2026, anticipating a rebound driven by the upcoming political year and the positive impact of these strategic operational changes.

Reach Media: DEI Pullback and Timing Shifts

The Reach Media segment, home to syndicated radio shows and BlackAmericaWeb.com, experienced a substantial revenue decrease of 40% year-over-year to $6.1 million in Q3 2025 and 20.3% to $17.3 million for the nine months ended September 30, 2025. This sharp decline was largely attributed to a lower overall network audio market, reduced national sales renewals, and a significant "drying up of DEI" advertising, which had previously been a strong tailwind. The segment also faced unexpected cancellations from its largest advertiser and was overly concentrated with two key clients.

A notable factor impacting quarterly comparisons was the timing of the lucrative Tom Joyner Fantastic Voyage cruise event, which occurred in Q2 2024 but is scheduled for Q4 2025, creating a timing difference in revenue and profit. Management acknowledges the difficulty of navigating this transition, especially following the departure of the former President of the Audio division. For 2025, Reach Media is projected to stabilize and show slight bottom-line growth despite a top-line decrease.

Digital: Streaming Headwinds and Local Opportunities

The Digital segment recorded a 30.6% year-over-year revenue decrease to $12.7 million in Q3 2025 and 11.4% to $33.2 million for the nine months ended September 30, 2025. This was primarily driven by a decline in direct revenue streams, lower political advertising, reduced DEI spending, and softer client demand. A significant operational detail was the $1.3 million year-over-year decline in audio streaming revenue in Q3 2025, stemming from the renegotiation of an exclusive third-party audio streaming deal. This deal, which previously bought all available inventory, was renegotiated downwards, leading to a projected halving of streaming revenue. Urban One is now actively rebuilding its streaming partnerships by integrating with multiple entities.

The segment also faces broader industry headwinds, including significantly reduced traffic from platforms like Google and Facebook (META), partly attributed to the impact of AI on content discovery. This leads to higher traffic acquisition costs and compressed margins. Management recognizes the company is "underpenetrated" in local digital efforts and sees growth opportunities in cross-pollinating national digital products to local sellers.

Cable Television: Churn and New Distribution Avenues

The Cable Television segment, comprising TV One and CLEO TV, saw revenue decrease by 7% year-over-year to $39.8 million in Q3 2025 and 10% to $124.1 million for the nine months ended September 30, 2025. This decline was primarily due to ongoing subscriber churn and lower advertising sales, with total day delivery (P25-54) for TV One declining by 29.4%. As of Q3 2025, TV One had 34.1 million subscribers, and CLEO TV had 33.5 million. Affiliate revenue was down 9.1% in Q3 2025.

Despite these challenges, management noted that TV One's ratings stabilized in Q1 and Q2 2025, performing in line with budget, with CLEO TV showing particular strength. The company's strategy involves investing in content in combination with expanding into FAST and AVOD environments rather than solely for linear networks. Key affiliation agreements with Charter (CHTR), Verizon (VZ), and NCTC are up for renewal in 2025, with Comcast (CMCSA), DIRECTV, and AT&T (T) following in 2026. Management believes subscriber churn has started to ease, with some industry observers anticipating a bottoming out of cable penetration around 40% of households.

Financial Health and Liquidity: Deleveraging as a Core Mandate

Urban One's consolidated financial performance for the nine months ended September 30, 2025, reflects the challenging revenue environment, with a net loss attributable to common stockholders of $92.5 million, compared to a net loss of $69.7 million in the prior year period. Operating expenses, excluding non-cash items, decreased by 4.2% in Q3 2025, partly due to cost-cutting measures. However, depreciation and amortization significantly increased by $4.9 million in Q3 2025, driven by the reclassification of TV One Trade Name and radio broadcasting licenses from indefinite to finite useful lives, leading to amortization expenses and substantial impairment charges totaling $136.5 million for the nine months ended September 30, 2025.

