Urban One(UONEK) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company reported a Q1 2023 net loss of $2.4 million, a significant downturn from a $17.1 million net income in Q1 2022, driven by a $16.8 million impairment charge and lower cable television revenue Consolidated Statements of Operations A 2.0% decrease in net revenue and a $16.8 million impairment charge caused operating income to fall sharply to $8.1 million from $36.5 million year-over-year Consolidated Statements of Operations (Q1 2023 vs Q1 2022) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 (As Revised) | | :--- | :--- | :--- | | Net Revenue | $109,869 | $112,131 | | Operating Income | $8,120 | $36,461 | | Net (Loss) Income | $(2,411) | $17,114 | | Net (Loss) Income Attributable to Common Stockholders | $(2,922) | $16,488 | | Diluted (Loss) Income Per Share | $(0.06) | $0.30 | - A significant impairment charge of $16.8 million was recorded in Q1 2023, which was not present in Q1 2022, heavily impacting operating income[20] Consolidated Balance Sheets Total assets decreased to $1.28 billion from $1.34 billion, primarily due to lower cash and the reclassification of assets to held for sale Balance Sheet Summary | Metric | March 31, 2023 (Unaudited) | December 31, 2022 (As Revised) | | :--- | :--- | :--- | | Cash and cash equivalents | $71,455 | $75,404 | | Total Current Assets | $258,739 | $295,406 | | Total Assets | $1,284,471 | $1,344,646 | | Total Current Liabilities | $112,596 | $132,818 | | Long-Term Debt, net | $714,780 | $739,000 | | Total Liabilities | $927,778 | $981,973 | | Total Stockholders' Equity | $331,577 | $330,750 | - Assets held for sale of $9.9 million were newly classified on the balance sheet as of March 31, 2023, related to the planned divestiture of the KROI-FM radio station[25][117] Consolidated Statements of Cash Flows Net cash from operations was $17.1 million, while investing and financing activities used $21.4 million and $25.6 million respectively, resulting in a net cash decrease Cash Flow Summary (Q1 2023 vs Q1 2022) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 (As Revised) | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $17,104 | $15,456 | | Net cash flows used in investing activities | $(21,446) | $(1,576) | | Net cash flows (used in) provided by financing activities | $(25,606) | $268 | | (Decrease) Increase in Cash and Cash Equivalents | $(29,948) | $14,148 | Notes to Consolidated Financial Statements Key notes cover the revision of 2022 financials, a $16.8 million impairment charge, debt repurchases, and significant subsequent events including a major asset sale and a Nasdaq delisting notice - The company is a multi-media entity targeting African-American and urban consumers, with four reportable segments: radio broadcasting, Reach Media, digital, and cable television[32][34] - Immaterial accounting errors related to stock-based compensation and the RVAEH joint venture necessitated a revision of previously issued financial statements for 2022[11][39] - The company recorded a $16.8 million impairment charge related to the KROI-FM radio broadcasting license, which was classified as held for sale[117][123] - In Q1 2023, the company repurchased $25.0 million of its 7.375% Senior Secured Notes due 2028, resulting in a gain on retirement of debt of approximately $2.4 million[129] - Subsequent to quarter-end, the company sold its investment in MGM National Harbor for approximately $136.8 million in April 2023[98][176] - The company received a Staff Delisting Determination from Nasdaq due to delays in filing its periodic reports, with a hearing scheduled for November 30, 2023[181][182] - A second referendum for the Richmond casino project was defeated, and $26 million in escrowed funds are expected to be returned to the joint venture[189] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 2.0% revenue decline driven by the cable TV segment, a 77.7% drop in operating income due to a large impairment, and a significant post-quarter liquidity event Results of Operations Net revenue decreased by 2.0% to $109.9 million, as a $6.5 million decline in the cable television segment offset a $3.7 million increase in radio broadcasting Net Revenue by Source (Q1 2023 vs Q1 2022) | Revenue Source | 2023 (In thousands) | 2022 (In thousands) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Radio advertising | $43,108 | $39,127 | $3,981 | 10.2% | | Digital advertising | $15,024 | $15,482 | $(458) | (3.0)% | | Cable television advertising | $25,822 | $30,414 | $(4,592) | (15.1)% | | Cable television affiliate fees | $23,837 | $25,752 | $(1,915) | (7.4)% | | Total Net Revenue | $109,869 | $112,131 | $(2,262) | (2.0)% | - The radio broadcasting segment revenue grew by $3.7 million, aided by the 2022 acquisition of three stations in Indianapolis and growth in the Atlanta market[204] - The cable television segment revenue fell by $6.5 million due to lower ratings, a decrease in advertising sales, and lower affiliate fees[206] - A $16.8 million impairment charge was recognized for the KROI-FM radio license, which is being sold[216] - Interest expense decreased by $1.9 million due to the repurchase of $100 million of the company's 2028 Notes since Q2 2022[217] Non-GAAP Financial Measures Adjusted EBITDA fell 27.9% to $30.3 million, and Broadcast and digital operating income decreased 18.8% to $39.3 million, reflecting weaker segment performance Non-GAAP Performance Summary (Q1 2023 vs Q1 2022) | Metric (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Broadcast and digital operating income | $39,300 | $48,403 | | Adjusted EBITDA | $30,285 | $42,004 | - The decrease in Broadcast and digital operating income was primarily due to lower net revenues and higher programming expenses in the cable television segment[227] Liquidity and Capital Resources The company's liquidity is supported by a $71.9 million cash balance and an undrawn ABL facility, significantly boosted post-quarter by a $136.8 million asset sale - Cash, cash equivalents and restricted cash totaled $71.9 million as of March 31, 2023[231] - The company had $725.0 million of its 7.375% 2028 Notes outstanding as of March 31, 2023, after repurchasing $25.0 million during the quarter[238] - In April 2023, after the quarter ended, the company received approximately $136.8 million from the sale of its Put Interest in MGM National Harbor[235] Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies, and therefore no information is provided - Disclosure is not required for smaller reporting companies[267] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to identified material weaknesses in internal control - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2023[270] - Material weaknesses were identified in the control environment and control activities, including IT general controls, segregation of duties, and review controls over key accounts[272][274] - Remediation efforts are underway, including hiring a Corporate Controller and Senior VP-Finance, engaging external experts, and redesigning controls[275][279] PART II. OTHER INFORMATION Legal Proceedings The company is involved in routine legal proceedings not expected to have a material adverse effect on its financial condition - The company believes the resolution of current routine legal matters will not have a material adverse effect on its business[279] Risk Factors The primary risk is the potential delisting from Nasdaq due to delayed SEC filings, which could harm stock liquidity and the ability to raise capital - The company is not in compliance with Nasdaq Listing Rule 5250(c)(1) for timely filing of periodic reports, which has resulted in a delisting notice[282] - A hearing before a Nasdaq Hearings Panel is scheduled for November 30, 2023, and a stay on delisting is in effect through the hearing[282] - Potential consequences of delisting include adverse effects on stock liquidity and price, reduced investor interest, and impaired ability to raise capital[283] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[285] Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[286] Mine Safety Disclosures This item is not applicable to the company - Not applicable[287] Other Information There is no other information to report for this item - None[288] Exhibits This section lists the exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data - Exhibits include Section 302 and 906 certifications for the CEO and CFO, and the Inline XBRL data file[288]