Q2 2020 Urban One Inc Earnings Call
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[noise], ladies and gentlemen, thank you for standing by welcome to urban ones Twentytwenty second quarter earnings up at fault.
I've been asked to begin this conference call with the following Safe Harbor state.
During this conference call urban one we'll be sharing with you certain projections or other forward looking statements regarding future events, where its future performance.
Urban one cautions you that certain factors, including risks and uncertainties referred to in the 10 10 pardon me 10-K's 10-Q's than other reports it periodically files with the Securities Exchange Commission.
Would cause the company's actual results to differ materially from those indicated by its projections or forward looking statement.
This call will present information as of July Thirtyth Twentytwenty.
Please note that urban one disclaims any duty to update any forward looking statements made in the presentation.
In this call urban one may also discuss some non-GAAP financial measures in talking about its performance.
These measures will be <unk> reconciled to GAAP either during the course of this fall or in the company's press release, which can be found on its website at www dot urban one dotcom.
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I'll now turn the call over to Alfred C. Liggins, Chief Executive Officer of urban one who is joined by Peter D. Thompson Chief financial off.
Mr. liggins.
Thank you operator and also joining me.
Joel is a joint venture or the Chief financial officer anyone in case, we need to drill down there Karen Wishart, our chief administrative officer.
And Christopher Simpson, who is our general counsel.
You are.
Seem the press release as expected Q2.
That's very tough quarter because of cone Ed.
We guided yeah, we'll actually see how folks now where our yeah, our business was pacing down to and it came in pretty.
Pretty much as expected I think our EBITDA came in better than we had expected the company got an extraordinary amount of costs to men upon minimize the impact of EBITDA and I just want to take my hat off to the management team and all the employees do you have done an amazing job.
Really battening down the hatches as at this virus is really ravaging the economy and Ah and our advertisers in businesses et cetera radio was the most impacted.
And we see Q2 as the bottom yeah. Unfortunately, and we're starting to see some quick guy sequential improvement going into Q3 for sure.
Our cable business is helping us a lot and we'll actually see EBITDA.
At TV, one grow year over year in 2020 in spite of CRO in spite of cobot.
Given the current climate for social Justice. We're also seeing a lot of new interest and our audience and platform as well I'm going to go into some more detail after I turn it over to Peter Who's going to drill down on the numbers and then he'll hand, it back to me and I'll give you a little more color on after that.
Okay. Thank you all front. So net revenue was down 37.5% for the quarter ended June Thirtyth 2020, but approximately $76 million.
As Alfred said the impact to cope with 19 was felt most strongly and a radio segment.
Well net revenue was down 58.4% in the second quarter.
National AD sales were down 49.1%, while local advertising sales were down 61.2%.
The same station basis, which excludes Detroit.
Radio segment net revenue was down 56.6% I think excluding political it was down 7.1%.
The worst affected categories for entertainment, which was down 90%.
Food and beverage down 83%.
Travel and transportation down 72%.
Auto down 71% until it comes down 68%.
Net revenue for reach media was down by 66.6% in the second quarter.
Of which approximately 45% is attributable to the postponement of the Tom Joyner Fantastic voyage cruise.
Adjusted EBITDA.
It was down a region by approximately a $1.7 million or 51.6% year over year.
The Tom Joyner Fantastic voyage event generated $1.7 million of adjusted EBITDA in the second quarter 2019 was postponed this year due to the pandemic.
Net revenues for our digital segment decreased by 20.4% Inc. second quarter adjusted EBITDA for the digital segment decreased by approximately $129000.
We recognized approximately $43.8 million of revenue for my cable television segment during the quarter a decrease of 5.7%.
Cable T. Atlas cable TV advertising revenue.
It was down 4.4% driven by lower demand due to the pandemic.
Leading to an average unit rate decrease of approximately 14%, which was partially offset by higher deliberate.
Cable TV affiliate revenue was down by 7.4% when the rates increases of approximately $1.3 million offset by churn of approximately $3.3 million.
Cable subscribers as measured by Nielsen finished Q2 51.4 million down from 51.8 million at the end of Q1.
We recorded approximately $40000 of cost method income less administrative expense for our investment in the MGM National Harbor property for the quarter compared to $1.7 million last year.
$9 million 37, 6% to approximately $53 million and Q too.
Due to cope with 19, all special events schedule to take place during the second, Florida or either cancel or postponed to a later date.
2019, Tom join a fantastic voyage generated.
Expensive of approximately eight $7 million.
Other reach media events generated expenses of $600000 and radio station events general expensive approximately two $9 million during the second quarter of 2019.
We saved approximately seven $1 million, an employee compensation expense reductions.
A combination of layoffs fellows contemporary pay cuts.
We've also.
Savings of approximately for $1 million and reduced or delayed marketing spend.
Two $3 million and lower programming content amortization.
One $8 million and contract labor on talent cost savings.
$114 million and reduce travel and office expenses.
In addition that will lower variable expenses, such as commissions and rep fees traffic acquisition cost of music license fees.
Approximately three $2 million.
Radio operating expenses were down 34, 7% radio S. G&A expenses line was down 37, 7% from lower revenue variable expenses, such a sales commissions and Nash national Rep fees cancellation of station events.
Play compensation and discretionary marketing promotions.
Productions.
Radio programming and technical expenses were down 28, 9%, mainly from lower employee and talent compensation on lower music royalties.
Reach operating expenses were down 68, 5%.
Program in in technical expenses were down 26, 1% driven by lower talent, an employee compensation expense.
SG&A expenses were down 87, 9%, mainly due to the cancellation of the cruise in other events.
Corporate SG&A expenses at reach for down 15, 3% due to staff compensation savings.
Operating expenses and the digital segment were down 20%.
Bye lower traveling acquisition costs reduced sales, an adult add operations costs and lower editorial content costs.
Cable T V expenses were down 32, 7% year over year sales and marketing expenses was down by for $1 million programming content expense decreased by approximately two $3 million.
Compensation and benefits were down by $1.1 million.
<unk> was down by $400000.
Operating expenses.
Corporate an elimination segment down by 12%.
And a favorable balance of $800000 for for adjustments to the company's employee agreement award liability and severance.
