UrbanOne's Q2 revenue drops 22.2% to $91.6 million, prompting a cut in full-year guidance and plans for further cost cuts.

OPERATOR - (00:00:45)

Ladies and Gentlemen, thank you for standing by and welcome to the Urban One 2025 second 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 10Ks, 10Qs 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 August 13, 2025. Please note that Urban One disclaims any duty to update any forward looking statements made in the presentation. In this call, Urban One 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@www.urbanone.com. a replay of the conference call will be available from 2:00pm Eastern Time August 13, 2025 until 11:59pm Eastern Time August 20, 2025. 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 3660282. Access to live audio and a replay of the conference will also be available on Urban One's corporate website at www.urbanone.com. the replay will be made available on the website for seven 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 Liggins, Chief Executive Officer of Urban One, who is joined by Peter Thompson, chief financial officer. Mr. Liggins, please go ahead.

Alfred Liggins - Chief Executive Officer - (00:02:46)

Thank you operator. Also joining us is our General Counsel, Chris Simpson, our Chief Administrative Officer Karen Wishart and our TV One CFO Jody Drewer. The earnings release press release is out consistent with what's going on in the industry. It was a tough quarter, albeit when Peter gets into the numbers. There are some adjustments that need to be taken into account that don't make the picture as dire. One of those is a difference in the timing of our Tom Joyner cruise which was in Q2 last year but has been moved to Q4 and that's a big revenue number. And also there's a non cash adjustment to the TV1 award which has significant impact on the downdraft on the EBITDA line as well. I think the big news is that we have revised our guidance for the year. Given the headwinds that we're experiencing down from the original 75 million which we had at the beginning of the year to a $60 million full year number. We have not instituted a second round of cost cuts and right-sizing as of yet. That's something that focused on over the next 30 days and look to institute by the end of Q3. So it takes back into Q4. We have seen a bit of moderation as I think we said last quarter in our TV business. Actually that's a business that that is doing better than we originally had budgeted. But the radio and the digital business, Reach Media in particular are undergoing significant headwinds. So with that I'm going to let Peter take you through the details and then we'll open it up for Q and A and talk about the business in more detail.

Peter Thompson - Chief Financial Officer - (00:05:23)