The company's liquidity position remains a key focus. As of September 30, 2025, cash and cash equivalents stood at $79.3 million, with an undrawn $50 million asset-backed credit facility (Current ABL Facility). The Current ABL Facility has a fixed charge coverage ratio covenant of 1:1, which the company is in compliance with at 1.7x. Urban One has aggressively pursued debt reduction, repurchasing approximately $96.7 million of its 2028 Notes during the first nine months of 2025 at an average price of 53.6% of par, resulting in a $44 million gain on retirement of debt. This effort has reduced the gross debt balance to $487.8 million as of September 30, 2025, down from $584.6 million at year-end 2024. The net debt stood at $408.5 million, resulting in a net leverage ratio of 6.02x LTM Adjusted EBITDA. The company has approximately $45.8 million remaining under its current Board authorization for debt repurchases. Management's stated long-term goal is to achieve a net leverage ratio in the mid-to-low 3s.

Outlook and Guidance: A Path to Rebound

Urban One has adjusted its full-year 2025 Adjusted EBITDA guidance to a range of $56 million to $58 million, down from an initial $75 million. This revision reflects the softer-than-projected Q3 revenues and persistent political advertising headwinds. However, management anticipates approximately $25 million in free cash flow generation for 2025, supported by lower interest payments due to debt reduction efforts and ongoing cost containment.

Looking ahead to 2026, management expresses a positive outlook, citing the upcoming political year and the expected benefits from strategic changes implemented in 2025, particularly in Reach Media and Radio Broadcasting. The $8 million in annualized cost savings from staff reductions in Q4 2024 and Q3 2025 are expected to fully impact 2026 results. The company's commitment to deleveraging through opportunistic debt buybacks and potential deleveraging M&A remains a core strategic pillar.

Competitive Landscape and Strategic Positioning

Urban One operates in a highly competitive and evolving media landscape. In radio, it competes with industry giants like iHeartMedia (IHRT) and Audacy (AUD), which possess broader scale and more diversified digital offerings. While Urban One's niche focus on African-American audiences provides a unique cultural moat, its smaller scale can lead to higher operational costs and greater dependence on advertising revenue. In national ad sales, Urban One has underperformed the market, struggling with large clients and agencies, partly due to the pullback in DEI spending and the emerging impact of AI in marketing campaigns that may exclude broadcast radio.

In cable television, TV One and CLEO TV compete directly with Paramount Global's (PARA) BET Networks. Urban One differentiates through lifestyle and community-oriented programming, but Paramount's larger production capabilities offer greater content variety. Urban One's strategic move into FAST and AVOD is a direct response to linear TV subscriber churn, aiming to leverage its content across new, growing digital distribution channels. The company's efforts to enhance local digital offerings and cross-pollinate national products to local sellers are crucial for competing more effectively against larger players who have already made significant inroads in this area.

The potential for deregulation in the broadcasting sector is viewed as a net positive, as it could facilitate consolidation and allow Urban One to align assets more efficiently in local markets. This could create economies of scale and strengthen its ability to compete digitally by offering more diverse demographic targets to advertisers. However, the challenge remains in attracting new capital to the industry for such consolidation, suggesting that asset swaps or internal restructuring might be more prevalent.

Risks and Challenges

Urban One faces several pertinent risks. Macroeconomic uncertainty, including tariffs, inflation, and interest rate fluctuations, continues to impact advertiser spending, making revenue forecasting difficult. The secular decline in traditional radio listenership and cable TV viewership presents ongoing top-line pressure. The pullback in DEI advertising has significantly impacted the Reach Media and Digital segments. Furthermore, the company has identified material weaknesses in its internal control over financial reporting, impacting its control environment, financial statement close process, and IT general controls, which, if not remediated, could lead to material misstatements. A recent cybersecurity incident, though not yet deemed materially impactful, highlights ongoing operational risks. The increase in music royalty fees due to new RMLC settlements also adds to programming costs.

Conclusion

Urban One is a company in strategic transition, leveraging its deep cultural relevance and niche market leadership to adapt to a rapidly evolving media landscape. The core investment thesis hinges on its ability to effectively execute its deleveraging strategy, stabilize and grow its digital and cable television segments through new distribution models, and capitalize on potential industry consolidation. While facing significant revenue headwinds from macroeconomic uncertainty, shifting advertising trends, and secular declines in traditional media, the company's aggressive debt reduction, cost control measures, and proactive strategic adjustments in digital and TV content distribution demonstrate a clear path towards improved financial health and long-term relevance. Investors should closely monitor the effectiveness of its digital expansion, the success of its new TV distribution strategies, and its progress in achieving its ambitious leverage targets as key indicators of its future performance.