Charles excluded from adjusted EBITDA, none of those adjustments corporate SG&A expenses were up by approximately $130000 with lower employee compensation offset by high legal fees.
Ohio operating lease expense.
And the second quota consolidated broadcasting digital operating income was approximately $32 million down 33, 1%.
Holiday till adjusted EBITDA.
24, $5 million, a decrease 38, 1% year to year.
Interest expense was approximately $18 $4 million for the second quarter compared to approximately $26 million for the same period in 2019 decrease at 10.6%.
Make cash interest payments, a approximately $22.4 million when it's outstanding debt and the quarter.
Senior secure MGM National Harbor term loan balance increased by pick interest of approximately $525000 Underdraw three $6 million.
Proceeds from this draw we used to pay down the senior unsecured term loan by the same amount.
So, including <unk> that loan was paid download approximately eight $4 million.
<unk> was paid down by approximately $824000.
Provision for income taxes was approximately $465000 in the quarter and there were no cash taxes paid.
Net income was approximately one $4 million [noise].
<unk> per share compared to net income of approximately six $6 million or 15.
For the same sort of 2019.
For the same quota capital expenditures were approximately one $2 million compared to one $4 million last year.
The company repurchase three 208288 chairs a class D common stop and the amount of approximately two $4 million and executed Stock-based tax repurchase of 155771 shares plasty common stop and the amount of 140.
Thousand dollars.
The covenant purposes, LTM EBIT was approximately 129 million.
Senior leverage was 487 times against the covenant of five eight.
Five times.
That was approximately eight $834 million.
223 million LTM reported adjusted EBITDA for a total net leverage ratio of 675 times.
With that I'll handbags.
Thank you Peter ourselves.
But.
The recoveries really.
For us is gonna be.
All about.
E L and.
And what that trajectory is going to be that's really.
The wildcard for US we had to make some.
Assumptions of how we thought things that we're going to bounce back.
After after the recovery I think the first assumption is that <unk> excuse me. After reopening first assumption was that things were going to bounce back.
And that's the good news they have it's still too early for us.
<unk> exactly what that percentage down.
Q3, yeah.
Is it going to B.
R. R July is kind of finishing down.
And the low forties and that's down from.
Kind of high fifties that we were seeing in Q too. So that's that's good progress.
Q4.
Is going to be important we've got.
Political.
Add spending that's going to be coming into play we've started.
Our conversations.
Deep conversations with the Buyten campaign.
And and are very encouraged.
And and hopeful about their need to reach our audience when we look to our other businesses.
We feel we feel pretty good about the reach media, which is national radio not local.
Dependent.
Right now we're forecasting that they're EBIT that should be about flat to 2019 at about 7 million Bucks.
T V. One T V. One has been a great bright spot.
We did 80 $283 million, a EBITDA 2019, and we should probably get.
To $90 million of.
EBITDA this year at T V. One.
They just had.
Some really good news T V. One got there first.
Virtual in bpd over the top launch.
The service phyllo.
Launch a T V. One at the end of July two 700000.
Customers and getting incremental carriage.
For for T V. One, which is an established networks been around a long time.
Very good.
Very good thing.
<unk>.
Our first.
It'll MVD.
OTT.
Deal for that network ratings had been strong yeah.
At T V. One people the good thing about the yet.
There's nothing good about the pandemic the good thing.
About our business.
In the midst all this is that with people that have been watching.
A lot more television.
M. G M National Harbor is not a huge part of our business, but it is a meaningful.
Part of our business and they and they were closed.
For for most of.
Q too.
Opened up at the very end of June.
July is almost.
Rover, they're open up at 50% capacity I actually have been out there multiple times.
And.
Talking with the folks out there and.
And they're opening up to very strong activity.
Great.
Social distancing.
Health.
Health and safety protocols.
Even at 50% capacity, they're going to do some decent numbers I believe.
Something I'm still learning that business. Yeah. Every every business a lot of business have these 80 20 rules, where you get 80% of your revenue for 20% of your customers and.
And I think the regional casino model.
It's very similar to that so what you're seeing as you're seeing very loyal hardcore customers.
Come out and and doing business. So we're going to start to see revenue from that.
This month.
Now at a respectable level I mentioned earlier.
There has been.
New advertiser demand.
An interest in our platform Proctor and Gamble has come out and made a big commitment to using.
<unk>, an American owned media, we've got some initial.
Additional business from them.
In June we're having a great conversations with them about growing that relationship.
<unk>.
Number one advertiser in the world in a leader.
Advertisers.
Two and.
Two.
Conversation.
Round.
Social Justice.
Israel and.
And they are investing in it as well we've had.
Great and continue to have great and better.
Conversations in further along than we ever have been with companies like Google Capital One Bank of America.
And target.
We've also seem broader interest from pharmaceutical companies.
Cove, It and also the disproportionate to the fact that it has.
On on African American communities, and and also lastly.
As part of our <unk>, we have a marketing agreement.
With them that.
They were to invest a certain level of marketing over a five year period end that marketing agreement is 12 31 21. So what I also expect is that there'll be coming back online.
To fulfill that marketing agreement, which actually still has probably.
Close to half of the original $5 million commitment left on it so that's going to be.
Some wind in our sales going into.
The back half of this year and into next year.
So I would say net net we feel.
That we're fortunate.
We we weren't a restaurant or some other businesses or even a casinos that we're closed down.
Totally even though the radio business has gotten hit hard at least there was.
A significant amount of revenue still running through.
The business and then our diversification.
Has.
Left us with other business divisions that.
Have.
Withstood the downturn in the pandemic.
Much better than the radio Division has.
Put us in a position to work our way through.
The current the current state of affairs.
Hopefully things improve.
Sooner than we expected, but certainly these rollbacks.
I have not been helpful.
Houston is a big market for us. It's also a hot spot so we definitely seen.
The role back effect revenue.
And a market like Houston.
Other places are are doing better and.
And moving up quite nicely.
So with that operator, I'd like to turn it over to.
The Q&A section so we can.
Take some questions from folks that or online.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press one zero on your Touchtone phone.
You will hear an indication you've been placed into the Q and you may remove yourself from the queue by repeating the one zero man.
If you're using a speaker phone we ask you to please pick up your handset. Please make sure to your phone is and muted before pressing anybody.
Again for questions London zero at this time.
