Alfred C. Liggins – Chief Executive Officer Peter D. Thompson – Chief Financial Officer.

Juliano Torii – Descartes Trading Ben Briggs – GMP Securities Ben Brogadir – Odeon Capital.

Welcome to the Urban One’s 2018 Second Quarter Earnings Conference Call. I have been asked to begin the call with the following safe harbor statement. During this call Urban One may share with you certain projections or forward-looking statements regarding future events or its future performance.

The company cautions that you – you that certain factors, including risks and uncertainties referred to in the 10-Ks and 10-Qs and other reports periodically filed at the Securities and Exchange Commission could cause the company’s actual results to differ materially from those indicated by its projections or forward-looking statements.

This call will present information as of August 8, 2018. Please note that Urban One disclaims any duty to update any forward-looking statements made in this presentation. In this call, Urban One may also discuss some non-GAAP financial measures in talking about its performance.

These measures will be reconciled to GAAP either during the course of this call or in the company’s press release, which can be found on the website at www.urban1.com. An audio replay of the conference call will also be available on Urban One’s corporate website at www.urban1.com under the Investor Relations section of the web page.

The replay will be made available on the website for 7 days after the call. No other recordings or copies of this call are authorized or may be relied upon. I’ll now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter D. Thompson, the company’s Chief Financial Officer. Mr.

Liggins?.

Thank you, operator and welcome to our second quarter results conference call. Also joining us today, we have David Kantor, who is the CEO of our Radio Group and Reach Media who is as a guest sitting in, doesn’t usually join the call, in case we got any radio questions from the audience, and also Jody Drewer, the Chief Financial Officer at TV One.

So the press release kind of lays it all out. Q2 radio performance was in line with the expectation, the guide that we gave in the last conference call and kind of in line with what I’ve seen from other operators. April was a really tough month but it got better along the way, Q3 though is right now pacing flat.

So we’re optimistic about that and then obviously Q4 is our big quarter for political. We in the last conference call talked about TV One doing mid $80s million in EBITDA. We’re still comfortable with that. We had a little bit of an unexpected churn issue from one of our big MVPD partners.

Part of our results this quarter factors in a true-up of our affiliation agreement with them and the commitments that we are in that affiliation agreement, which netted us a benefit of a couple of million dollars. TV One, again still on track to do mid $80s million.

We feel – we continue to feel very comfortable with the guide of overall EBITDA of $140 million for this year. We had a tough Q2 for digital, but Q3 is starting off very, very strong. MGM continues to do very well. In July, which just got released yesterday, which is not in the Q2 numbers that we booked for them, they did another $58 million.

So they continue to be up 14%, 15% gaming revenue year-over-year and we just feel like that’s going to continue to do well and be a very, very good investment for us. As I have said in Q1, our goal is to hold our market share in radio, control our expenses and reduce expenses where we can and look for growth opportunities.

But the main task at hand is to continue to delever – pay down debt, delever, and to that end we were levered at about 6.74x in the Q2 we are at 6.57. I stated that, we feel we’ve got a path to get down into the low 6s by the year-end and I still feel very good about that.

As far as future growth opportunities, we are announcing that we are launching a second network called Cleo, which will be a lifestyle network for women of color.

And for those of you who want to know what does lifestyle mean, you can think Scripps Networks, so food, home, travel, beauty for black women and Afro-Latino women, so kind of how-to content, which is very advertiser friendly, lower cost to produce.

It will be a complementary network to TV One, which will give us a second platform of which we can monetize additional content investments across two platforms. We expect to launch that network in January with two major MVPD partners and grow it from there. It’s a license fee free network, as I have mentioned also in previous calls.

You got to look at different business models and in order to maximize distribution this network will be free to operators and we’ll make our money from selling advertising and we think we got a good strategy on it. And it’s the next step in the evolution and further diversification of the company.

With that, I’m going to turn it over to Peter and let him talk about the numbers in more detail..

Thank you, Alfred. Net revenue was down 2.1% for the quarter ended June 30, 2018 at approximately $115.2 million. Breakdown of revenue by source can be found on Page 5 of the press release and a breakdown by segment can be found on Page 8. Radio segment net revenues were down 3.5% in the second quarter.

