Q4 2022 Urban One Inc Earnings Call

July 7, 2023

Ladies and gentlemen, thank you for standing by and welcome to Urban One's 2022 year-end earnings conference call.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

During this conference call, Urban One will be sharing with you certain projections and other forward-looking statements regarding future events or its future performance. Urban One cautions you that certain factors, including risks and uncertainties referred to in the 10Ks, 10Qs, and other reports it periodically files with the Securities and Exchange Commission.

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 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.urban1.com.

A replay of the conference call will be available from 12pm Eastern Time, 7-7-2023 until 11.59pm, 7-14-2023.

Callers may access the replay by calling 866-207-1041 within the U.S.

International callers may dial direct 402-970-0847.

The replay access code is 801-9907.

Access to live audio and a replay of the conference call will be available on Urban One's corporate website at www.urbanone.com.

The replay will be made available on the website for 7 days after the call. No other recordings or copies of this call are authorized or may be relied upon.

I will now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban who is joined by Peter D. Thompson, Chief Financial Officer.

Thank you very much operator and we also have Jody Drewer the Chief Financial Office of the TV1 with us and Chris Simpson who is the General Counsel of the company who is also joining us.

Finally, our year-end earnings report in the middle of the year. Thank you everyone for bearing with us as we got through an unexpected lengthy audit. We're happy to report that the year ended as expected.

A couple things just to give you highlights before I turn it over to Peter. You probably also know and seen in the press release, we monetized our MGM National Harbor investment and we did that in April . It ended up being a fantastic investment for us. We invested 40 million dollars.

of cash in the project. We ended up pulling that $40 million out in dividends over the length of time that we held it. And then our equity investment in the end is worth $137 million. So it's probably roughly a four and a half times.

Yeah, our money investment. Why did we do it? We did it because we thought that their 2022 performance was number one, a high watermark for the property. That was not expected. It was well ahead where we had expected it to be.

sure, you know, but that was our calculus. But the third thing is that, you know, on that $137 million.

we were earning approximately $8.8 million of dividends, which is about a 6.4% return on the value of it. Since the tremendous return on $40 million, but on $137 million, it's just a 6.4% return. And we thought that we could do better than 6.4%.

is we're not giving up a ton of current income right now holding that in treasuries and we're sitting on a bunch of cash right now as we live through an uncertain economic time hoping that you know the uncertainty actually moderates feels like you know maybe there's not going to be a recession but who knows

And we got a number of things coming up where we may need to deploy that cash. You know, whether it's debt continued debt buybacks, which we haven't been doing, particularly since we hadn't filed our financial statements, but I haven't checked in a minute. The last I checked our bonds are yielding like 10 percent north of 10.

referendum in Richmond for our casino project with our new partner Churchill Downs. We believe that there is an exceptionally high likelihood that we will be running that referendum. We've got some assurances and public assurances by.

the Virginia Senate budget negotiators that a Richmond referendum, you know, or this casino referendum being blocked to potentially move to Petersburg is a non-negotiable item for them that was recently in the news press in Virginia.

So we've got some real support there. City Council has voted it out. We're at the Virginia Lottery now for approval and then we'll go to the Circuit Court to get the referendum scheduled. Early vote would start September 22nd of 2023, Friday September 22nd on Election Day.

would be November 7th. So if we're successful with the referendum, we'll obviously need cash in order to fund that. Although the partnership in Richmond is different now, we are not the sole equity provider at this point in time. It's a 50-50 equity investment with us and Churchill Downs. They are great.

well capitalized company, the CEO is very engaged in this. We couldn't be luckier to have them as a partner. We also recently, I don't wanna say recently, a few months ago announced the acquisition of four Houston radio stations from Cox.

media group, you know, we expect for 27 and a half million dollars. We have also signed agreements to spin off two stations that we can't own because we'll be over the limit for a total of 10 and a half million dollars. So we're going to be into that acquisition for about 17 million dollars and some change.

you know, we expect that that cash flow from that acquisition will equate to at least five million dollars, you know, as we as we step into it. So a very attractive multiple, you know, that we were able to acquire that once you factor in the.

the amount of money that we got for the spends. We also think that there are a number of other potential radio acquisitions that are out there that, you know, if you, right now radio, the radio companies are trading kind of like in the fives in terms of an EBITDA multiple.

And so if you were to buy radio at a five and a half times multiple, you're talking about close to a 20% return, which is also better than our 6.4% that we were getting on the MGM investment. So there are a number of things that we think that we can do going forward that will

and investing in the Richmond casino is another.

