Urban One’s Radio Clusters Beat Their Markets By 2%

Story by Inside Radio

The first quarter of 2018 marked a turning point for Urban One. For the first time in years, CEO Alfred Liggins says the company’s radio clusters outperformed their markets, beating them by an average of 1.9% in Q1 during what he called “tough” market conditions.

For the past two and half years, Urban One’s radio stations have felt the brunt of new competitors in Houston, Columbus and Indianapolis, which Liggins says have cost the company $50 million in cash flow. Now, with a turnaround underway, he’s optimistic – not only about the company’s prospects in 2018, but for the industry as a whole. “Short of a recession coming, radio definitely has a chance to finish flat to up this year, and our goal is to outperform that,” he said during the company’s quarterly earnings call Wednesday.

Urban One’s radio broadcasting segment largely held steady in the quarter, posting a 0.6% revenue decline. The first three months of 2018 brought a mixed bag, with revenue increases at the company’s clusters in Cincinnati, Cleveland, Dallas, Philadelphia and Richmond while Atlanta, Raleigh and St. Louis posted declines. The average market decline for all the markets where Urban One operates was 3.2%, the company said, citing Miller Kaplan data.

Liggins explained that four large markets drive Urban One’s radio business: Atlanta, Baltimore, Houston and Washington, DC. Of them, total market revenues for Baltimore and Atlanta declined by double digits for reasons that aren’t clear. As a strong growth market, Atlanta’s down quarter was especially vexing. “Nothing’s changed from a competitive standing,” Liggins said.

Auto Up, Retail Down

Breaking down the quarter by ad categories, radio revenues were up in services, entertainment, auto and government/public but down in retail, healthcare, financial, food & beverage and travel & transportation. Telecom, the company’s biggest radio ad category, was flat and McDonald’s revenue was down about $700,000.

Looking ahead, Urban One’s radio division is pacing down mid-single digits, partly due to lower event revenue.

Weaker demand caused Q1 billings at the Reach Media syndication unit to fall 14% to $6.52 million from $7.66 million in the same period last year. CFO Peter Thompson attributed most of the decline to decreases in affiliate and audience for “The Tom Joyner Show.” But expense savings allowed the syndication unit to post positive cash flow growth.

Joyner has been sending mixed signals about his radio future. Shortly after signing a two-year contract extension with Reach Media in Oct. 2017, Joyner announced his pending retirement.
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Fielding a question from an investor, Liggins said the company is open to talking to Joyner about his future. “Tom is still going to be a viable source of good radio entertainment two years from now,” Liggins said. “The show may not be as big as it was 10 years ago but he’s still going to have an audience.”

Total revenue at the minority media company – which recently changed its corporate name from Radio One to Urban One to reflect its various TV, radio and digital media assets – was $99.6 million, a decrease of 1.6% from the same period in 2017.

Revenue at the TV One cable TV segment dipped 4.7% to $46.2 million, due to a decline in ad sales from lower ratings and fewer cable TV subscribers. TV One’s primetime ratings in the persons 25-54 demo were down 9% year over year and flat compared to the fourth quarter. “TV One ratings have been a problem,” Liggins said, in part due to its own shortcomings but also due to industrywide cable TV declines.

Digital was a Q1 bright spot. Last year’s purchase of the Bossip and Madame Noire websites pumped digital revenue up 47.9% to $8.15 million, exceeding the company’s expectation for the acquisitions.

Companywide earnings before interest, tax, depreciation and amortization (EBITDA, a measure of cash flow) grew 2.7% to $28.5 million. "I was pleased that we were able to grow our adjusted EBITDA, despite some softness in the radio markets and ratings challenges at TV One,” Liggins said. “Our cash generation for the quarter was strong,” Liggins continued, with the company adding $6.3 million of cash to the balance sheet while repurchasing $11.0 million of its 9.25% notes due in 2020, which Liggins said re-affirms its commitment to reducing leverage.