The markets in which we operate were down 3.3% for the quarter with the Atlanta market down 11.3%. While market conditions were difficult, Cincinnati, Cleveland, Dallas, Detroit, Philadelphia, St. Louis and Washington DC clusters all outperformed their respective markets.

During the quarter, we received approximately $1.2 million in political advertising. Advertising sales were up in the government/public sector, services, automotive and healthcare, while the retail, telecommunications, entertainment, food and beverage, and travel and transportation sectors were down.

As Alfred mentioned, for Q3 our radio stations are currently pacing flat. Net revenue for Reach Media was down by 6.5% for the second quarter. The decline is primarily related to the Tom Joyner Morning Show, driven by a decline in audience and also downward pricing pressure.

But expense savings, primarily from contractual talent compensation and some staff reductions offset those revenue declines allowing Reach Media to post adjusted EBITDA growth for the second quarter.

Net revenues for our digital segment decreased 2.7% in Q2 and direct sales were down 9% at iOne Digital, but are expected to rebound in the second half after a strong July performance with third quarter revenues currently projected to be up double digits.

We recognized approximately $46.8 million of revenue from our cable television segment during the quarter, an increase of 3.2%. And the increase was primarily driven by a favorable $2 million adjustment of previously estimated affiliate fees with a major MVPD as the final reporting became available.

Cable TV advertising revenue was down 4.6%, driven by 15% lower unit rates due to declined deliveries and this was partially offset by an increase in the number of units by converting some promo units to ad units.

Cable subscribers, as measured by Nielsen, finished second quarter 2018 at 57.7 million, down from 58.4 million at the end of first quarter.

We recorded approximately $1.8 million of cost method income for our investment in the MGM National Harbor casino equal to 1% of the net gaming revenue reported to the state of Maryland, which is an increase of 19.1% from the second quarter of 2017.

Operating expenses, excluding depreciation, amortization, impairments and stock-based compensation, decreased by 3.8% to approximately $81 million in Q2. Radio operating expenses were down 0.9%.

The increase in radio programming and technical expenses is mainly due to tower leaseback expense of $200,000 year-over-year and increased on-air talent investments in certain markets. SG&A expenses were down mainly due to lower sales commissions, reduced outside marketing and advertising spend and lower event costs.

Reach expenses were down by $1.4 million, driven by savings in talent and staff compensation. Operating expenses at the digital segment were up 9.7% driven by higher costs of revenue and data research costs and also full quarter of BHM expenses.

Cable TV expenses were down by 6.3% year-over-year with programming and technical savings due to lower content amortization and SG&A savings due to lower consumer marketing spend. Corporate SG&A expenses were up due to a non-cash timing difference on the annual bonus accrual and equity planning expense.

For the second quarter, consolidated broadcast and digital operating income was approximately $44.3 million or 6.1% from $41.8 million in 2017. Consolidated adjusted EBITDA was $39 million, which was an increase of 6.4% year-to-year.

Interest expense was approximately $19.2 million for the second quarter compared to approximately $19.9 million for the same period in 2017. And we made cash interest payments of approximately $19.2 million in the quarter.

Company repurchased $14 million of our 9.25% 2020 notes at a discount, resulting in a gain in the retirement of debt in the amount of approximately $626,000 and an additional $5 million of those 2020 notes were repurchased on July 3.

Company recorded a non-cash benefit for income taxes of approximately $15.6 million in the quarter and paid cash taxes in the amount of approximately $493,000 in the quarter. Net income was approximately $23.6 million or $0.51 a share compared to net income of approximately $802,000 or $0.02 a share for the second quarter of 2017.

Capital expenditures were approximately $1.2 million compared to $2.3 million in Q2 of 2017. Company repurchased 232 shares of Class A common stock and also repurchased 760,113 shares of Class D common stock in the amount of approximately $1.6 million.

During the three months ended June 30, 2018, the company repurchased share-based equity awards in the amount of approximately $1.1 million. Company also purchased 10,646 shares of Class D common stock in an amount of approximately $22,000 to satisfy employee tax obligations in connection with the 2009 stock plan.