There is a process going on that you guys have probably seen in the business press where Paramount is looking to sell the BET Media Group, which includes BET and VH1. Our name is never mentioned, but we are involved in that process with a number of other parties.

However, we remain disciplined from an acquisition standpoint. We're fully aware of the challenges that the pay TV ecosystem has. One of the reasons why we think that.

finding scale in this business could make a lot of sense as well. So we're doing our work and staying engaged on that. 2023 guidance. We are expecting 2023 EBITDA to come in.

you know, thinking leverage will continue to be below four times, you know, call it three seven-ish, you know, by the end of the year. And given the macroeconomic backdrop, I think we'd all feel pretty good about that as an outcome should that come to pass. So with that, I am going to turn it over to

our stake in that as an equity investment at that cost. However, once the put option that we had became exercisable, we should have reclassified the investment as a debt security available for sale. So really it's a technical change in how we should have carried it on the balance sheet. So once you end up in that.

that bucket that is a debt security available for sale, you then revalue it every quarter. And we didn't do that. And obviously, we knew what it was worth. And I think we've done a decent job of telling our investors what it's worth. But when, you know, the put crystallized that. So the end state value of $136.8 million was known.

But we have to go and hire an outside valuation specialist to appraise the asset for each quarter of 2021 and 2022 using multiple methodologies.

valuation specialists to appraise the asset for each quarter of 2021 and 2022 using multiple methodologies which took some time to work through.

around journal entries and other things as a result of a lack of reliance on internal controls that in prior years had been deemed sufficient but weren't this year. And all of that meant that it took many additional weeks of work to get the accounts signed off.

Which has been frustrating both for the company and the investors and I thank you all for your patience and support I've been speaking to As many as many of the investors as I can just to try and keep people appraisal what's going on and we appreciate you Being patient and bearing with us while we work through Turn into the numbers themselves

Consolidated adjusted EBITDA was 31.7 million dollars for the quarter, which was down 2.3% from last year. Full year consolidated adjusted EBITDA was 165.6 million dollars in line with the company's guidance and up 10.2% year over year.

Fourth quarter consolidated net revenue was at 1.6% year over year. Indianapolis radio acquisition added approximately $4.2 million and there was the absence of the beach cruise event which generated $7 million last year in the fourth quarter in 2021. Normalizing for those two things net revenue was at 1.9%

And on a same station basis, our local ad sales were on par with the market at minus 1%. And national ad sales outperformed. We were up 41.9% against the market that was up 17.4%, helped by heavy political spending and also our corporate sales effort.

We recorded $8.1 million in net political ad revenue, of which $7.2 million was radio, compared to $1.5 million in prior year. Government and public was our biggest radio advertising category for the quarter, 97.6%. Healthcare was up to 3.6%. All total was on.

86.3%, retail was up 12.7%, entertainment was up 8.9%. Services, financial, telecoms, food and beverage, and transportation were down in the quarter.

Q1 of 2023, radio revenue excluding digital was up 2% on the same station basis, or up 3.1% same station excluding political. Q2 is currently pacing down 5% excluding digital on the same station basis.

of them. Just at Ibadar with $3.1 million down from $8 million in prior year.

a full year of just to beat the tower increased by 13.3% to $15. Net revenues for our digital segment increased by 24.1% in fourth quarter to $24.2 million. The direct sales team had an exceptionally strong finish to the year, driven by continued demand to reach black audiences at scale.

$8 million quarter of 12% year over year. We recognize approximately $49.7 million of revenue for my cable television, second during the quarter, decrease of 8.2%. Cable TV advertising revenue is down 8.4% with a favorable rate and volume impact of $900,000.

increase $1.2 million being offset by $2.4 million of net share, $650,000 of increase in interest support. Cable subscribers for TV1 as measured by Nielsen finished $246.5 million.

That's only $3.6 million at the end of Q3. And Clio TV had over 1.8 million more than us. We're having trouble hearing us. Oh, yeah. Sorry, I just heard that the sound quality is poor. We turn the air conditioning off here and move the microphones around. Hopefully that will be better. We recorded approximately $2.6 million in investment income from our...

in Q4 of 2021. Event expenses decreased by $6.9 million due to the absence of the Reach Cruise event which returned in May of this year.

Cable TV content amortization decreased by $5.3 million. And the non-cash charge for the CEO's employment award decreased by $3.5 million.