We do have questions chewing up one moment, while we got their their name.
Our first question will be from Aaron What go ahead. Please.
Hi, guys. Thanks, Thanks for letting me on the color.
Just trying to think about the overall radio AD environment do you feel that your AD performance in Hastings relatively in line with the overall marketplace or your station.
Performing or lagging a little bit any reason you might think that to be.
I like I don't know for sure yet because I haven't seen anybody else's numbers.
I think you're going to find that we're going to.
Better.
I'd like I'd been channel checking talking to other people.
And.
And the folks that I've checked with we definitely have been outperforming.
Those pacing numbers and so.
Yeah, I'm going to wait and see how things Rowland, but if I had the bed I think you're going to see us.
Outperform yeah, and look to buying a half a cue to we got a mellow cap data in on on a total spot basis.
We'd be the molecule by about four percentage points Yep. That's so.
We got.
We got a number of things going in our favor.
And not the least of which is some some renewed interest in our platform R stations yell are still performing pretty well.
Ratings wise, even though overall ratings went down but yeah, I think you're going to see our radio business outperformance.
Okay no doubtful.
Yeah.
And your comments around some of your advertisers, having an increase focus on African American owned and operated focus businesses. Do you think those offers will benefit across your platform or you think it's going to be more focused on T V or radio specifically.
They've been cross platform conversations.
Proctor and Gamble conversation was.
Digital radio and.
T V.
Okay got it.
And last one for me, it's it seems as though traffic volume.
Had.
Increase or recovered a lot over the last few months and I know, there's some ebbs and flows to that.
As Cove, it kind of dovetails are improves in some areas, but traffic improving seems to be a theme.
You still seeing some pretty.
Deep down pacing for third quarter down, 40% give or take what do you think it'll take for the advertising to come back and follow those sort of traffic volume improvements that we're seeing out there.
I mean, you got it you need a stabilization on the way we live right I mean.
You got you got businesses that are operating at.
50% capacity, 25% capacity.
You can only.
So many people in.
Store at any given time, you got to be six feet away everybody's got to wear masks that puts a damper on some of the experiences that.
You've had zoomy right now, we're all focused on being safe and trying not to get sick.
And and people are dying, but in order for business to really come back you're going to have to see a.
You're going to have to see.
Handle being put around this virus I think you're going to have to.
See more certainty around.
The slow a infection that things.
Cases are dropping and then.
And then what's the.
Trajectory of a vaccine I had a conversation last night.
With somebody who.
Is.
Hi up in one of the major pharmaceutical companies.
And they were really bullish about.
Vaccines, making it to the market.
By the end of the year.
And this was this was a very well placed person at a very big pharma company, that's participating in all of that so I.
I think that's what has to happen. That's why you don't know what whether or not.
Q3 is going to be down 40 or down 30, because you just you know.
Houston was Texas opened up first you really like okay, great. We're off to the races were in Houston in Dallas, but then.
You start to see.
Those infection rates in Houston explode and hospitalizations.
And then it slows and I mean, and we definitely saw money get cancelled.
From that so and then I'm starting to read that things are flattening out the curves flattening and if that starts to happen and if you do get your arms around it then I think you'll see.
Another bumper would definitely been seeing an increase of local advertiser activity, but we got to get out of this choppiness.
People are still very scared.
Very cautious.
The back to school issue is problematic.
Because.
Large portion of our Workforces.
R. R women, who will also care.
Four.
Their children and is very difficult to school from home and.
And work at the same time and business is that going to have to.
Adjust to that.
And so.
I'm starting to ramble as that by like you know.
No something that that's just my viewpoint of what has to happen is issues just got to get back to more of a normalization I think people I don't think and know people want to be normal I mean, it's really taken a toll on folks about how.
Mental health and how they feel in their day to day lives. So people people are going to want to go back to doing what they have done before.
We just got to get the safety.
Alright.
Operator can we.
Next question will come from the line of been Briggs go ahead.
Morning, guys. Thanks for checking the questions I just have a quick one here. So I heard you give guidance on.
For EBITDA at T V. One and 2020 of about $90 million, that's up call at 10% or so.
2019, EBITDA looks like it was 80 283.
A T V. One reach you said it'd be about flat did you give guidance that I missed for for the radio EBITDA or is it.
Thank you you didn't miss it [laughter].
Yeah, Yeah, okay.
Yes.
It's just too I mean, I would really I, just don't know yet.
Yes.
No better and another month right.
After let me see how.
Q3 starts to play out where a month into Q3.
Already I can tell you this.
For July I mean, we added money pretty much.
Every day.
It was one of those were.
Money added.
Was more positive than cancellations pretty much every day and that was the first month that we've had that yeah and.
And look and there wasn't great news throughout July right. It was it was choppy but.
Seeing that so I'm hopeful.
But this is.
This is this to me this is not whether or not things were returned to some level of normalcy, it's just win and whether who can and who can withstand it who can withstand the long gated pain.
Yes.
Yeah, so and kind of actually.
<unk>.
I know you ended the quarter with pretty strong liquidity positioning $70 million cash.
In that vein of it's not.
When I know liquidity is that the top of People's minds right now.
Can you could you give it a cash balance as of today or even though more general you guys feel comfortable with your what's your current liquidity position.
And your liquidity position looking forward.
We do I think as of this morning.
We were around $76 million.
Assuming.
Presented checks clear so.
I think it's.
Liquidity is held up very well.
And so we feel we feel comfortable with that.
Point, I think we look to to pay down some if not all of the <unk>.
Right now, we'll leave that outspend.
Just a an abundance of caution, but liquidity generally been pretty robust.
Sure. Okay, and then last thing are there any talked on the.
Capital structure is always at the forefront of your minds are you, having any thoughts related to be capital truck for kind of take a backseat, let you guys manage.
Cove at 19 crisis or are there any are there any talks you're having a capital structure right.
Capital structure maturities all of that stuff is front and center for US and we are we are deep and conversations about different solutions.
Different solutions to drive additional liquidity.
Different solutions.
Four.
With dealing with maturity's, ranging talking to our existing debtholders.
Stay in constant contact.
The major debtholders.
For the company and.
So we're looking at.
We got a lot of items in the fire and I would say that it is probably.
I would say sure.
The number one goal was to make sure that we were covenant compliant so.