Bank covenant, perhaps, pro forma LTM bank EBITDA was approximately $138.6 million. Net senior leverage was 4.78x against the covenant of 5.85x. Net debt was approximately $921.5 million compared to $140.2 million of GAAP adjusted LTM EBITDA for a total leverage ratio of 6.57x.

On or about August 8, so later today, the company will close on its previously-announced sale of the assets of one of its Detroit, Michigan radio stations, WPZR FM, 102.7 FM to Educational Media Foundation of California for total consideration of approximately $12.7 million.

As part of that deal, the company will also receive three FM translators that service the Detroit Metropolitan area and these signals will be combined with its existing FM translator to multicast the Detroit Praise Network.

So that consideration of $12.7 million is approximately $12.2 million of cash, and approximately $500,000 is the value of the three FM translators that we are receiving.

On or about August 9, so tomorrow, the company will close on its previously-announced acquisition of the assets of the radio station, The Team 980 WTEM 980 AM from Red Zebra Broadcasting and upon closing the company will also enter into an agreement with the Washington Redskins to ensure that all Redskins games, as well as pregame and postgame programming will remain on The Team 980.

And with that, I’ll hand back to Alfred..

Thank you, Peter. Operator, let’s open it up to the audience for questions..

Thank you. [Operator Instructions] Our first question is going to come from the line of Juliano Torii from Descartes Trading. Please go ahead..

Well, good morning and thanks for taking my question. I just have a question about – it seems that you continue to buy back the subordinated bonds.

I mean, how does that tie up with your plans for refinancing? How do you see your plans for refinancing at the stage, what kind of options are you considering and have you come any closer to essentially executing it?.

Yes, I think, a great question and a timely question. We consider – continue to consider all of our options. We’ve been in conversations with various lenders and advisers. I think it’s premature to talk about which path we think we may go down, we have options.

And I think by the time of the next earnings call, we should have some in concrete to talk about. It’s probably premature at this point to talk about any specifics, but I would say that we are focused on it, and we continue to work diligently towards a favorable outcome on refinancing those notes out..

Okay.

And just a follow-up on that, you mentioned by the time of next earnings call, so when do you see your next earnings call?.

Early November..

Early November..

Yes, I mean – yes. I don’t think we’re going to have to wait that long, I’m just giving as a backstop day..

Okay. Thank you..

Thank you. [Operator Instructions] We have a question from the line of Ben Briggs with GMP Securities. Please go ahead..

Good morning, guys. Thanks for taking the questions. Thanks for the detail on the cap structure there. Just a quick one on the Cleo network – are there – just any color on costs and expenses associated with that and any revenue..

Yes, look we’ve got – yes, look we are not – we are not going to provide that. It’s a new network. We will be launching it with original programming, but also we have secured the rights to acquired programming.

We’ve known – we’ve been known that we are going to do this for a while now, so we’ve been kind of planning it into the stuff that we’ve been acquiring. We obviously also have a library – TV One has been around since 2004, so it’s 14 years.

We had done a fair amount of lifestyle programming, early in the network’s lifespan, so we’ve got a library of some of that stuff. But suffice it to say that we know – we run this business to grow our cash flow and delever and not take unnecessary wild swings of programming hope.

So the plan for Cleo will be to grow its programming investment as its distribution and its ad sales grow. So no investors should be worried that all of a sudden we’re going to have a WG in America issue where we’re spending now wildly on programming and depressing our EBITDA to some great degree. That’s not in anyone’s best interest.

And quite frankly, distribution in the cable network grows slowly over time and you should gear our programming investment to the size of your potential audience. I’ve seen people do the opposite and that’s not a great financial move. So – yes, we’re not going to give any details. It’s still a bit influx, but it will be a prudent investment.

And the other thing is that some of the stuff we will be able to – that we will be making – new stuff that we’ll be making will be able to be used on both platforms. So it’s also a way of investing in TV One as well as the new Cleo platform, which in this environment of uncertain distribution pass, content is even more important.

