With A Pile Of Cash Ready To Invest, Urban One Aims For Diversified Asset Mix - by Inside Radio

 

Story by Inside RadioWritten by Frederick M. Brown

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Sitting on a mountain of money after cashing in its MGM National Harbor investment, Urban One is keeping its options open in an uncertain economy. The dry powder could go toward building a resort and casino in Richmond – CEO Alfred Liggins says there is a 50-50 chance of voters approving the Richmond referendum. Urban One and its investment partners are also among the bidders for BET Media Group (BET, VH1), which would fit nicely with its TV One cable unit. And with radio stations selling at attractive multiples, Urban One could continue its radio buying spree. The goal is a diversified asset mix.

“Radio is hanging in there,” Liggins said Friday, despite what he called “an advertising recession.” He’s more worried about TV One, where ad sales fell 8.4% in fourth quarter 2022, than he is concerned about the company’s radio division, which grew same-station revenue 5% (minus political). “There was a time when I was a lot more worried about radio and I felt really good that we were in the cable television business,” Liggins told analysts. “Today, I feel really good that we're diversified among all of these things.”

The elixir for its struggling cable TV unit might be “more distribution, programming, investments, some sort of consolidation opportunity,” Liggins said in his first conference call with analysts since November 2022. “We’ve got to figure that [out],” he said. The company’s manageable leverage level gives it time to invest without the pressure of having to operate in a non-strategic way, Liggins said. “I think that we’re going to have the runway to make the turn.”

‘Fantastic Investment’

While the direction of that turn remains unclear, Liggins used the African-American media specialist’s much delayed fourth quarter earnings call to gloat a bit about the “fantastic investment” the company made in MGM National Harbor. It received about $136.8 million after issuing a “put notice” in April that required MGM to buy back all of the media company’s minority investment in the gaming resort in suburban Washington. In addition to the settlement amount, Urban One says it received $8.7 million from its annual distribution from the casino for the 2022 fiscal year. That was a handsome payoff for the $40 million investment Urban One made in 2016. Since then it has received that $40 million back in dividends during the time it held the investment. Factor in the roughly $137 million check it cashed when selling its minority stake back to MGM and Liggins says they more than quadrupled their initial investment.

So why cash out? Last year was “a high watermark for the property,” Liggins said, adding that it wasn’t likely to perform better than that in the future. Plus he felt that investing the money in other areas would produce a higher ROI than the 6.4% return they were getting in MGM National dividends.

“We’ve got a number of things coming up where we may need to deploy that cash,” Liggins said, including debt buybacks, and the potential Richmond casino. “If we're successful with the referendum, we'll obviously need cash in order to fund that, although the partnership in Richmond is different now.” No longer the sole equity provider for the One Casino + Resort, Urban One and partner Churchill Downs have a 50-50 equity investment split in the proposed project.

Fresh from cutting a deal to buy four radio stations in Houston from Cox Media Group for $27.5 million, Liggins likes the idea of buying more stations in today’s marketplace. “We think there are a number of other potential radio acquisitions that are out there right now,” he said. With radio assets trading at a 5.5-times earnings multiple, radio approaches a 20% return, which is better than the 6.4% Urban One was getting on the MGM investment.

Choppy First Half

Urban One finally reported its fourth quarter and full year 2022 results last Thursday, six months after the year ended. The delay was caused by a need to restate all of 2021’s financial statements and most of 2022’s after it discovered it understated the value of the MGM investment and related tax effects. That involved bringing in a battery of outside accountants and financial consultants. By the time all the 2022 numbers were crunched and reported out, both the first and second quarters of 2023 were history. As such, Urban One gave a look into its first half 2023 performance. First quarter radio revenue, excluding digital, was up 2% on a same-station basis, or up 3.1% same-station, excluding political, CFO Peter Thompson said. The second quarter is currently pacing down 5%, excluding digital on a same station basis, or down 0.9% excluding political. “We're holding well on a same-station basis, ex-political,” Thompson said.