Abby any sort of.
Then a default.
Issue and.
We've been doing that until great about that.
And then tracking where the business is going in and manage in that and then the secondarily.
It's capital structure and.
What are what are the options for.
Resolving our upcoming maturities and also taken some of the pressure off so.
Okay, Alright, well, hi, very very hyper hyperfocus.
Okay, Great. That's all that's very helpful. I appreciate the question.
Very much.
Thanks Man.
We'll go next to line of Kirk, Let's go ahead.
Good morning, Thank you for taking my question.
Of course.
Very impressive on the cost reduction side.
I think you've mentioned in the past that summer temporary summer longer term.
Is there a.
Can you.
Give us a range of what a normalized.
Run right might be some of these line items like programming SG&A corporate.
Yes.
It's tough to do that because there's just so many variables.
Obviously, we've got a pretty strong handle on the Q3 cost space.
That's.
Going to come out.
I mean, the employee piece of that.
Is probably around $6 million.
Compared to the $7 million that we say.
Q too.
The programming pace Q3.
About two $8 million.
Last year on year so.
Slightly more savings.
And content amortization.
The masked and spend is about $1 million five of savings in Q3.
Contract labors about 900 Grand.
While I'm on office expenses about a half a million dollars.
Variable expenses projected to be about two $6 million down.
And events about $1 million and a half.
Down at the radio stations in about $3.1 million down right. So.
If you taught all that up.
Q3 is about $20 million savings and Q3 that are embedded in our current projections.
And I can't really annualized or run right at the moment because things are so kind of fluid.
Particularly around events and that kind of thing, but hopefully that gives you a sense of the the scale of what we're doing.
That would look like.
Rowland forward another quarter.
That's very helpful.
Thank you.
A couple a couple revenue related questions I'm curious.
With respect to events is there a way to pivot from.
And then the traditional in person events to virtual events and do you have any.
Anything on the horizon.
Alright might January.
I mean less.
The answer is sure you can do that but.
I mean are events.
Many of them were reliant on people's showing up and buying tickets.
Or women's empowerment in Raleigh, North Carolina, we probably sell 12 15000 tickets.
To that thing so.
You could do a virtual event and have your seminars and the whole bit but.
If somebody going to pay to see that online.
You certainly can't generate enough advertising dollars too.
Match the profitability.
That you would've had so yes, there are some things that were doing.
But.
It's.
But they won't be the same.
We we may do a virtual event for our urban one honors award show that.
We had last year that.
That's in Q4.
BT awards were done virtually and they actually did have.
Really good get job, but generally attached to the <unk> awards as a whole <unk> experience.
Concerts in three days, a week and stuff.
<unk> is.
That.
You just won't be able to make up the revenue scale.
Four events in person, but can you actually execute something yeah, I don't know what the profitability looks like but it's not even close to a replacement.
Okay. Thank you then.
Yes, that's helpful.
A national Harbor can you get to.
Two year old revenue sharing number.
Even though the casinos only open.
I don't know, but.
Yes.
The answer is no you're not going to get to we did $7 million yeah.
Last year, you're not going to get to that same number.
But it's going to be it's going to.
It's going to be better than than we thought it was going to be at 50% capacity.
I don't I don't know.
I will know what those numbers are in six days when they get released like everybody else does because they released the numbers to the state of Maryland.
Usually during the first week of the following month.
But I can tell you.
They did.
The very first week day, we're open.
They did.
Close to $10 million I think it was $888 million to $10 million.
Very first week.
At the end of June and.
And.
July has been very strong so.
Yeah.
I think we'll be happy where it is I'm not expecting us to get to any sort of.
Normalized revenue level.
For any of our businesses and by the way.
When I gave you those EBITDA guidance number some of them they're pretty positive.
I didn't even mentioned or digital business, but our digital business did about $1 million, a EBITDA last year, and you'll probably get two double that this year too.
A lot of that is on the on on the back of holding revenue down minimally and being able to take a lot cost out of those businesses rates. So it's not like those EBITDA numbers are going up because revenues up year over year just FYI. So.
No I don't expect us to.
Do last year's revenue.
Across any of our units, but it's really about can we ultimately.
Get more cash flow out.
And the good thing about the casino is that.
Every dollar is cash flow to us so.
Got it. Thank you and then one last question if I may on the capital structure.
You mentioned you bought some sure is during the quarter.
The stock.
When crazy.
Do you have any do you have any.
Perspective on.
On on the stock market activity other than I would think of it's pretty bullish sign that you think you can get this <unk>.
<unk>.
I.
We.
We bought those shares we bought.
Brigade.
The hedge fund it also happens to be our largest debtholder and they were the second largest.
Equity holder after the family and.
We stay in close contact with them.
We made that deal.
With them.
A couple of reasons one.
We didn't want to a big hunk of depth stock.
Hitting the market and.
From our perspective, it was really kind of that that we're going to make it through this and and stock was trading.
Hello.
One dollar.
When we did it and we also did it with one of our not one of our with our largest debtholder. So we were kind of in sync with that and it wasn't.
Lotta money.
Four.
For the purchase given where the stock trading plus we it also gives us the ability to continue to fuel.
<unk> incentives and things.
Of that nature.
During this period of time.
I had no idea that.
The stock was going to.
Rocket like it did.
I originally thought maybe there is a short squeezed, but there wasn't a very big short position.
I really think that it was just sheer coincidence because you have a large shareholder themselves and it was just pure coincidence that at the same time.
There was a lot of retail interest.
To develop and our company and some other African American companies, coupled banks, one Broadway financial another Carver.
Carver Bank at the same time.
And.
And I think it was just pure coincidence that happened at the same time the level of trading that's continued even though the stock.
Has come down.
The level of trading and activity is still been very very robust.
So.
Yes, this retail trading.
Thing is unbelievable I saw something on CNBC.
Sure.
A guy was saying that with financial information in the Internet.
Lot of folks that or.
Our trading have just as good information as people, who do it for a living.
At hedge funds.
And.
And so.
That's what I think has happened.
With us.
And.
I think certainly the.
Interest in our audience and social Justice.
It has been.
Been helpful to that.
So yeah.
That's great to hear.
Thank you very much.
Yeah.
And is there any additional questions.
The first one zero.
