Q1 2021 Urban One Inc Earnings Call
Yes.
[music].
Yeah.
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the urban one 2021 first quarter earnings call. As a reminder, this conference is being recorded.
We will begin this call with the following safe Harbor statement.
During this call urban one will be sharing with you certain projections and other forward looking statements regarding future events or its future perform at urban one car.
That certain factors, including risks and on.
Certainties referred to in the 10-K 10.
10, Qs and other reported periodic cleave files with the Securities and Exchange Commission.
Could cause the company's actual results to different materially from those indicated by the projection or forward looking statements. This call will present information as of May 12, 2021. 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 its website at www urban one.
Dot Com a replay of this conference will be available from 12 P. M. Eastern standard time today May 12, 2021 until 11 59 P. M may 13th 2021 callers may access the replay by calling 1866.
2171041, or four zero to 90, 701, I'm, sorry, 90, 70847 with the access code 10593 to one.
Access to live audio and a replay of this conference will also be available on urban one's corporate website at www urban one dot com. The replay will be made available on the website for seven days after the call no other recordings or copies of this call on.
Authorized or may be relied upon.
I would now like to turn the conference over to average C. Liggins, Chief Executive Officer of urban one who is joined by Peter Thompson, Chief Financial Officer. Mr. Liggins. Please go ahead. Thank you very much operator also joining me on our Karen Wishart, our chief administrative officer Jody Drew R. R.
CFO for TV, one and Kris Simpson, our general counsel for the company.
You all have got the press release for the first quarter result, Yeah, we were pretty happy with.
Our performance in Q1, and very excited that this is a quarter that we will put behind us and start to lap.
Our COVID-19 comps.
Even with two months of of COVID-19 negative bad COVID-19 accounts are strong months last year, we actually posted stronger EBITDA in Q1 compared to 2019, we're starting to see significant.
Rebound activity for Q2, and our radio business.
Our other units continued to perform well so we're very optimistic.
About the full year, so I will now turn it over to Peter to go into the specifics on the numbers.
Thank you Alfred net revenue was down by three 6% year over year for the quarter ended March 31, 2021, and approximately $91.4 million.
Core radio revenue, excluding political was down 13, 7% year over year on the first quarter January was down 28, 4% February was down 19, 9% on March was up eight 8%. So we saw sequential improvement throughout the quarter.
Including political National AD sales for Q1 were down by 23, seven percentage year over year, while local AD sales were down 21, 5% by.
By category Entertainment was down approximately $2 million driven by the lack of concert event and moving activity financial was down by $1 $7 million services was down by $1 $4 million driven by lower tax legal and recruitment clients spending retail was down.
$1 million food and.
Average was down approximately $900000 driven by lower spend from fast food and other restaurants.
The outlook for radio in the second quarter because of our strong with Q2 pacing currently up by more than 70% as we lapped our most difficult quarter from 2020.
Adjusted EBITDA for Q1 was impacted by $1 $4 million of expenses related to the Richmond Casino project, Despite which as Alfred said, we posted a higher adjusted EBITDA on that.
In the first quarter of 2019.
GAAP net revenue for reach media was up by 16, 8% in the first quarter driven by increased advertiser demand for the African American audience.
Non business related to COVID-19, and the launch of a Macy's podcast adjusted EBITDA reach was up by approximately $1 $9 million year over year net.
Net revenues for our digital segment increased by 64, 7% in Q1 strong demand from brands to spend with Blackstone and certified diversity publishes contribution to the growth in direct advertising sales at one digital.
This drove adjusted EBITDA growth for the quarter of approximately $3 $2 million year over year for our digital segment.
We recognized approximately $46 $2 million on revenue from our cable television segment during the quarter a decrease of 2.6% cash.
Cable TV advertising revenue was down one 6% cable TV affiliate revenue was down by two 8%.
The rate increases of approximately $1 million offset by churn of approximately $1 $7 million.
Cable subscribers for TV, one as measured by Nielsen finished Q1 2021 at $49 4 million down from 51 4 million at the end of Q4, and Cleo had 20, $29 8 million Nielsen subscribers.
We recorded approximately $1 $7 million of cost method income less administrative expenses for our investment in the MGM National Harbor property for the quarter.
That's a $1 $4 million last year and $1 $7 million.
<unk> 2019.
Okay.
<unk> expenses, excluding depreciation amortization impairments and stock based compensation decreased to approximately $65 2 million in first quarter down 0.6% from prior year.
We saved approximately $1 million in employee compensation expenses on $650000.
And reduced travel and office expenses due to our cost savings initiatives year over year. We also saved approximately $1 1 million and lower programming content amortization expense on our cable TV per se.
