Radio One Inc. said yesterday that its second-quarter profit rose 11 percent on the strength of rising advertising revenue and lower interest payments on debt.
The broadcaster, based in Lanham, also said it will pay $11.5 million in cash to acquire WABZ-FM in Charlotte. Radio One owns another station in Charlotte and the acquisition is part of Radio One's strategy to "fill in" in markets where Radio One already operates, Radio One president and chief executive Alfred C. Liggins III said during a conference call with analysts.
Radio One is the nation's seventh-largest radio broadcasting company and the largest radio company that primarily targets African American and urban listeners. It recently added stations in Philadelphia, Houston and Atlanta, and Liggins said it will continue to use its operating cash to finance acquisitions and pay down debt.
For the three months ended June 30, Radio One reported net income of $17.5 million (12 cents per common share after payments to preferred shareholders), up 11 percent from $15.7 million (10 cents) for the second quarter of 2003. Net broadcast revenue was $86.2 million, an increase of 7 percent from $80.9 million for the same period the previous year.
Radio One's results beat Wall Street expectations, said Jason Helfstein, media analyst with CIBC World Markets in New York. Not only was revenue up, he said, but Radio One kept costs down as well. "We were looking for fixed expenses to grow 4 percent and they fell two and change," Helfstein said. "They're clearly focusing on expense control."
Radio One outperformed the radio broadcasting industry, which lately has had only single-digit profit growth, Helfstein said.
Liggins called the current market "a challenging environment. . . .We continue to weather the storm."
Station operating income rose 11 percent, to $48 million from $43 million for the same quarter a year earlier. Higher ratings helped boost ad revenue in several markets, including Atlanta, Baltimore, Dallas, Los Angeles and Washington, said chief financial officer Scott R. Royster. However, those gains were offset by revenue declines in Houston, Louisville and Richmond.
Among advertisers, the financial, travel, transportation, government, services and telecommunications sectors were strong. Auto, retail and health care were weaker, Royster said.
Over the past year, Radio One has paid down about $50 million in total debt, lowering its interest expense for the second quarter from $10.7 million to $9.7 million, Royster said.
Last year Radio One and Philadelphia cable provider Comcast Corp. formed TV One, a cable network based in Silver Spring that targets African Americans. TV One produced smaller-than-expected losses for Radio One because of strong ad revenue.
Radio One has said it will invest $74 million in the network over four years. Launched in January, TV One has about 5 million subscribers and is projected to have 10 million subscribers by the end of the year, Liggins said. Radio One lost about $1.4 million for the quarter because of its TV One investment.
Shares of Radio One closed 40 cents higher at $15.38 yesterday.