We have no one else going up for questions. At this time you May proceed.
Well. Thank you operator, and thank you everybody per tune in in again as always we are available offline for any questions.
You very much.
Ladies and gentleman that will conclude your conference for today. Thank you for your participation.
Telecom.
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During this conference call urban one we'll be sharing with you certain projections or other forward looking statements regarding future events, where its future performance.
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I'll now turn the call over to Alfred C. Liggins, Chief Executive Officer, Overbid, One who is joined by Peter D. Thompson Chief financial.
Mr ligand.
Thank you operator and also joining me.
Joe is Ah Jodi Gerard Chief Financial Officer, TV, One case, when you drill down there Karen Wishart, our chief administrative officer.
And Christopher Simpson, who is our general counsel.
Yes.
The press release as expected Q2.
What the very tough quarter because of co that.
We guided yeah, that's the how folks now.
Where are our business was pacing down too.
And it came in.
Pretty much as expected I think our EBITDA came in better than we had expected.
The company, an extraordinary amount of costs to men upon minimize the impact to the EBITDA.
And I just want to take my hat off to the management team and all the employees, who have done an amazing job of really battening down the hatches as at this virus isn't really ravaging the economy.
And ER and our advertisers and business as et cetera radio was the most impacted.
We see Q2 as the bottom.
Fortunately and we're starting to see some quick got sequential improvement going into Q3 for sure.
Cable business is helping us a lot and we'll actually see EBITDA.
At TV, one grow year over year in 2020 in spite of CRO in spite of cobot.
Given the current climate for social Justice, we're also seeing a lot of new interest and our audience and platform as well.
Go into some more detail.
After I turn it over to.
Leader, who is going to drill down on the numbers and then ill hand, it back to me and I could get a little more color.
Okay. Thank you Alfred So net revenue was down 37.5% for the quarter ended June Thirtyth 2020, approximately $76 million.
As Alfred said the impact to cope with 19 was felt most strongly and our radio segment.
When net revenue was down 58.4% in the second quarter.
National AD sales were down 49.1%, while local advertising sales were down 61.2%.
The same station basis, which excludes Detroit.
Radio segment net revenue was down 36.6%, excluding political it was down 7.1%.
The worst effect to categorize what entertainment, which was down 90%.
Food and beverage down 83%.
Travel and transportation down 72%.
Auto down 71%.
Well it comes down 68%.
Net revenue for reach media was down by 66.6% in the second quarter.
Of which approximately 45% is attributable to the postponement of the Tom Joyner Fantastic voyage cruise.
Adjusted EBITDA.
It was down a region by approximately $1.7 million or 51.6% year over year.
Tom Joyner Fantastic voyage event generated $1.7 million of adjusted EBITDA in the second quarter of 2019 was postponed this year due to the pandemic.
Net revenues for our digital segment decreased by 20.4% Inc. second quarter adjusted EBITDA for the digital segment decreased by approximately $129000.
We recognized approximately $43.8 million of revenue from my cable television segment during the quarter a decrease of 5.7%.
Cable T. ADVATE cable TV advertising revenue.
It was down 4.4% driven by lower demand due to the pandemic.
Leading to an average unit rate decrease of approximately 14%, which was partially offset by higher deliberate.
Cable TV affiliate revenue was down by 7.4% when the rate increases of approximately $1.3 million offset by Chan of approximately $3.3 million.
Cable subscribers as measured by Nielsen finished Q2.
51.4 million down from 51.8 million at the end of Q1.
We recorded approximately $40000 of cost method income less administrative expense for our investment in the MGM National Harbor property for the quarter compared to $1.7 million last year the decrease.
As a direct result of the casino closure do should Corona coated 19, Maryland State mandates Casino is now we opened up 50% capacity with enhanced health and safety protocols.
Operating expenses, excluding depreciation amortization impairments and stock based compensation decreased by $31.9 million, 37.6% to approximately $53 million in Q2.
Due to covert 19 year old special events scheduled to take place during the second quarter why the council focus bone too late to date.
2019, Tom Joyner Fantastic voyage generated.
Expenses of approximately $8.7 million.
Other reach media events generated expenses of $600000 on radio station events general expense of approximately $2.9 million during the second quarter 2019.
We saved approximately $7.1 million, an employee compensation expense reductions through a combination of layoffs Bose contemporary pay cuts.
We've also.
Savings of approximately $4.1 million and reduced or delayed marketing spend.
$2.3 million and lower programming content amortization $1.8 million in contract labor on talent cost savings.
$1.4 million and reduced travel and office expenses.
In addition that were lower variable expenses, such as commissions and fees traffic acquisition costs and music license fees.
Proximately $3.2 million.
Radio operating expenses were down 34.7% radio SJ DNA expenses line was down 37.7% from lower revenue variable expenses, such as sales commissions Nash national Rep phase cancellation of station events.
Employee compensation and discretionary marketing promotions.
Reductions.
Radio programming and technical expenses were down 28.9%, mainly from lower employee in talent compensation and lower music royalties.
Reach operating expenses were down 68.5%.
Programming in technical expenses were down, 26.1% driven by lower talent and employee compensation expense.
Each SGN I expenses were down 87.9%, mainly due to the cancellation of the crews and other events.
Corporate SGN I expenses at reach were down 13.3% due to staff compensation savings.
Operating expenses in the digital segment were down 20%.
And by lower traffic acquisition costs reduced sales and add up flat operations costs lower editorial content costs.
Cable TV expenses were down 32.7% year over year sales and marketing expenses was down by $4.1 million programming content expense decreased by approximately $2.3 million.
Compensation and benefits were down by $1.1 million.
Any was down by $400000.
Operating expenses.
Corporate eliminations segment down by 12%, including a favorable variance by 100000 dollar sprint for adjustments to the company's employee agreement award liability and severance which are excluded from adjusted EBITDA. None of those adjustments corporate DNA expenses were up by approximately 130000 dollar.
With lower employee compensation offset by higher legal fees.
Hi, operating lease expense.
The second quarter consolidated broadcast and digital operating income was approximately $30.2 million down 33.1%.
Holiday to adjusted EBITDA was $24.5 million decreased 38.1% year to year.
Interest expense was approximately $18.4 million for the second quarter compared to approximately $20.6 million for the same period in 2019 decreased 10.6%.