Savings were offset by an increase of approximately $1 $3 million in marketing spend to promote programming at TV one.
The increase in corporate selling.
General and administrative expenses, primarily due to an increase in professional fees related to Richmond gaming opportunity.
Radio operating expenses were down 11, 4% on radio SG&A expense line was down nine 9% flow.
Employee compensation revenue variable expenses on discretionary marketing and promotions.
Radio programming and technical expenses were down 14%, mainly from lower employee and talent compensation reduced music royalties.
Reach operating expenses were down 21%, mainly due to lower employee compensation on a favorable reversal of bad debt expense.
Operating expenses in the digital segment were up by 12% driven predominantly by variable expenses related to the increased revenues cable TV expenses were up five 2% year over year programming content expense decreased by approximately $1 1 million sales and marketing expenses were up by approximately $1 nine.
$1 million driven by the increased media campaigns to support program.
Operating expenses in the corporate and elimination segment were up by 23, 9%, primarily due to the increase in professional fees for corporate development activities relating to potential game in another similar business activities.
For the first quarter consolidated broadcast and digital operating income was approximately $36 $4 million.
Greece, a three 3% consolidated adjusted EBITDA was $28 $8 million, a decrease of 10, 6% year to year.
Interest expense was approximately $18 million for the first quarter compared to approximately $19 1 million for the same period in 2020 company made cash interest payments of approximately $13 9 million on our site extending debt in the quarter.
The benefit from income taxes was approximately $10000 in the quarter on the company received a cash refund of taxes of $32000.
Net income was $7000 zero, which rounds to zero.
<unk> per share compared to a net loss of approximately $23 2 million or 51 cents per share for the first quarter of 2020 capital expenses expenditures were approximately $804000 compared to approximately $1 4 million last year.
As previously announced on January 25th 2021, we successfully refinanced all of the company's existing debt cash on hand, and $825 million of senior secured notes at a rate of 737, 5% to February one 2028.
As of March 31, 2021 total gross debt was $825 million.
And then unrestricted cash was $56 $8 million and net debt was approximately $768 2 million compared to $134 6 million.
<unk> LTM reported adjusted EBITDA, given a total net leverage ratio of 571 times.
With that I'll hand, it back to al. Thank you Peter I wanted to call to everyone's attention I don't know if you've seen.
<unk> seen it much in the advertising price, but yeah.
Yes, there is.
Very very positive advertising climate.
For African American owned media companies.
Corporations, like Procter and Gamble and general Motors have made significant.
<unk> to increase their investment an African American owned media, specifically and also within the last week. The Interpublic group of AD agencies, and now group, Inc. Advertising to very large <unk>.
Advertising holding companies have also committed to increase their spend with African American owned media.
<unk> will benefit greatly from that these are a tailwind that started in the aftermath of the protest over the George Floyd murder in the Black lives matter of movements of last year I got a lot of questions about.
About whether or not.
We thought that momentum was one time, whether it was sustainable or whether it really was a sign of.
Oh.
Positive momentum that would create systemic change and and I got it.
Certainly say that all signs are pointing to continued momentum.
Larger commitments.
On a real desire to create a more equitable playing field as it relates to media investment so that's very positive.
On the group M on the Interpublic announcements all came within the last week.
I've been involved in high level conversations.
With the with these corporations and these AD advertising agency holding company so yeah.
Well aware of the intent and the commitment that they're laying out and you know it all starts at the top so when the Ceos decide that this is a commitment that they want to make two multicultural media and.
And diverse one media then.
That's a big statement.
Secondly.
I want to talk about our Richmond, Virginia.
Virginia Casino.
Opportunity and initiative is that mentioned before we are.
Urban one in partnership with <unk>.
Peninsula Entertainment made a proposal to the city of Richmond to build a $600 million casino resort in the study.
It was an initiative based on our desire to further expand into the gaming arena since we had such a great experience with our investment at MGM National Harbor.
It started off with six different companies that.
Responded to the RFP on February 22nd it is now down to just two of us.
Other than one and the Cordish companies and dock and we're spending a lot of time.
Trying to to to win this in and get it over the finish line I guess you could say since there's two of US we are on yes, we.
We have a 50 50 shot.
But we are.
Currently in.
And discussions with the study so as the other.
What was the other party however.
However, we've got very different proposals or.
Proposal is on the south side of Richmond in an industrial area.
That.
It doesn't really impact neighborhoods and actually has widespread support from the largely minority neighborhoods in population status that surround it because of the amenities that are project would bring.
