Urban One Looks To Close Out 2018 With Big Revenue Bang.

Story by Inside Radio

If Urban One is a harbinger for the rest of the industry, radio is heading for a robust fourth quarter. Heavy demand by political campaigns put intense pressure on TV inventory, sending non-political advertisers to radio, CEO Alfred Liggins told investors Thursday morning. The African American-targeted media company is pacing up 10% in Q4, excluding political advertising, and up 20% with political included in the mix.

“Political tends to sell out TV and then that spills over into radio because TV’s got so much demand on it,” Liggins said during Urban One’s quarterly earnings call. But it’s more than just political and displaced TV advertisers driving the bus. “The radio management team feels good about things and it’s not just all political,” Liggins said. “Our guys feel comfortable about how their stations are positioned.”

While pacings only mark a moment in time, the company is confident enough in where things are heading that it is forecasting revenue to be up by double digits in fourth quarter. “I feel more optimistic going into next year than I have in a while,” Liggins said.

During the Q&A portion of the earnings, investors sounded genuinely excited about the company’s Q4 outlook.

Urban One’s revenue is being bolstered in part by the mid-August purchase of sports “The Team 980” WTEM Washington, DC, from Red Zebra Broadcasting for $4.2 million. The pickup added $800,000 in revenue in third quarter revenue. But even when WTEM’s contributions are backed out of Q4 pacings, Liggins said Urban One is on track to grow year over year revenue by 16% in fourth quarter.

Of course, the company was both a buyer and a seller in Q3, having sold gospel “Praise 102.7” WPZR Detroit (102.7) to Educational Media Foundation for $12.7 million. As part of the deal, EMF transferred three of its Motor City translators to Radio One, allowing it to keep the Detroit Praise Network airing in the market, in combination with its existing translator. The results exceeded Liggins’ expectations. “We kept more revenue and ratings in Detroit than we thought we would,” he said.

Liggins called 2018 an “interesting year” marked by a “volatile market.” It began with what he called a “very challenging first half, followed by a third quarter where Urban One’s radio revenue grew 1.7% in the third quarter – even as total radio revenue in its markets, as reported by Miller Kaplan, declined 3%. CFO Peter Thompson said the company outperformed the market in eight of its markets. Radio ad sales increased 2.5% to $52.1 million from $50.9 million one year earlier.

After all the hype about record political spending it’s not uncommon to hear radio execs say there were disappointed by the category. But that’s not the case here. Urban One has booked $7.1 million in political advertising year to date, which Thompson said was the company’s highest ever in a nonpresidential election year.

Category Blow By Blow

In another encouraging sign, automakers increased their spending with the company by 14% in Q3 as services boosted their allocations by 16%. Entertainment spending increased about 2%, healthcare grew 7%, travel and transportation ticked up by a high percent (but from a small base) and government/public spending jumped by a whopping 23%. “Those were the big drivers,” Thompson said. On the other hand, telecom spending fell 14% and retail was down double digits.

In addition to the impact of political, strong ratings in Washington, Atlanta and Houston were also cited by Liggins for the positive outlook. The Atlanta cluster “has been a killer all year long,” despite a market that was down 11% in the first half of the year. Houston is a big revenue driver for Radio One. Liggins said the market has overcome a revenue hit from a new H-Town competitor that signed on a few year ago. That, combined with rebounding oil prices pushed Houston out of the red and into the back. “We’ve lapped three years of competitive pressure and the market has gotten healthier.”

For third quarter, Atlanta, Indianapolis and Philadelphia posted the biggest declines while Columbus, Dallas, Houston, Raleigh and Washington, DC reported growth.

Liggins and Thomson declined to offer any specifics on how Urban On intends to refinance its debt. Liggins would only say that the company is “very focused” on it and is having “deep discussions about our options” — and that Urban One should have info on the refi direction in the near term.

Burrowing deeper into the company’s Q3 numbers, billings from the Reach Media syndication segment increased 3.2% to $10.8 million. Total company billings decreased 1.2% to $110.7 million from $112.1 million for the same period in 2017.

Radio accounts for almost half of Urban One’s billings. Revenue from the company’s TV One cable channel dipped with advertising down 7.9% to $19.2 million and affiliate fees off 1.2% to $26.2 million. Revenue from events tumbled 35.6% to $3.5 million and digital jumped 7.9% to $8.7 million. While small in comparison, Q3 political dollars rocketed up 277% to $917,000 from $243,000 in the non-election year of 2017.

Earnings before interest, taxes, depreciation and amortization (EBITDA, a measure of cash flow) jumped 11.4% $37.8 million. That growth “puts us in a great position to hit or exceed our full year guidance of $140 million,” Liggins said. “As TV One heads into the new broadcast calendar year, we are optimistic that the recent declines in cable TV advertising can be reversed, and we continue to manage our costs prudently, enabling the business to grow its cash flow in a challenging marketplace."