The company made cash interest payments.
Ultimately $22.4 million on its outstanding debt and the quarter.
Senior secured MGM National Harbor, Tom loan balance increased by Pik interest of approximately $525000 under draw up $3.6 million. The proceeds from this draw we used to pay down the senior unsecured term loan by the same amount.
Including amortization that loan was paying down by approximately $8.4 million.
Tom lumpy was paid down by approximately $824000.
Provision for income taxes was approximately $465000 in the quarter and there were no cash taxes paid.
Net income was approximately $1.4 million.
Three cents per share compared to net income of approximately $6.6 million or 15 cents per share for the second quarter 2019.
The second quarter capital expenditures were approximately $1.2 million compared to $1.4 million last year.
The company repurchase 3 million 208288 shares of class B common stock and the amount of approximately $2.4 million.
Q to the stock last tax repurchase of 155771 shares class B common stock in the amount of $140000.
The covenant purposes, LTM EBITDA was approximately $129 million.
Senior leverage was 4.87 times against the Covenant of 5.8.
Five times.
Net debt was approximately 800 $830.4 million compared to $123 million LTM reported adjusted EBITDA for total net leverage ratio of 6.75 times.
With that I'll hand back down.
Thank you Peter so.
But the.
The recoveries really for us going to be.
All about local radio and.
And what that trajectory is going to be thats really the wildcard for us we had to make some.
Assumptions of how we thought things were going to bounce back.
After after the recovery I think the first assumption is that they excuse me. After reopening first assumption was that things were going to bounce back.
And and that's the good news they have it's still too early for us.
To tell exactly what that percentage down.
Q3, yes.
It is gonna be yes, our July is kind of finishing down.
In in the low Fortys and Thats down from.
Kind of the high Fiftys that we were seeing in Q2. So that's that's good progress.
Q4.
Is going to be important yes, we've got the political.
AD spending that's going to be coming into play.
We started.
Our conversations.
The deep conversations with the Biden campaign.
And die and are very encouraged and hopeful about there need to reach our audience.
When we look to our other businesses.
We feel we feel pretty good about the reach media, which is national radio not local.
Dependent.
Right now we're forecasting that their EBITDA should be about flat to 2019 at about 7 million Bucks.
Yes, TV one.
TV, one it's been a great bright spot.
We did $80 million to $83 million of EBITDA in 2019, and we should probably get.
To $90 million.
Of EBITDA this year at TV one.
They just had.
Some really good news TV, one got there first.
Virtual in bpd over the top launch.
The service by low.
Launches TV one at the end of July to 700000.
Customers and getting incremental carriage.
For for TV, one, which is an established networks been around long time.
As a very good.
Very good thing.
That side, that's our first virtual MPPD.
Oh TT.
Deal for that network ratings have been strong yes.
At TV one people the good thing about that that yet.
There's nothing good about the pandemic the good thing, yes about yes, our business, yes in the midst. All this is app with people that have been watching.
A lot more television.
MGM National Harbor Harbor is not a huge part of our business, but it is a meaningful yes.
Part of our business and they and they were closed.
For for most of.
Q2, they opened up at the very end of June.
In July as almost.
Over their open up at 50% capacity I actually have been out there, yes multiple times.
And.
And talking with the folks out there and.
And they are opening up to a very strong activity.
Great, Yes, social distancing help.
Health mistaking protocols.
Even at 50% capacity, they're going to do some decent numbers, yes, I believe something I'm still learning that business. Yes. Every every business a lot of businesses have these 80 20 rule is where you get 80% of your revenue for 20%.
Of your customers and.
And I think though the regional casino model.
It is very similar to that so what you're seeing is you're seeing very loyal hard core customers.
Come out and down and doing business that we're going to start to see revenue from that.
This month.
Now at a respectable level I have mentioned earlier.
That there has been.
New advertiser demand.
And interest in our platform Procter and gamble's come out and made a big commitment to using.
African American owned media, we've got some initial.
Additional business from them.
In June we are having great conversations now with them about rolling that relationship.
Yes, there that number one advertiser in the world leader that other advertisers.
Look to and their commitment to.
For the conversation around.
Social Justice.
Is real and and they are investing in it as well we've had.
Great and continue to have great better and conversations and further along than we ever have been with companies like.
Google Capital One bank of America.
And target.
We've also seen broader interest from pharmaceutical companies.
Co bid and also the disproportionate effect that it has on on African American communities and then also lastly.
As part of our MGMT out we have a marketing agreement.
With them that.
They are working on Thats, a certain level of marketing over a five year period, and yet that marketing agreement in 12 31 21. So what I also expect is that there will be coming back online.
[music].
Phil that marketing agreement, which actually still has probably.
Close to half of the original $5 million commitment left on it so thats going to be.
Some wind in our sales going into.
The back half of this year and into next year.
So, yes, I would say net net we feel that.
We're fortunate that.
We weren't a restaurant or some other businesses or even to casinos that were closed down.
Yeah totally even though the radio business has gotten hit hard at least there was.
Yes, a significant amount of revenue still running through.
The business and then our diversification.
Has.
Left us what other business divisions that.
Have.
Withstood the downturn independent pandemic.
Much better than the radio Division has.
Which is put us in a position to work our way through.
The the current the current state of affairs and.
Hopefully things improve.
Sooner than we expected, but certainly these roll backs.
I have not been helpful.
She usten is a big market for us. It's also a hot spot we've definitely seen now.
Rollback affect revenue.
And in a market like Houston.
Other places are are doing better and and.
And moving up quite nicely.
So with that operator, I'd like to turn it over to.
The Q and a section so we can now take.
Take some questions from folks that are online.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press one then zero on your Touchtone phone.
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Again for questions, Chris one than zero at this time.
We do have questions queuing up one molded while we got that their name.
Our first question will be from Aaron Watts go ahead. Please.
Hi, guys. Thanks. Thanks.
Other color.
Oh for just trying to think about the overall radio ad environment.
Still that your AD performance from pacing relatively inline with the overall marketplace or your station outperforming are lagging a little bit any reason you might think that could be.
I would look I don't know for sure yet to that seen anybody else's numbers.
I think youre going to find that work on a.
Better now.
Look I have been channel check and I've been talking to other people.
