Urban One, Inc. Q1 FY2026 earnings call

• Market and Quarter Context

• Q1 2026 was softer than budgeted, driven by continued declines in the traditional advertising market amid broader macroeconomic weakness.
• Management's core near-term priority is balance sheet strengthening, debt reduction, and deleveraging.

• Debt Reduction and Capital Structure

• Year-to-date through early Q2 2026, the company reduced long-term debt by a total of $60.2 million, through discounted open market repurchases of outstanding notes. This will generate annual interest savings of $4.6 million.
• As of Q1 end 2026, outstanding long-term debt stood at $326.7 million. Current outstanding ABL balance is $20 million, with $22 million of remaining incremental borrowing capacity.
• Net leverage ratio was 6.39x as of Q1 end 2026.
• Interest expense decreased to $4.4 million in Q1 2026 from $10.9 million in Q1 2025.

• M&A and Station Portfolio Actions

• The company agreed to acquire two Dallas radio stations from Service Broadcasting for a $22 million purchase price. It simultaneously agreed to sell one non-cash-flow contributing Dallas station and two non-cash-flow contributing Charlotte stations, resulting in a net cash outlay of approximately $11 million. The transaction is expected to add $5 million in pro forma annual EBITDA.
• The Charlotte station sales follow a format shift moving spoken-word news/talk to a stronger full-market FM signal, positioning the Charlotte cluster for future growth. The transactions also free up valuable AM tower land parcels in Charlotte, which are listed for sale to monetize the unused assets.
• All transactions are expected to close between Q2 and Q3 2026, pending regulatory approval.

• Cost Control

• Total operating expenses (adjusted) were $73.5 million in Q1 2026, down from $80.7 million in Q1 2025, with expense reductions across all operating segments and corporate. Cost cuts included lower sales and marketing, revenue-variable costs, headcount, professional service fees, and programming costs.

• Operational Performance Highlights

• Local digital revenue growth remains a key strategic focus, with 10.9% YoY growth in Q1, though the segment currently has lower margins than traditional broadcast due to custom content requirements and third-party traffic acquisition costs.

Consolidated total revenue for Q1 2026 was $77.7 million, a 15.8% year-over-year (YoY) decline. Consolidated adjusted EBITDA was $4.7 million, down 63.8% YoY. The four product segments performed as follows:

1. Radio Broadcasting: Net revenue of $30.5 million, 39.3% of total consolidated revenue, down 6.4% YoY (down 8.7% YoY excluding political revenue). Local ad sales fell 5.5% (outperforming the broader market decline of 7.1%), while national ad sales fell 8.2% (underperforming the market decline of 6.7%). Expenses were down 3.8% ($1.1 million) YoY.
2. Reach Media: Net revenue of $4.9 million, 6.3% of total consolidated revenue, down 17% YoY, with an EBITDA loss of $0.5 million. The decline was driven by lower network marketplace revenue and key client attrition. Expenses were down 16.2% ($1.1 million) YoY.
3. Digital Segment: Net revenue of $6.8 million, 8.8% of total consolidated revenue, down 33.5% YoY. The decline was driven by pulled-forward DEI-focused ad spending to later quarters and a general macro-driven pullback in national advertiser spending, though local digital revenue grew 10.9% YoY. Expenses were down 19.7% YoY.
4. Cable Television (TV1): Net revenue of $36 million, 46.3% of total consolidated revenue, down 18.5% YoY. Advertising revenue fell 24.9% YoY, and affiliate revenue fell 9.8% YoY due to declining linear subscribers (partially offset by higher subscriber rates). TV1 ended the quarter with 29.1 million Nielsen subscribers, down from 30.2 million at the end of Q4 2025. Expenses were down 9.8% YoY.

• Full-year 2026 adjusted EBITDA guidance is updated to approximately $60 million, down from prior guidance following a softer than expected Q1 start. • Management expects full-year 2026 operating cash flow to be approximately $40 million. • The company expects net leverage to fall below 5.0x by the end of 2026, following completed debt repurchases and the closing of the announced accretive M&A transactions. • The company expects to repay the full $20 million outstanding ABL balance in the second half of 2026. • Management expects the Dallas/Charlotte M&A transactions to add $5 million in incremental pro forma annual EBITDA and be both accretive to earnings and deleveraging.

• Continued weakness in the traditional advertising market, with broader macroeconomic conditions driving a larger-than-expected pullback in advertiser spending across most major categories, outside of limited growth categories including legal services and political government spending. • Structural industry headwinds: ongoing linear cable subscriber declines, pressure on traditional broadcast revenue, and heightened competition from large digital platforms for advertising dollars. • The digital segment, while growing in local revenue, has lower margins than traditional broadcast due to higher traffic acquisition costs and custom content requirements for local campaigns. • The market currently prices the company's equity at distressed bankruptcy-level multiples, reflecting investor uncertainty about the long-term viability of traditional broadcast and cable businesses, following recent bankruptcy filings of peer media companies including Cumulus and Spanish Broadcasting. • Uncertainty around the future trajectory of the broader media ecosystem and shifting consumer and advertiser behavior, which no market participant can reliably forecast long-term.

Q: What is the strategic rationale behind the recent Dallas/Charlotte M&A transactions, and how does the company plan to monetize the freed-up Charlotte AM tower land? / A: The acquisitions are in-market consolidation of similar formats to expand the company's reach to the African American community in Dallas and create revenue scale and economies of scale for the combined cluster. Non-contributing, low cash flow stations are disposed to fund the transaction and improve overall profitability. The freed Charlotte tower land is currently listed for sale with JLL, and the company will evaluate incoming offers to complete a sale to monetize the unused asset. (321 characters)

Q: Why was Q1 digital revenue down, and what is the company's outlook for full-year digital profitability and margins? / A: Q1 digital revenue declined mostly because DEI-focused national ad budgets were pushed to later quarters. The company expects digital to meet its full-year targets, with growing local digital revenue, though margins are lower than traditional radio due to required custom content and expensive third-party traffic acquisition costs for scale. Full-year digital profitability is expected to be around $6 million, down from prior peak levels but still a positive contributor. (407 characters)

Q: Given the company's rapid debt reduction and low current share price relative to projected free cash flow, when does management expect the equity to be re-rated by the market? / A: The company's stock trades at distressed multiples because the market is still uncertain that traditional media companies can navigate the ongoing industry downturn, after multiple peers have filed for bankruptcy. Management is focused on continuing to reduce debt quickly to reach a 3x net leverage target, which will convince the market of the company's viability and support a re-rating. The company has no material liquidity or near-term maturities issues after the 2025 refinancing. (458 characters)

Q: What is the expected trajectory of the company's quarterly cash interest burden after recent debt repurchases? / A: Pro forma annual cash interest expense after all completed debt repurchases is $24.8 million, which is a dramatic reduction from historical levels. Lower interest expense helps generate additional free cash flow that can be used for further debt reduction. The accounting amortization of debt premium from restructured debt reduces reported P&L interest, but cash interest is the better measure of the company's actual ongoing interest burden. (356 characters)