Thanks, Alfred. I'll just quickly run us through the numbers. So consolidated net revenue is approximately $91.6 million, down 22.2% year over year. Three months end of June 30, 2025. Net revenue for the radio broadcast segment was $36.7 million, a decrease of 12.6% year over year. Excluding political, net revenue was down 10.3% year over. According to Miller Kaplan. Our local advertising sales were down 5.6% against a market that was down 11%. Our national ad sales were down 23.6% against the market that was down 13.1%. Our largest ad category was services, which was up 23.4% was driven by legal firms and Legal Services Financial was also up 11.3%. All the other major categories were down. Net revenue for Reach Media segment was $5.3 million in the second quarter, down 71.9% from the prior year. And adjusted EBITDA for Reach was a loss of $1.7 million for the quarter. The Tom Joyner Cruise event, as Alfred said, was in the second quarter of 2024 and generated $9.6 million in revenue in Q2 last year. This year is going to be held in Q4, so you have a revenue and a profit timing difference there for the quarter. Aside from the absence of the crude revenue, client attrition and lower average unit rates drove the network advertising revenue decline. Now revenues for the digital Segment were down 27.1%. Q2 at $10.3 million. The decline was driven by the loss of an exclusive third party audio streaming deal, so that impacted us by $1.6 million of revenue. Direct and indirect digital sales were down by $1.2 million. Adjusted EBITDA was a loss of $0.1 million compared to a profit of $2.7 million last year. We recognized approximately $40.1 million of revenue from our Cable Television segment during the quarter, a decrease of 7.5%. Cable TV advertising revenue was down 4.2%. Total day delivery declined 12.5% for persons 2554 and that was offset by an increase in CTV and third party platform revenue share. Cable TV affiliate revenue was down 11.7% driven by subscriber churn which was partially offset by an increase in subscriber rate and the launch of Now TV. Cable subscribers for TV One as measured by Nielsen finished second quarter at 30 compared to 35.6 million at the end of Q1. CLEO TV had 33.7 million Nielsen subscribers. Operating expenses excluding depreciation and amortization, stock based compensation and impairments of goodwill and intangible assets decreased to approximately $78.1 million for the quarter, a decrease of 16.3% from the prior year. The overall decrease in operating expenses was primarily due to the absence of the Reach Cruise event which had $8.4 million of expenses in the second quarter of last year. Other notable expense decreases include corporate professional fees, overall payroll expenses and cable TV advertising expense. A non cash credit of $6.2 million was included in the prior year expenses for the reduction in the value of the CEOs TV1 award and that compares to a charge of $0.7 million which was included in this year's second quarter total. That caused an unfavorable variance of $6.9 million year over year which was non cash normalizing for this. Adjusted EBITDA was down 8% million year over year and further adjusting for the timing of the Tom Joyner Fantastic Voyage. EBITDA was down approximately $7 million year over year. Radio operating expenses were down 7.8% or $2.5 million driven by lower employee compensation and fewer station event expenses. Reach operating expenses were down by 55% due to the absence of the cruise event. Operating expenses in the digital segment were down 8.4% driven by lower employee compensation. Operating expenses in the cable TV segment were down 19.6% year over year driven by lower programming content amortization, lower marketing campaign expenses and lower employee compensation expense. Operating expenses in corporate were up by approximately $2.1 million. Third party performance professional fees were significantly down from last year. However, the non cash compensation related to the TV1 award that I just mentioned increased by $6.9 million. Hence the overall corporate expense was up. Consolidated Adjusted EBITDA was $14 million for the second quarter down 51.7%. Consolidated broadcast and digital operating income was approximately 25.7 million, a decrease of 25% year over year. Interest and investment income was approximately $0.6 million in the second quarter compared to $1.8 million last year. Decrease was due to lower cash balances and interest bearing investment accounts. Interest expense decreased to approximately $9.7 million in Q2 down from $12.4 million last year due to lower overall debt balances as a result of the Company's debt reduction efforts. The Company made cash interest payments of approximately $0.8 million in the quarter and during the quarter the company repurchased $64 million of its 2028 notes at an average price of 51.8% of par, bringing the balance to $492.3 million as of June 30, 2025. We recorded $130.1 million in non cash impairments in Q2 against the carrying value of the FCC licenses in all of our markets with the exception of Baltimore and Goodwill Impairment for certain important units in the radio broadcasting segment and digital segment. Due to the decline in the forecast cash flows in Q2 continued decline in the radio industry generally, the Company prospectively changed the useful life of the FCC licenses from indefinite lives to finite lived intangible assets. Effective June 1, 2025, we recorded amortization expense of approximately $1.3 million for the three months ended June 30, 2025. Benefit from income taxes was approximately $21.4 million and the company paid cash income taxes net of refunds in the amount of $0.2 million. Capital expenditures were approximately $1.2 million for the quarter. Net loss was approximately $77.9 million or $1.74 per share compared to a net loss of $45.4 million or $0.94 per share for the second quarter of 2024. During the three months ended June 30, 2025, the Company repurchased 226,041 shares of Class A common stock in the amount of approximately $369,000, average price of $1.63 per share and we repurchased 200,549 shares of Class D common stock in the amount of approximately $117,000 and at an average price of $0.59 per share. As of June 30, 2025, total gross debt was approximately $492.3 million. Our ending unrestricted cash was $85.7 million, resulting in net debt of approximately $406.6 million, which compares to $79.1 million of LTM reported adjusted EBITDA for a total net leverage ratio of 5.14 times. With that, I'll hand it back to Alfred.

Alfred Liggins - Chief Executive Officer - (00:13:50)

Thank you, Peter. Operator, could you open it up for Q and A, please?

OPERATOR - (00:13:55)

We will now begin the question and answer session. In order to ask a question, press Star followed by the number one on your telephone keypad. Again, that is Star one for any questions. Our first question will come from the line of Ben Briggs with Star Stonex Financial Inc. Please go ahead.

Ben Briggs - (00:14:12)

Good morning, guys. Thank you for holding the call and for taking the questions.

Alfred Liggins - Chief Executive Officer - (00:14:16)

Sure.

Ben Briggs - (00:14:19)

So a couple quick ones for me here. First of all, I'm looking at the margins here in your cable TV segment, and I'm noticing that the EBITDA margins. Have grown a bit. Am I right to infer that those are from this first round of cost cutting initiatives that you guys did?

Peter Thompson - Chief Financial Officer - (00:14:41)

No, I think.