The competing project that's sponsored by the Cordish companies is yeah.
In North Richmond, and trendy restaurant bar area called Scotts edition.
That has the exact opposite population so ultimately it's going to come down to where.
Where the city.
<unk> itself wanting to spark further economic development, so stay tuned on that we should.
We should hear something by the end of the month.
But this is the first time, you'll see it flowing through our P&L.
We had $1 $4 million of what we call chase costs.
And those are costs for the RFP lobbyists.
On top.
Printing.
Yes.
On the initial architecture designs renderings that you have to put together to show what your what your project is advertising et cetera.
Should we be chosen.
Which Neil will know by the end of May beginning of June then we will have to go to city council to get.
Approved to be put on the ballot for a referendum that will happen in November whereas the citizens of Richmond will then vote on whether or not to approve.
On a casino <unk> resort casino App.
<unk> on location right out at our location there'll be additional costs that will come from running the referendum and then more architecture costs.
So.
Estimating our chase cost could be if we win.
Up to now.
$4 million or so if we don't win there'll be.
Half that but.
Pretty exciting to get this far and <unk>.
You can go to one casino resort Dot com.
It's one casino resort dot com and get updates information Theres lots of videos about what were planning there as I've said before should we be lucky enough to be chosen this particular opportunity it could create.
Create a another revenue and EBITDA stream.
That would rival the size of our radio group or our cable television operation So would be a pretty significant diversification opportunity for the company.
Operator can we go to the line for Q&A. Please.
And ladies and gentlemen, if you wish to ask a question. Please press. One then zero on your telephone keypad, you will hear an acknowledgment town that you have been placed in the queue and you may remove yourself from queue at any time by repeating the one zero co man.
And again, if you do have a question. Please press one to zero at this time and one moment. Please.
And we do have a question from RAF Lehman from Eaton Vance. Please go ahead.
Hi, great. Thanks.
So you mentioned on the pacings.
For I guess quarter up 70% in Q2 that sounds great.
Like others in the space your actual numbers for Q1 ended up being better than the pacings and Thats kind of what what people had said is that.
Things were coming in later and then the actual numbers are actually doing better than the patients does that is that continuing do you think that will occur again, where.
There's a little bit of a delay on you'll still you'll do even better than the pacings or is that has that kind of normalized in terms of its on it.
It feels like it you know.
But the.
The timing of when dollars hit.
It's.
It's so much harder to predict these days certainly done.
During the pandemic things, we're canceling at breakneck speed and then when they started to turn you started to see.
The numbers look really really ugly and clothes and improve throughout the throughout the month.
And throughout the quarter.
Q1 was.
January is down 28, and then it was February is down 21 in March was plus eight right.
So I suspect that will.
We will see things booking late.
And improving.
But as you get closer and closer to normalization.
Then I think that improvement pace.
During the month in the quarter will start to slow as well now.
You are seeing you are seeing a robust economy right now.
And particularly on our national.
National facing businesses.
Reach media.
We have we have inventory problems and sold out and so therefore, we're in a position where rates are rising.
I guess inflation is a good thing from that sense.
And.
And you're seeing that you're seeing more demand and inventory.
Okay.
In digital and Youre also seeing pretty strong demand and television local radio is not as robust robust as those other platforms, but is absolutely improving so the answer to your question is I guess, if you're asking do we think we're going to do better than <unk>.
Plus 70.
Four for Q2.
I don't know do we have a forecast Peter.
Do and it is slightly better on that but it is not not not dramatically so and as I look at the patients I think we called out in your quote Alpha. The April finished up about just just on the 90% 89.
On up Mays.
Mays pace in.
Up about 75% june's pacing up about 49%.
On.
If we were calling it now we'd say, it's mid seventies mid seventy's, yes. So.
A tick over the 70 Mark.
I would say that when we budgeted for our radio business, we did not budget to be back at 2019 levels, we budgeted to be somewhere between 2019 and 2020.
And we are on target for that.
Revenue performance.
And.
Yeah, and so so.
So we feel comfortable about that is too early for us to say, whether or not we're going to now.
Over perform that but right now we feel we feel pretty good about it we've got them.
Our Q4 last year was which was tremendous.
Tremendous because of political so Peter and I were talking about it earlier I think we're gonna be feeling good tracking along until we get to Q4 right now.
And then because it was such a big big quarter for us, but we still think that we.
We can hit the metric that I just described to you.
And then on the other thing to point out is.
Digital obviously is.
Strongest growth there at the moment from a radio standpoint, and so when we talk about our patients were included in the.
Digital business and that the radio digital business in that when we report out on breakdown.