So you just don’t want to create content for the sake of creating and without having a way to monetize that the second network gives us a second avenue to monetize it..

Okay. Thanks very much. I appreciate that. And just one follow-up related to programming.

I know that – can you just give me color on what the status of Empire is, how that’s performing? You guys have the entire library yet or is that coming later in the year?.

Yes, fourth quarter we get the entire library. Right now we just get the – we just add the subsequent season for the summer months. But in October, we will get the first – we will have the first five seasons, four seasons whatever we’re up to now to use every week.

And from a performance standpoint, it is still one of our best performing acquisitions, especially given the costs. Obviously it has declined some over the years just like the broadcast delivery but it is – it’s still – it’s our highest performing from a 18 to 49. And so I don’t see why we wouldn’t max out our use of it..

All right. Great. Thanks very much. I appreciate it guys..

Thank you. We have a question from the line of Ben Brogadir from Odeon Capital. Please go ahead..

Hi. Thank you for taking the question. Just want to get your current thoughts on the current M&A environment. You guys have made some nice tuck-in, deleveraging acquisitions, particularly on the radio side. Just wondering, kind of how you’re thinking about that in today’s environment.

We saw Beasley, CBS Radio, a few guys participating in some M&A transactions? Just wondering kind of what you’re seeing out there and how you are thinking about it right now?.

In the similar fashion that we’ve articulated kind of guided the deals that we’ve done. They’ve been small deals, but they add up. And I think that we got to continue to look for things that will be delevering and the most likely target for that in the radio space are kind of end market acquisitions.

But you also – just because it’s end market if you pay too much for it, that’s problematic. So we’re being selective. There are no markets where we feel that we have to be in from a strategic standpoint. And you also got to make acquisition knowing that the top line revenue in that market is probably not likely to grow.

And so you should factor that into your projection of what the resulting cash flow will be. I do think that there will be more deregulation in the radio business, which will give people an opportunity to swap around stations and clusters and build more profitable clusters. We plan to participate in that.

In Detroit, Michigan, we really are still operating.

That was a really unique opportunity for us because basically we sold a full power station and picked up three lower power stations and paired it with a fourth lower power station that we had and we’re deploying that intellectual property in that format and that revenue back over to the lower power stations.

But because there’s four of them covering all different parts of the city, we think that we’re going to keep that business intact. And so we really view it as how operating the same cluster of assets that we’ve had there in the past.

I think that there is also going to be future opportunity for consolidation in the digital space and the cable TV space and we’re just going to be selective. We’ve got a real path to delevering. That’s really what it comes down to even in a challenging environment across all media, I mean the Internet had disrupted all media as folks know.

But we’ve got a business that produces strong free cash flow. We’ve got the one debt maturity that’s in a year, in a year and half. Basically we’re focused on refinancing that now, but our free cash flow is going to allow us to continue to pay that down.

And – by the way, at the end of 2021 we have the ability to put our MGM stake to MGM, an investment grade credit, at 7x whatever the EBITDA is of National Harbor and we think that’s going to be anywhere between, depending on what analyst report you believe, worth $80 million to $100 million. And that’s a lot of delevering.

And we just block and tackle and do that and even if the market doesn’t improve, we’ve got a view. So we’re not going to take any unnecessary risks that get us off of that – that get us off of that glide path. So all acquisitions have to actually make that glide path easier for us and that’s how we’re looking at it..

Understood. I appreciate all that color. Just one more for me.

With announcing the buildout of Clea, congratulations on that endeavor, just wondering if you kind of think about Urban One, call it end of 2018, 2019, once Clea is fully built out, is there an ideal kind of business mix of the pie caught between radio, cable, digital, Reach Media that you are kind of steering Urban One towards or is it just kind of more of an opportunistic longer-term view?.

You know what, I think originally, we had a view and a goal to diversify to be 50-50 TV, cable to radio mix and we’re there, right, now. So it’s funny because some people – we went through a little non-deal road show where we were talking to a bunch of our investors about what our refi options were.