Employee compensation increased by approximately $5.6 million, including incentive compensation across the organization for superior annual performance against plan. Revenue variable expenses increased by $4 million, travel, entertainment and office expenses increased by $2.2 million.

and outside services including contract talent and consulting fees increased by $2.5 million. About $3.3 million of those increased expenses were in relation to the Indianapolis radio acquisition as included in those totals. The operating expenses were up by $4.8 million.

digital segment were up 36.9%, driven predominantly by variable expenses related to traffic acquisition costs which were up $2.3 million, and ad production and marketing which was up $2 million, and content and streaming music royalties which was up by $1.7 million.

Cable TV expenses were down $4.9 million with content amortization expense down by $5.3 million due to some write downs in prior years that didn't recur. Operating expenses in the corporate and elimination segment were down by 4.7%. It was a favorable variance of $3.5 million for the non-cash TV1 Employment Award chart.

$47.6 million, an increase of 7.9%.

During the quarter, the company repurchased $25 million of its 2028 notes at an average price of approximately 86.4%, resulting in a net gain on retirement.

of approximately $3 million. An additional $25 million of the 2028 notes was repurchased in the first quarter of 2023 at an average price of approximately 89.1%, bringing the total gross debt.

balance down to $725 million today, down from $825 million at the start of 2022. So we've now paid down $100 million.

of the debt. Interest expense decreased to approximately $14.6 million for the fourth quarter, down 8% from last year due to the debt paydowns. Company-made cash interest payments of approximately $625,000 in the quarter, including the accrued interest on the retired notes.

And the semiannual interest payment was paid on February 1, 2023. A non-cash impairment of $10.3 million was recorded for our radio market broadcasting licenses in Cincinnati, Dallas, Houston and Raleigh and also for our Philadelphia market goodwill balance.

Provision for income taxes was approximately $3.9 million for the quarter. The company paid cash taxes in the amount of approximately $1.1 million.

Net income is approximately $856,000 or 2 cents a share compared to $5.3 million or 10 cents a share for the quarter of 2021. Capital expenditures were approximately $1.5 million. The company repurchased 13,577 shares of Class D common stock in the amount of $57,000.

As of December 31st, 2022, total gross debt was $750 million. The ending unrestricted cash balance was $94.9 million.

resulting in net debt of approximately $655.1 million, which compared to $165.6 million of LTM reported adjusted per").

pro forma for the Indianapolis acquisition, token net leverage was 3.91 times.

On March 8, 2023, the company issued a put notice with respect to 100% of its interest in the MGM National Harbor LLC. On April 21, 2023, we closed on the sale of the put interest. The company received approximately $136.8 million of proceeds at the time of settlement. During the quarter under March 31, 2023, the company also received $8.8 million.

representing the company's annual distribution from MGM National Harbor with respect to fiscal year 22.

Proforma for the MGM put, total net leverage was 3.21 times, including $145.5 million of cash receipts from MGM and excluding the LTM, just to be the top for the MGM stake of $8.8 million.

On April 11th, 2023, the company announced it had signed an asset purchase agreement with COPS Media to purchase a Houston radio cluster. And one will divest two stations to comply with FCC ownership regulations. Transactions subject to FCC approval.

and is anticipated to close either late in the second quarter or early in the third quarter of 23. And until that time we and CMG will continue to operate our respective stations.

And then finally, with the MGM proceeds, our current cash balance today is approximately $235 million. And with that...

I will hand back to Alfred. Thank you operator. I would like to open the line up for Q&A.

Absolutely. Ladies and gentlemen, if you do have any questions, please press 1, then 0 on your telephone keypad. You'll hear an indication you've been placed into cue, and you may remove yourself from cue by repeating the 1, then 0 command.

If you are using a speakerphone, we ask that you please pick up your handset before pressing any buttons. Again, for questions, press 1 then 0 at this time. We will first go to the line of Aaron Watts with Deutsche Bank. One moment while we open your line.

You may go ahead. Hi, guys. Thanks for posting the call. Good to hear from you.

I've got a couple. Peter, sorry to ask you to do this, at least for me. Your line was a little choppy at the beginning of your comments. Could you repeat what, on the radio side, what your kind of same Station Corps advertising?

performance was in 4Q, 1Q, and then also what you said 2Q was pacing at.

Yeah, so let me go back.

Q1 of 23, excluding digital, which is what we report, the radio segment was up 2% on the same station basis.

Excluding political, it was up 3.1%. As reported.

it's probably going to look like it was up about 11% the first quarter because of the Indianapolis acquisition.

about 11% the first quarter because of the Indianapolis acquisition.