Advertising, we pull all of digital into the digital segment. So.
Just just to be careful that we're talking about the same thing to plus plus 70 number includes our.
Radio digital performance.
Okay. Thanks, that's helpful and any update on events.
What the timing is looking like on that.
I mean, our biggest event that.
We've got we got two big events, one birthday Bash and and.
<unk> is.
It is scheduled to resume in June.
We're doing it forgot the name it's the old Atlanta Braves Stadium that now I think is a Georgia state facility.
It holds 50 or 60000 people and were setting it up to be socially distance for 15000.
People, but the business model for this year actually.
Could see it be quite profitable should we yes.
We hit that benchmark so that is happening at reduced capacity and then we have our fantastic voyage cruise.
From reach media schedule for Q4 and right now that's on.
We'll all plans are.
Our set for it to go.
On.
And that would be a significant driver.
As well with profit expectations to be.
Not.
At historical.
On the profit levels, but not far off of it.
And I think as long as.
Cases, keep coming down and vaccinations keep happening in the economy keeps.
We are starting to open then youll youll see.
US continue to return to events, but two of our biggest events are happening at this point in time this year terrific terrific and if I could maybe just one more on them at all.
I'll jump out just any update in terms of the financing on Richmond, I think you've been pretty clear on the last call that I guess, you can write up to a 75 million income and equity check out of this.
Everyone silo, but it might not be that much.
Yeah.
On program so.
Yeah.
It's moving around and the reason is moving around is because we are negotiating with the city, which kind of moves around the numbers.
And the project.
But a couple of things we've got.
Robust demand from almost 60 local investors that have signed up to invest alongside us on this project.
And.
And so the idea that we sell off at least 10%.
Of this too.
To people, who actually live in Richmond.
As a real concrete plan right. These people are signed up with given us numbers et cetera.
And so that.
That is helpful to go to reduce whatever.
Hard numbers, our original equity commitment was $75 million, so that equity commitment would have been <unk>.
75, minus the seven and a half for their 10%.
I pledge to put some personal money into it.
As well.
And so.
The local investment number can go up we could look at alternative ways to finance it.
The pandemic was helpful from the standpoint as we got.
I think smarter about.
The tools that we could use to raise capital we were very.
Lucky and excited to have gotten that refi off we have two ATM programs for both classes of shares in place.
We've used at least one of them.
The class as we haven't used the class days, so, yes, I would say to you that.
<unk>.
It will be very conscious of how we finance this.
And avail ourselves of all capital opportunities to also.
Be able to focus on think about our continued goal of deleveraging.
That's yes.
That's super important even though our current leverage level is.
Is that a place given the pandemic that we haven't seen before we realize that it's not where it needs to be now and so.
We're not going to do anything.
Yes.
That stretches us to them so.
So we would we would look at also other outside out.
Other ways to raise capital outside of.
Selling equity and taken a local investors to deleveraging.
The deleveraging is still a very important.
Effort for us and we're not losing sight of that if we are if we were lucky enough to be chosen yeah, I think that I don't know whats going to happen to our securities, but they should respond in a positive manner, because yes, it will be significantly accretive event.
Although it will be out.
In terms of when it comes to fruition.
When in that license will build significant value in and of itself.
Terrific, Thanks very much.
Once again, if you do have a question. Please press one zero.
Our next question is from the line of Todd Morgan. Please go ahead and he's from Jefferies.
Great. Thank you and thanks for all the color as usual I'll just have to kind of follow ups on the operating side I guess first of all very broadly I mean, given the kind of a positive start to the year in your comments here I know you said the fourth quarter is a little bit of a tougher comp but is it fair to say that kind of your broader thoughts about sort of EBITDA for the full year.
That you've kind of talked about it in the past.
I would think you're feeling a little bit better about the ability of that at this point just given the gastro on.
100% of view.
Remember our road show.
And we did a refi.
And actually yes, we.
We didn't actually give official guidance, but.
We knew Q4 was going to be.
And we knew this was going to be a non political year in Q4 was big for us et cetera.
So what we expressed.
In terms of EBITDA gout kind of neighborhood ZIP code soft and you whispered guidance Joe.
Still is still on effect now I'll caveat that by saying if we if we don't win the reference the Richmond license, we're going to have a one time hit of probably a couple million Bucks.
That will come off of that number on that.
That you are probably referring to.
But if we do it a roll into the investment and we will probably be over our bogey.
No. That's helpful. That's helpful and then also.
This year with production restarting in the TV side, I know you've called out expectations that the programming cost levels could rise along with that is that unfolding as you've kind of previously anticipated or as how is that really kind of book.