And I remember we had a conversation with one investor about which business is better, right. The radio business is traditional media, it’s got its challenges et cetera. But it’s actually been holding up pretty dag on good compared to other traditional mediums. I mean, our markets were down through Q2 whatever 3%, low-single digits.

Can’t say that for newspaper, magazine, very few other things, right. But still radio in a lot of investors’ sentiment has a negative connotation. But then I had another guy who was like, yes, well, the cable – we looked at the cable business, that’s great.

You got now two revenue streams and advertising in cable television, Jody, it’s still up as an industry. It’s still positive year-over-year as an industry, even though the pay TV ecosystem is under pressure from cord cutting. But some people believe, oh my god, an MVPD could drop you, you don’t own your distribution.

So I got two different diverging point of views; one guy thinking radio was better because you own your distribution and another guy thinking that cable was better because of its business model. So I don’t know, but I’m just happy that we’re diversified.

And so I don’t – I think you got to look at each acquisition opportunity in and of itself as a discrete event and how good do you feel about that. And so – so I don’t think we’re steering towards one or the other.

I could see us – it’s probably more likely that we get more scale in the TV arena because – in the near-term, because there’s no regulatory hurdles there. You really – I think in order for something dramatic to change in the radio business, you have to have de-reg and that’s not a certain path on timing, et cetera.

But that’s kind of my view, I mean I like – I really like our mix of assets, like I said..

Understood. Appreciate those thoughts and best of luck guys..

Thank you..

Thank you. [Operator Instructions] We have a question from the line of Alan King [ph] from New York. Please go ahead..

Hey, guys thanks for taking my question. Just one more on Cleo if I can. If I look at the timeline for the launch, it’s fairly close to the date that your 2020 bonds become callable at par.

I’m just wondering when you head into a refi however form or shape that it will take, do you expect Cleo to be a meaningful contributor to EBITDA as part of that refinancing? And then just an add-on, do you have any plans to switch from an ad only revenue model to an affiliate revenue model for Cleo in the foreseeable future? Thanks..

Cleo will not be an affiliate revenue model. It’s going to be ad only forever. And we expect Cleo to not hurt our refi efforts, so meaning that we believe that we can launch this network from a breakeven point of view while we grow it.

I mean, we are fully cognizant that we have a refi coming, but even if we didn’t have a refi coming, I’m not a big fan of deficit financing for long periods of time of content investments in uncertain distribution environments.

But fortunately we’ve got the platform that exist to TV One, so that’s what’s going to allow us to, I believe, launch it from – and break even on it of the gate..

Got it. That’s helpful. And just one follow-up on the refinancing effort. Realize you guys are looking at a variety of options with regard to the 2020 maturity.

Do you anticipate that the Comcast Note will be part of that 2020 refinancing or should we look at that as more just a cash outflow from the company to repay at par? I was just going to ask separately, obviously National Harbor, it’s a quite valuable stake and currently it’s sitting in an unrestricted subsidiary.

Just wondering if that – if you have a plan to bring that into the restricted group as part of the refinancing? Thanks..

Two things. One, we’re just going to pay Comcast off when it comes due. So that’s just the cash outflow. And we’re looking at all of our options as it relates to National Harbor contributing and aiding in some sort of a refi package. So obviously people know it’s valuable and that helps when it comes to giving us options to refi..

Got it. That’s helpful. And then just lastly, this is more of a clarification.

Just on the cable side, with the contract adjustments of one of your major MVPD contracts, can you just go over that again, what was that and what was the financial impact year-over-year?.

It was a $2 million positive impact in the affiliate revenue line, which was one-time in nature and essentially it adjusts for a difference in what we thought the billable subs was versus what the MVPD was reporting.

And so it was really just resolving an issue between our view of a contract and their view of a contract and the accounting around that..

Will it be correct to assume that goes away in Q3?.

Yes, it was an onetime account, so yes..

Thank you very much guys. And best of luck..

Thank you..

Thank you. And at this time, I have no further questions in queue..

Great. All right, folks, thank you for joining and as usual, Peter and I are available offline for any additional questions that you might have. Thank you..

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thanks for participation and for using AT&T Executive Teleconference. You may now disconnect..