Jody Drewer - CFO of TV ONE - (00:14:44)

Timing. Yeah. Do you want to speak to it? Jody, it's just a timing. It's a timing issue. We did get some savings on programming. That will be real for the year. But just timing of our marketing campaigns. This year versus last year. Is what. Giving you the positive flip.

Ben Briggs - (00:15:07)

Got you. Understood. Understood. And after this second round of cost cuts, I know you mentioned that they're going to happen kind of by the end of the third quarter, so expect to see them flow through results in the fourth quarter. Can you give any granularity on what we should expect to see and how we should expect to see those cost.

Alfred Liggins - Chief Executive Officer - (00:15:32)

Cuts flow through the financials? Not yet. We haven't tapped yet. We've started the process, you know, but we're not finished, you know, so that's the reason they haven't taken effect. I don't suspect it's going to dramatically change, you know, the current guide. And I think you'll see the majority of the impact come through for 2026. But I don't have that answer for you just yet. But since we talked about it on the call last quarter, I wanted to point it out that we. That we haven't gotten there yet, but we wanted to go ahead and get the guide out there, sort of irrespective of what that cost cut was going to bring. I mean, could it bring a million or $2 million in the quarter? Maybe. We'll find out. We haven't tabulated yet, but it's not going to take it to 70. Right, right. Okay, got it, got it.

Ben Briggs - (00:16:58)

Good.

Peter Thompson - Chief Financial Officer - (00:16:59)

And Ben, just circling back on the TV1, margins. I'm looking at the full year projections and the margins are flat, essentially. So we're holding margins pretty well off of obviously a diminished revenue base, but the margins are not. Margins are flat. But it's a good effort.

Ben Briggs - (00:17:19)

Okay, I appreciate that. Thank you. And then next thing, and maybe the last thing for me is obviously those 64 million of debt buybacks during the. During the second quarter. How are you guys thinking about debt buybacks? Obviously, your bonds are trading a little up. They're closer to 60 now than I think they were when you were buying them. Are you guys planning on continuing those debt buybacks or maybe a pause now that the debt is rallied?

Peter Thompson - Chief Financial Officer - (00:17:52)

Yeah, I think that our focus continues to be debt reduction and expense management. So whether or not we're going to be back opportunistically buying debt at this level remains to be seen. Meaning that one of the reasons why we wanted to get our numbers out there so the market can have a realistic view of where we're going to be this year. So we'll see how it all plays out. But the vast, vast, vast, vast majority of our cash is continued to be focused on our delevering. So don't have an answer of what we're going to do this afternoon or tomorrow in terms of debt buybacks. But our priority has not changed.

Ben Briggs - (00:18:58)

Understood, I appreciate that. That'll be all from me. I'll hand it over to others. Thank you again for the call.

Peter Thompson - Chief Financial Officer - (00:19:05)

Thank you.

OPERATOR - (00:19:07)

Once again. For any questions, press star followed by the number one on your telephone keypad. And our next question will come from the line of Ken Silver with Stifel. Please go ahead.

Ken Silver - (00:19:19)

Hey, guys, thank you for the time. Can you guys hear me?

Peter Thompson - Chief Financial Officer - (00:19:24)

Yes, we can.

Ken Silver - (00:19:24)

Okay. Sorry about that. There's an echo on my end. Just a few questions. And you sort of just addressed this with the last question, but your sales and marketing expenses on a consolidated basis were down a lot year over year in the second quarter. Is that like the new normal or are they going to, like, I think you kind of. Are they going to reverse a lot in the second half of the year?

Alfred Liggins - Chief Executive Officer - (00:19:51)

There's a timing difference that Jody just mentioned for TV1. So that there's some element of reversal there. I mean, we're just obviously tightening our belts across everything we can. So I don't think there's going to be a major rebound on those.

Ken Silver - (00:20:09)

Okay. And then I guess if you're tightening sales and marketing a fair amount, are you seeing any sort of unintended consequences negatively from top line or you feel like that hasn't affected you?

Peter Thompson - Chief Financial Officer - (00:20:28)

It's almost the other way around. It's like the sales commission because.