Moving in this environment is there any change from what you thought previously Joe do you want to give them an idea of what the increased programming expenses due to share.
I don't have on our total one last year, but yeah, we are expecting.
Was it about a 10% increase in our on our program amortization based on.
Production being back and and.
Just making commitments.
Our promises to our affiliates deliver a certain number of original hours.
But that's what it sounds like there's really kind of on track with what you thought before in other words, yes.
Okay. Okay no that's that's.
That's perfect no good good quarter. Thank you very much.
<unk>.
Thank you. The next question is on Patrick Wang from Diana investments. Please go ahead.
Yeah. Good morning, Thank you for the questions.
Congratulations on the.
But bidding can you just talk about.
Six months on cadence so you eliminate the other whore on whats consolidation from the city pumps other garden This project.
Yeah, I think look it was a a number of factors that eliminated the the other four.
Not all of them got eliminated for the same reason I think.
Uh huh.
The level of experience.
And belief in their business plan one.
As.
Was one.
Our site control are.
<unk> was a second one size and scope of project.
On.
Would be a third one.
The per Monkey Indian tribe.
Yes proposed a $350 million per.
Project that is essentially across the street from our location so.
I think they got eliminated because.
They also warrant teamed with <unk>.
I'd known existing gaming operator, and they had the lowest project sort of proposal in terms of value I know valleys got eliminated because of.
Issues with.
<unk> from state and governmental organizations at the city didn't control for their site and also.
Neighborhood pushback Golden Nugget got eliminated because they basically had a backup contract on the valley site. They didn't actually have an option on it so various different ones.
On.
And and now its down to to us on Cordish and and it's really going to be about location.
Where folks want to put it.
The ability for that location to also win in a referendum.
Because the citizens get the vote now on that and.
And I think.
To some degree.
What.
<unk>.
The City selection committee feels.
About who will.
Create develop the.
The the highest quality product.
And.
And so I think those are going to be kind of the remaining consideration. In addition to what are the economics that are going to go to the steady so.
In terms of the underlying real estate.
As a former Philip Morris sites do you actually have a contract with by the loan or are you going on leased land.
Yes, we have an option about it we have an option to buy it.
Okay.
And the timing of sales made in June.
Just around the corner.
Yeah.
Honestly I suspect we'll know if we've.
One of our last in the next two weeks.
Okay.
Okay, Great if you one.
Do you have to go back to your MGM hub of minority interest.
Interest.
No.
We do not.
Yes.
Okay great.
On the other questions regarding <unk>.
Radio advertising.
Traditionally it's more local.
And.
You talked about the increased interest from advertisers for minority on media.
Uh huh.
Would that have what's the component right now between the mix between national local and how much would that increase your national advertising too.
Yes look.
Our local radio business.
It's about 27% national or is it higher than that now Peter.
Right now it's around 30, it's around 30%.
And it depends on the political on non political obviously, we tend to be on a political year.
Yeah and look I.
I can't I can't tell you how much it's going to help right now.
That depends on how many clients each of these people. These AD agencies have at any given time.
Yeah.
They've given us percentage targets for where they want to go but that percentage target.
Leaves out.
Sum total spend is right yeah.
I can just tell you that it has been helpful is continuing to be helpful and people are making commitments and that only good news for us.
Okay.
Considering joining the cash media platform.
Because some of your competitors talked about Inc.
Thank you Mark.
We're already part of it.
Okay, Yeah, yeah catches catches basically.
The facto only national Rep on the radio business.
Alright, that's on this.
Good.
Right I'm.
I'm sorry.
Under that is that owned by script.
It catches on by I heart.
Okay.
Okay, I'm thinking about per caps.
Uh huh.
Moving on the TV line, Okay, Yeah, Youre thinking about the cats TV networks now different company.
Okay.
Gotcha.
My last question is regarding the ATM program that you said.
The aged AR.
Has been used up so I think during the quarter you have spent one $5 million.
Whereas the shares.
Good day.
I said, we view I didn't say it was used up I said, we've used it as a the only shares that we've issued.
I'm sure we still have outstanding capacity on it.
But we also stood up a class D for the U K.
Okay.
Shares that we have not availed ourselves of.
Yes as of yet.
What's the size of that be.
ATM is it 50 or 25, it's the shelf is 50, but we're putting on pro subsequently implemented yeah.
We have a $50 million shelf registration, but on a process that will register is going to be 25 million book.
Okay.
<unk> now dollar rate.
No that's dollar amount.
Okay, and how much do you have left one under a.
Uh huh.
I think we.
Top on my head about 19, but I'd have to I'd have to double check.