And down.
The folks that check with how we definitely have been outperforming.
[music].
Yes.
Outpacing numbers and so.
Yes, I'm going to wait and see how things roll end, but if I had the bed I think youre going to see us.
Outperform yeah and look to bite off of Q2, we got the MELA cap data and then on on a total spot basis.
We beat the market by about four percentage points Yep, that's so.
Yes, we got yes, we got we got we got a number of things going in our favor.
And not the least of which is some some renewed interest in our platform. Our stations yell are still performing pretty well.
Ratings wise, even though overall ratings went down but yes, I think you're going to see our radio business outperformed.
Okay. That's helpful.
Yep.
Yes.
And your comments around some of your advertise having an increased focus on African American owned <unk> operated focused businesses do you think.
Those operates well benefit across your platform or you think it's going to be more focused on TV or radio specifically.
Ben Cross platform conversations.
Procter and Gamble compensation was yes.
Digital radio and TV.
Okay got it.
And last one for me, it's it seems as though traffic volumes that have.
Increased our recovered a lot over the last few months and I know, there's some had been close to that.
As kobin kind of dovetails, our improves in some areas, but traffic improving seems to be at theme.
You're still seeing some pretty steep down pacing for third quarter down 40% give or take what do you think it'll take for the advertising to come back and follow those sort of traffic volume improvements that we're seeing out there.
I mean, you got you need to stabilization on the way we live right I mean now it's yet you've got the have you got businesses that are operating at.
50% capacity, 25% capacity.
You can only has have so many people in.
Store at any given time, you got to be six feet away everybody's got to wear masks that lets say damper on some of the experiences that.
Pads you me right now, we're all focused on being safe and try not to get sick.
And and people are dying, but in order for business to really come back you're going to have to see a.
You got to see a handle being put around this virus I think you're going to have to.
See you have more certainty around.
The slower than section that things they out.
Cases are dropping and then.
And then what's the.
Trajectory of a vaccine added conversation last night.
With somebody who.
Is.
Hi up in one of the major pharmaceutical companies and and they were really bullish about yell.
Vaccines, making it to the market.
By the end of the year.
And this was this was a very well placed person at a very big pharma company, that's participating and all of that so yes, I shall I think thats what has to happen. That's why you don't know what whether or not.
Q3 is going to be down 40 year down 30, because you just now.
She Usten was Texas opened up first real like Okay, great. We're off to the races were in Houston and Dallas then.
You start to see.
Those infection rates in Houston explode in hospitalizations and.
And then it slows and I mean, we definitely saw money get canceled.
From that so and then I'm starting to read that things are flattening out the tariffs flattening as that starts to happen. Then if you do get your arms around it then I think you'll see.
Another bump up with would definitely been seeing an increase of local advertiser activity, but we got to get out of this choppiness people are still very scared and very cautious.
The back to school issue is problematic.
Because.
Large portion of our Workforces.
Our our women who also care.
For their their children and it's very difficult to school from home and and work at the same time and businesses are going to have to.
Adjust to that.
So.
Look I'm starting to ramble as that by like you know really know something that that's just my viewpoint of what has to happen as as you just got to get back to more of a normalization I think people I don't think no people want to be normal I mean, it's really taken a toll on folks about the out.
How they.
Mental health and how they feel on their day to day lives. So people people are going to want to go back to doing what they have done before which is got to get the safety.
Right.
Operator can we see if next question will come from the line have been rigs go ahead.
Morning, guys. Thanks for taking the questions I just have a quick one here. So I heard you give guidance on.
For EBITDA at TV, one in 2020 of about 90 million, that's up call it 10% or so from.
EBITDA it looks like it was 80 to 83.
At TV, one rich you said it'd be about flat did you give guidance that I missed for for the radio EBITDA or is it.
Thank you you Didnt Miss it.
Yes, yes, yes, okay.
[laughter], yes that it's just it's just too I mean, I would really I, just don't know yet yes.
Yes, I'll I'll know better and another month right, yes, after going to see how.
Q3 starts to play out were a month into Q3.
Already I can tell you. This now for July I mean, we added money pretty much.
Every day.
It is one of those were no.
Money added.
Was more positive than cancellations pretty much every day and that was the first month that we've had that yes and.
And look and there wasn't great news throughout July right. It was it.
It was choppy, but and so we are seeing that so I'm hopeful yes.
But this is all this is this for to me this is not whether or not things retirement returned to some level of normalcy assist when and weather, yes, who can and who can withstand it who can withstand the elongated pain, yes, yes.
Yes, so any kind of actually and that in that vein. I know you ended the quarter with pretty strong liquidity position and you had 70 million of cash just in that vein of not it but when I know liquidity is that the opposite People's minds right now.
Can you could you give a cash balance as of today or even a more general you guys feel comfortable with your with your current liquidity position.
And your liquidity position looking forward.
We do I think as of this morning, we were around $76 million.
Assuming all.
Presented checks clip so.
I think it's essentially the liquidity has held up very well.
And so yes, we feel we feel comfortable with.
At some point I think we look to pay down some if not all of the IPO, but right now will lead the outstanding.
Just to have an abundance of caution but liquidity generally beam.
The robust.
Sure. Okay, and then lapsing are there any talks on the I know capital structure is always at the forefront of your minds are you, having any thoughts related to be capital Chuck for kind of take it back. The do you guys manage ruberg overnight in crisis or are there any or are there.
Any talks you are having on the capital structure.
Yes capital structure maturities all of that stuff is front and center for US and we are we're deep and conversations about different solutions.
Different solutions to drive additional liquidity Gal different solutions.
For.
With dealing with maturities ranging in talking to our existing debt holders we stayed constant contact.
The major debt holders.
For the for the company and.
So we're looking at Yale.
Got a lotta irons in the fire and I would say that it is probably.
I would say sure. The number one goal was to make sure that we were covenant compliance. So we didnt have any sort of.
Event of default.
Issue and.
We've been doing that until great about that.
And then tracking where the business is going and then manage in that and then secondarily.
Its capital structure and.
What are what are the options for.
Resolving our upcoming maturities and also taken some of the pressure off so.
Okay, Alright for high barrier hyper hyper focused.
Okay, Great. That's all that very helpful. I appreciate the question.