Alfred Liggins - Chief Executive Officer - (00:20:31)

Yeah, exactly. It's variable. Right. Yeah. We have not gone in and taken out sales people in our cost efforts. That's not. And in fact, if anything, in markets like Washington, D.C. we're looking to beef up. Right. So we're not, you know. Sales is. Not an area where we're looking to take out a bunch of costs. Right. Like, you know, it's really kind of. We actually need to be reorienting, you know, our efforts in the radio business to actually increase our digital. Our local digital revenue generation. So I think that cost reduction in that area has got to be largely related to just the revenue being down right there. Yeah, I get it. I understand.

Ken Silver - (00:21:34)

I thought it was something marketing expenditure, too. I got it. I understand. Okay. And then, Peter, I think I heard you say that a national radio, yours was down 22% in the quarter versus, like a market down 11. Is that right? And if that's right, can you maybe just talk about that a little more?

Peter Thompson - Chief Financial Officer - (00:21:55)

Yeah. So national, we were down 23.6% against a market that was down 30 and 1. So we've been. We've been struggling nationally with big clients and big agencies. There's some.

Alfred Liggins - Chief Executive Officer - (00:22:10)

Yes. So look, so we got a couple of things happen when you got the national. The natural pressure on, secular pressure on our businesses, cable television, broadcast radio, and national radio. Then you also have the pullback in DEI dollars, which, you know, have absolutely, you know, hurt our performance, you know, and so, yeah, it's a combination of those things.

Peter Thompson - Chief Financial Officer - (00:22:49)

And then we're also hearing about AI, you know, AI related. Yeah.

Alfred Liggins - Chief Executive Officer - (00:22:54)

Excluding radio altogether. So. Yeah. So these, you know, these large language models that people are now using to do marketing campaigns are not. They're emitting broadcast radio as part of it. We got to figure out what the solution is for that. But again, that's more the digital transformation that puts pressure on us. Got it. Okay.

Ken Silver - (00:23:27)

And great. And then just lastly, on your abl, I think it was undrawn, but is it fully available? Are there covenants? Can you just remind us.

Peter Thompson - Chief Financial Officer - (00:23:36)

Yeah, no, it's fully available. To be drawn. There's a maintenance covenant, a fixed charge ratio covenant, which we're in compliance with. So if we needed to draw on it, we could.

Ken Silver - (00:23:49)

What is the covenant?

Peter Thompson - Chief Financial Officer - (00:23:52)

I think it's 1.1 ratio and we're at 1.7 off the top of my head. So we got significant headroom on that. And it's just fixed charge.

Ken Silver - (00:24:05)

Okay, great. Thanks a lot. I appreciate it. That's it.

OPERATOR - (00:24:10)

And our next question comes from the line of Marlene Pereira with Bank of America. Please go ahead.

Marlene Pereira - (00:24:16)

Good morning, everyone, and thanks for taking the question. I was wondering. Wondering if at a very high level you can just let us know how you're thinking about free cash flow for the remainder of the year and for the full year. Obviously, given the reduction in the EBITDA, obviously there should be some cost saving elements in the second half of the year, although I know that's still to be determined. Also, has there been any tax benefits? Sorry if I had missed that. But just if you can provide some context, that would be great.

Peter Thompson - Chief Financial Officer - (00:24:46)

Sorry, what was the last bit?

Marlene Pereira - (00:24:48)

Tax benefit from the new legislation?

Peter Thompson - Chief Financial Officer - (00:24:54)

What new legislation?

Marlene Pereira - (00:24:56)

I was wondering if there's any interest benefit from the Big Beautiful Bill.

Peter Thompson - Chief Financial Officer - (00:25:02)

Oh, I don't. No, not in the simple. I think on the interest side. Okay. No. So we're projecting at the moment, if we don't do any more debt buybacks, we're projecting about a $95 million cash balance at year end. 95. 95. So obviously, you know, even with the lower EBITDA, we think we're going to generate, we're going to generate some additional. Cash in the back half. Was there a third part to the question? I've answered two.

Marlene Pereira - (00:25:35)

That was it just, you know, any context on the moving parts. But that's helpful. So thank you.

OPERATOR - (00:25:44)

That will conclude our question and answer session. I'll hand the call back over to Alfred Liggins for any closing comments.

Alfred Liggins - Chief Executive Officer - (00:25:49)

Great. Thank you, operator. Thank you, everybody, for joining the call. As usual, we're available offline for any additional questions that you may not have had a chance to ask. Thank you. Thank you, operator.

OPERATOR - (00:26:06)

Thank you. And this will conclude today's call. You may now disconnect. Please wait. The conference will begin shortly.