So we have significant capacity still under the second $25 million.
Gotcha.
Alright, Thank you very much thank you.
And our next question is from then on Odeon. Please go ahead.
Hey, Thank you guys for taking the question.
On Richmond, Im just trying to understand the purchase price and potential accretion for you guys. So you are saying it would kind of all things if all things go well it could be an equal contributor to your radio television EBITDA So call it.
On all between 100 $130 million.
On a $600 million purchase price it seems quite cheap compared to other gaming transactions am I thinking about that the right way and also does the $600 million include the land or would that be additional net.
Actually the $600 million includes land includes everything actually include some soft costs like interest and everything else too so.
I mean.
Yeah, that's kind of the math right now that how were looking at it right and but all of this stuff is contingent upon gaming studies that we are the.
The state hires a company a project with gaming revenue would be by market given.
On the structure that they have set up in terms of the number of licenses et cetera, then we hire people to come in and drill down on the market and give us the estimate what they think the market size will be based on household income population et cetera.
And then you overlay.
A tax.
Tax rate, yes that whatever the state is going to charge you and then what you think the.
The local city charge is going to be then you layer in whatever else additional you're going to do in sort of a host community agreement, where you're also going to make some financial commitments and then you lay over an expense structure, which your operating partner.
Has yes.
A very strong and deep knowledge base, because they run casinos and it spits out on EBITDA number and yeah that EBITDA number is you know is 100 or better right and.
Ah.
But I'm going to caveat all of this is that <unk>.
<unk> studies have been wrong right like you can miss them, some do better some.
Do worse National Harbor was actually right on target, it's actually not.
A little better when we first saw that business plan I think it said that gaming revenue was going to be.
In the sixes in.
And cash flow EBITDA was going to be $1 75 in gaming revenue has been.
In the low sevens and they've done a couple $100 million of EBITDA.
When MGM did Springfield.
That study was wrong and they missed the mark right. So for us yes.
<unk>.
That's the math, we look at but we will.
We will capitalize it and think about the risk from solved yet.
Yet the perspective of whats our downside right.
How far off could this be.
And and its still be.
An accretive.
Opportunity for the company.
And that will inform how much we're willing to spend and bid et cetera.
To also protect our downside, but yeah that that's kind of the math right now.
Got it.
All of that context, and then I kind of follow up onto the ATM program that you guys are running obviously.
It's dilutive to the equity and I guess I'm just curious when you guys think about bolstering liquidity or.
Raising capital for these type of projects.
I guess, what's the thought process behind diluting your equity when it's trading at $2 50 a share.
Kind of comparing that to the.
The current rate environment, and kind of fixed income instruments. I mean are you guys yeah.
Equities cheap on the I'm, just trying to understand that.
That's a good question look.
I still think we have too much leverage.
I knew for sure we had too much leverage when we were levered at six seven times.
Yeah, now that we're a turn lower coming out of our other.
Out of a pandemic I still think it's too much leverage and should go down we bought back a lot of shares over the years.
I think we bought back.
Half the company.
Probably no more than half the company now probably on an average rate of.
Dollar right you used it was 80.
We've we had always said that in order to Delever parts of fund.
Projects that we think can build value we were potentially a seller of stock.
At three.
$3 level.
On the DS.
We're a seller of stock of the A's.
At these higher levels, we haven't been a seller where it's at now but we were we.
We were a seller in the sixes.
In the Sevens.
And how I think about that is that's a yes.
That's a positive trade for us given what we.
Bought shares back for in the past and if you still think you have too much leverage.
I do yeah, I don't I don't I don't think this company should be living in.
In the high fives in terms of leverage so.
And so that's that.
That's how we think about it.
And in the.
The family My mother, and myself, probably one close to 50% of the shares. So it's really we're taking the biggest hit on the dilution.
But I think getting into a leverage range.
One.
Are you comfortable in that.
Al.
And it's sustainable is more important for the long term health of the company.
On.
And so you know.
That's how I think about it.
On just jump in and just jumping in for saying the previous gentlemen question.
I just checked on the $21 $9 million available on the class a.
The amount of the 25 or so.
Still substantial.
<unk>.
I appreciate all that context and color makes sense just last one for me. Obviously you guys are extremely busy on the gaming initiatives. When you think about kind of your broadcasting assets in stations car Radio T V.
You guys have done so.
Selective asset optimization on the M&A front do you think that your portfolio is kind of where you want it to be as it stands today and kind of how do you kind of view the current M&A landscape. Thanks very much.
Think that the answer is now I think our assets should ultimately be combined with a.