Very much thanks Brent.
We'll go next to lineup Kirk Ludtke go ahead.
Good morning, Thank you for taking my question.
Of course.
Very impressive on the cost reduction side.
I think you've mentioned in the past that summer temporary some are longer term.
Is there a.
Can you.
Give us a range of what a normalized.
Run rate might be some of these line items like programming that's gionee corporate.
Yeah. It so it's tough to do that because it just so many variables.
Obviously, we've got a pretty strong handle on the Q3 cost base.
Thats.
Kind of come out.
I mean, the employee piece to that.
It's probably around $6 million.
Compared to the $7 million that we say.
In Q2.
The programming pace from Q3.
About $2.8 million.
Last year over year, so slightly more savings there.
In content Amortizations.
Hey, Mark can span is about a million five assignments in Q3.
Contract Labor is about 900 Grand.
Trial, one office expenses about a half a million dollars.
Variable expenses projected to be about $2.6 million down.
And events about 1 million and a half.
Down at the radio stations.
$3.1 million down right. So.
If you talk a whole lot lot.
From Q3, that's about $20 million of savings in Q3 that are embedded in our current projections.
And I can't really annualize or run right at the moment because things are so kind of fluid.
Particularly around events.
Kind of thing, but hopefully that gives you a sense of the tipped the scale of what would.
But.
I would look like rolling forward another quarter.
That's.
That's very helpful.
Thank you.
A couple a couple revenue related questions I'm curious.
With respect to events is there a way to pivot from.
No the traditional in person events to virtual events and do you have any maybe just anything on the horizon.
That might might generate.
I mean luck.
The answer is sure you could do that but it's not I mean, our events.
Many of them, we're relying on people showing up and buying tickets right now our women's empowerment, and then and Raleigh, North Carolina, we probably sell 12 15000 tickets.
To that thanks so.
You can do a virtual event and have your seminars and I'll bet, but.
If somebody's going to pay to see that online.
You certainly can't generate enough advertising dollars too.
Match, yes, the profitability.
You would have had so yes, there is some things that we're doing.
But.
It's now.
But but they won't be the same.
We we may do a virtual event Dom for our urban one honors award show that that we had last year that.
Thats in Q4.
The B T awards were done virtually any action did it.
A really good good job, but generally attached to the GE awards as a whole BT experience the outwear concerts in three days a weakens the stuff at the point is.
That.
Just won't be able to make up the revenue scale.
Wow for events and person, but can you actually execute something yes, I don't know what the profitability it looks like but it's not even close to a replacement.
Okay. Thank you that.
Yes, that's helpful.
Our National Harbor can you get to.
To your old revenue sharing number.
Even though the casinos only opened 50.
I don't know but ill.
I Yeah I look at the answer is no you're not going to get to we did $7 million.
Last year, you're not going to get to that same number.
But the out it's going to be it's going to its going to be better than than we thought it was going to be at 50% capacity.
I don't I don't know it I'll know what those numbers are in six days when they get released like everybody else does because they released the numbers to the state of Marilyn now.
Usually during the first week of the other following month.
But I can tell you.
So they did.
Now the very first week day were open now got they did.
Close to $10 million I think it was a $10 million in the very first week.
At the end of June and down and in July has been very strong so.
Yes.
I think we'll be happy where I'm not expecting us to get to any sort of.
Normalized revenue level.
For any of our businesses and by the way.
When I gave you those EBITDA guidance number some of the pretty positive and yes, I didn't even mentioned our digital business, but our digital business did about $1 million of EBITDA last year, and probably get out to double that this year to.
A lot of that is on the on on on on the back.
Holding revenue down minimally and being able to take a lot cost out of those businesses right. So it's not like those EBITDA numbers are going up because revenues up year over year, just apply so no I don't expect us to.
Do last year's revenue.
Across any of our units, but it's really about can we ultimately.
Get more cash flow out.
And the good thing about the casino is that.
Every dollar is cash flow to us so.
Got it. Thank you and then one last question if I may on the capital structure.
You mentioned you bought some shares during the quarter.
The stock when when crazy.
Do you have any do you have any.
Perspective on.
On on the stock market activity other than its I would think of it pretty bullish sign that you think you can get this.
Rifai done.
I.
We.
We bought those shares we bought job.
Brigade business the hedge fund it also happens to be our largest debt holder and they were at the second largest.
Equity holder after the family and.
And.
We stand close contact with them.
We made that deal.
With them for a couple of reasons one.
We didnt want to a big hunk of that stock.
Hitting the market and.
From our perspective, it was really kind of that that we're going to make it through this and then.
Stock was trading.
Hello.
A dollar.
When we did it and we also did it with one of our yet not one of our with our largest debt holders. So we were kind of in sync with that and it wasn't a lot of money.
Of four gout.
For the purchase given where the stock was trading plus we it also gives us the ability to continue to fuel.
Employee incentives and things.
Of that nature that you need.
During this period of time.
I had no idea that.
The stock was going to.
Rocket like it did.
Hi, originally thought maybe there was a short squeeze but there wasn't a very big short position I really think that it was just pure coincidence that because you have a large shareholder the cells and it was just pure coincidence that at the same time.
There was a lot of retail interest that started to develop and our company and some other African American on companies couple of banks, one Broadway financial another Carver.
Carver Bank at same time.
And.
And I think it was just pure coincidence that happened at same time the level of trading Thats continued even though the stock has has has come down.
Yes, the level of trading in activity is still been very very robust.
And so.
Yes, this retail trading.
Yes thing is unbelievable I saw something on CNBC, where yes.
A guy withstand that with financial information and the Internet.
Lot of folks that are.
Our trading haven't just as good information as people, who do it for a living.
At hedge funds and down.
So ill.
Yes, that's what I think has happened.
With us.
And.
I think certainly the.
Interest in our audience and social Justice.
It has been since been helpful to that.
[music].
So yes, yes, but that's great to hear thank thank you very much.
Is there any additional questions. Please take this opportunity now the press one than zero.
Okay.
We have no one else gearing up for questions. At this time you May proceed.
Well. Thank you operator, and thank you everybody protein and again as always we are available offline for any questions.
Thank you very much.
Ladies and gentleman that will.
Thank you for your participation.
You bet teleconference.
You may now disconnect.