Larger radio platform to get more scale, particularly in the markets that we already operate in the swap we did with entercom to get out of St. Louis and.
And get larger in Charlotte has been great.
<unk>.
The businesses is just a lot more stable when you.
<unk> got larger share shares in and Youre in multiple formats, and it's also becoming more of a scale business.
Competing against I heart, and Entercom and Cumulus, Yes, I think that now that there is not.
Radio DRAM on the on the horizon.
That our company probably has the best well positioned to be.
One of the central platforms.
On the consolidation.
And that's absolutely what I think should happen in radio I've said it before.
And Oh.
And why aren't we focused on it now because nobody wants to do anything now because nobody has any idea of what their real EBITDA is right now.
Coming off of COVID-19, I mean, Cumulus used to do 210 or $216 million on EBITDA and they went down to like 80, something last year and now theyre going to bounce back to somewhere between $1 12, and 120 I don't think that they think that's their EBITDA equilibrium right. So nobody wants to do a deal.
Nobody wants to buy nobody wants to sell right now because you just don't know what assets are worth.
But as soon as we get through that I think are.
I think we should be focused on doing something.
Makes sense I appreciate that Ms sneak in one more.
You mentioned kind of target leverage do you have a number in mind there.
And the force.
Yes.
Great appreciate all the context and answering the questions today. Thank you guys.
Thank you and the next question is from Matt Van.
On some legal on Danielle. Please go ahead.
Hi, guys. Thanks for taking my question and follow up on the last one did you sort of imply that you'd be the consolidator.
Sure.
On this consolidation update of video assets.
Yeah.
That's a good question I have always said that we are willing.
And assets to be on either side of a transaction that created value and made sense I like the radio business.
Quite frankly it.
Other than.
Co prior to COVID-19 hit it actually stabilized.
And so on.
Like the Entercom deal was interesting because I was like we either need to leave Charlotte or you need to leave Charlotte.
As I said I'll do either.
In fact, they were actually going to buy our stations in Charlotte two and a half years ago and then they backed away from it. So we ended up buying them.
So I'm always willing to be on either side of a transaction if I had to handicap it.
Yes.
They're not a lot of radio operators left with people, who know the business know how to work on radio stations like run on radio stations don't mind. The business. So I would have to say that given the current landscape.
We would probably be the surviving entity.
Just because.
I don't see.
<unk> not going to be able to do anything.
Substance neither entercom.
But again I'm willing to look at it.
Other way, but if I had to handicap, it where the where the surviving entity in and I'm happy to and I'm happy to be that and I'm happy to be there.
Management solution for that because we like the business we know the business.
On the radio business has actually helped us get into these other businesses, we would've been able to get into the cable business. If it hadn't been for the radio business. The radio business is absolutely.
Helping us.
In getting to the gaming space so.
Now I.
<unk>.
But if there are opportunities.
If there were markets that made sense for us to to leave or swap around because we created value.
I have no intention of.
Of exiting the business altogether of the business that we're creating we think we have a lot of opportunity and upside. So I don't want to give anybody an intention the intention that we're a.
A stellar from that we're leaving the business standpoint.
We would be a seller or a swap or.
Of assets in order to create value.
Of which we can then use to delever or deploy into other areas that we can grow faster does that makes sense.
That makes sense.
Ladies to that because it's like.
Wholesale large transactions included difficult just given the ownership rules more sort of market by market.
Our mindset and couple of station that's simple.
Yeah, I mean, there really are no buyers I mean, if somebody put a radio company up for sale today, I mean, I think that happened I think there was a process.
For town square at one time, it Didnt ultimately materialize.
And ultimately that materialized in the major shareholder getting.
Just getting bought out.
I don't I don't think there's anybody who wants to go out and just.
By Big Radio company, but.
For a company like ours.
There are significant synergies for matching up in markets, where we're not full yet so Indianapolis Dallas.
Cincinnati, Washington D C.
There's there are significant cost savings.
If you look at us.
On another company like a lack of Cumulus.
Yeah.
Between corporate and the seven markets that we overlap in.
There is there is there are.
A lot of cost and revenue synergies there.
I think that somebody needs to take advantage of that.
Alright, that's helpful and just to put it all of them.
The previous question that was asked I think like doing the road show you showed us.
Soft indication income stuff like on EBITDA I think for the.
Full year on 130 <unk>.
And from what Youre, saying.
Yes, I mean with that with that EBITDA number.
Is there anything a pretty healthy amount of free cash flow.
I mean are you.
What do you plan to do with the cash.
How are you going on.
If you're going to see on our balance sheet that you can invest into casino.
Buybacks debt.
How would you sort of think about that.
So I think rough.
Roughly $70 million is not a bad number to think about.
Free cash flow for this year and.
It's probably not that much of a coincidence.
Yes.
Around the quantum give or take a bit on the Richmond investments. So we could invest a year's cash flow and that project. If we don't I think we'll keep it on the balance sheet and look for other opportunities and we also have the ability to prepay.
10% a year on the note so up to $82 $5 million, we could prepay at 103 on the notes. So we will look at that we will see where we come out on Richmond, and then make.
On the appropriate capital allocation decision after that book, but to your point I think our cash and liquidity position at the end of the year will be extremely robust.
So how does that tie ratio or is that on earlier comment I think that leverages to latch on to reduce the leverage but then you sort of take on the free cash flow and invest in the entity that is sort of outside the risk.
Strictly right, so and how does that sort of philosophy.
Well.
That was always the plan when we marketed our our refi we talked about gaming opportunities and we've got a specific carve out.
For additional gaming investments and.
And we talked about we talked about Richmond.
<unk> and.
You heard the gentleman earlier, when he asked about the Richmond math.
And should we be fortunate enough to be chosen the math works right.
It would be a it would be a great transaction and it would be accretive to the company and worth doing.
And so you would.
<unk> to take.
A year's free cash flow and invest and enrichment and.
Net net you're going to improve the company's.
We're going to improve the company's equity value and <unk>.
Lower the risk on.
On its debt hopefully our securities move as well and.
If they do then you could also.
Ah.
Issue, you could issue more equity and pay down debt.
If we only put $70 million in Richmond will probably even have leftover cash to.
Pay down some debt.
As well so.
So that's how we kind of look at it right and if we don't win Richmond will now.
We'll pay down debt and Delever yeah.
Even more so than we might otherwise.
I think the yes.
Yes, I think the theories.
Work hand in hand, it wouldn't work hand in hand, if we Didnt think Richmond was a significant opportunity.
But but but we do.
Got it and then I think like this.
<unk> put option that become exercisable at day.
'twenty two 'twenty three edits Inc.
I mean, I think if you sort of indicated that you plan to.
Which one.
On the MGM put option.
Yes, yes, it's exercisable every year. It's just this year, it's exercisable at its highest.
At its maximum value, which is seven times whatever their EBITDA is but it's exercisable every year and yes, we always have the opportunity to put our stake in Jim and now we think Thats, probably worth you know north of $90 million and that's another way to Delever. Yeah. So the multiple is fully back to the end of this year at <unk> seven.
Times EBITDA with no balance sheet adjustments.
And then it's on annual Evergreen so we get the chance to do that.
Every Q1 from from here on out.
Is there a plan to monetize the share or what are you thinking.
We haven't talked about it but I wouldn't monetize this year because they are probably still dealing with.
Theyre not theyre not even up at 100% capacity. So there is still dealing with the.
COVID-19 effects on their on their business.
I don't think Theyre EBITDA would get back to $200 million this year I could be wrong.
But yeah, I wouldn't monetize it to share plus it's stable.
And so I think you monetize it when you need the cash for something whether that delevering.
Or.
Some other value creating transaction, but.
Okay, great. Thank you very much thank you.
Operator, we've got time for one last question.
And actually there are no further questions in queue at this time I'm sorry, Mr. Lehman just queued up my mum. It please.
Oh, sorry, I'll just stop.
A quick one.
We said one last one.
Yes.
Otherwise they won't do it.
Can you talk a little bit about the sports betting potential revenue opportunity and whether or not you see that is impacted at all by your success or lack of with Richmond.
Say that again, we look at all the one.
Okay.
Sports betting advertising opportunity I mean, I'm wondering generally about your AD category, even though one doing strong.
We have not seen the level of sports betting advertising activity as other companies have because we don't have now and we've got one sports station yeah and.
And we.
We had one in Washington, but we traded that as part of the inner gum swap we picked up a sports station in Charlotte actually I was not sure we had one and.
Enrichment, but we also just.
Did something down there.
We don't run that any longer one one of the competitors does.
So.
So we we havent been benefiting from that.
I do think that if.
If we're able to win win Richmond will have a very different view on sports betting and how the company plays in it.
We will pick up a one.
Sports betting license, along with the bricks and mortar line.
License. So the company probably will start to think about.
On our brand and how it participates in sports betting not just from an advertising standpoint, but from an operator standpoint, yeah on who can we partner with and now et cetera et cetera.
Perfect.
Thank you.
Operator, thank you very much and everybody. Thank you we will talk to you next quarter as always feel free to reach out to us directly.
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