The second quarter is pacing down 5% at the moment on the same station basis.

But obviously political, there was a fair amount of political last year, a couple of million dollars. So excluding that same station, we're pacing down 0.9%.

the second quarter on radio. As reported, because we're layering in the on top of that, we're probably looking more like we're going to be up probably low to mid single digits.

Okay, got it. Thank you for repeating that. And as you – Hey, sorry, and then on the radio segment on a same station basis, 14.1% up for fourth quarter. Thank you for repeating that.

And as you sit today, guys, how is the environment feeling to you as you enter – you're entering July here relative to what you felt in the first half of the year? Any –

Any rays of light coming through in terms of advertising? Willing advertiser willingness to spend whether it's on the local or national level or it feels relatively steady with what you had been feeling In the kind of April May June time frame. Yeah. Look there's definitely an advertising recession going on I mean I

I was at the Cannes Lion advertising conference, you know, a few weeks ago. And you hear it from, you know, the big holding companies. And it's particularly taken root in national, you know, so you're seeing that come through with.P

People who have national ad platforms, local feel stronger.

I mean, you watch the news CNBC that economic data is still really strong. But just because advertisers are pulling back, not sure they're pulling back because they're worried about something that's coming or exactly why, but there's definitely an ad recession going on.

We're still feeling a level of strength due to interest in diverse media. We're definitely still feeling that. It doesn't mean that we're not seeing less demand, but...

we're doing better than our non diverse owned peers. One of the reasons why we also felt it would be good to be sitting on a lot of cash at this point in time, don't know exactly what's gonna happen. But I feel if there's a recession, it'll be a mild recession. I think we're-

It was 13 last year. That was the prior presidential cycle. So it's only about 30. Yeah, yeah. Still significant. Significant, excuse me. And, um, but I, you know, that's what we're preparing to be okay, regardless of what the economy does, but I would

say I feel better about where things are going today than I did in January .

Okay, that's helpful context. Thank you for that. Okay.

Second question, and I'm sorry if you already disclosed this, but with the stations you're picking up from TOCS – 2014 May 19, 2016

Are you able to share what the multiple you paid was on that purchase?

No, I mean we paid, you know, we paid $27.5 million. I think I just said that we think with ad backs and things of that nature that we'll have at least $5 million of EBITDA. Yeah. Yeah. I mean, I don't know if you called up at the...

Yeah, yeah, yeah. So, so, so, so, so, so let's say that they're even dollars less than $5 million, we think would add that we'll have at least $5 million. And when I say add that, you know, duplicate expense stuff that we can take out, you know, day one, and it's not a lot of it, right?

You know, we're not changing formats. But what was a surprise for us, to be honest with you, because we modeled something else, you know, was we were able to, you know, get out of the two radio stations, you know, for

you know, an acceptable price, right? You know, and we didn't know what the marketplace was going to be like. Yeah, and we were able to find two buyers and got what we thought were, you know, not amazing prices, probably low water marks for stations in Houston, but given the M&A activity in

radio period is pretty tepid. You know, we felt pretty good about the sales there. And so we're going to be in to Houston for about $17 million.

Okay thank you for that and one last question you've mentioned your liquidity a couple times and it is a nice cushion to have given the uncertain economic backdrop. As you move forward here you've bought back bonds but you also have this potential casino project how should we think about the uses of those of that cash whether it's

you know, it's not certain exactly what the equity check, you know, will be, it's 50-50 right now. But, you know, let's assume that it's $80 million, you know, for each us in Churchill and that's assuming you put some debt on it.

We may not go that route, depending on how expensive project financing is. So we may need to write a slightly bigger check. But…

assume that that's going to be something that we will spend cash on starting in Q4, beginning with closing on the land acquisition. And then I think we sit back and, you know, just look at, you know, stuff opportunistic. I mean, the good thing is that, you know, our bonds trading at a discount.

call it 90 or in some change or whatever, you know, 10 and a half percent, right? So that's always, you know, that's a good use of capital at that point in time. And if we can make, you know, some radio acquisitions that are, you know, are better return than that, then we should look hard at that. But

paying down debt. I mean, we're also starting to get into a strike zone.

of leverage into threes, you get leverage, you know, three and a half, you know, low threes, you're starting to get in the strike zone of what other kind of capital, you know, returns of capital do you look at. But we've got a, we've got some significant projects on the plate right now that we need to see how they're going to turn.

Thank you for holding the call and taking questions.

So, a lot of mine got answered, but I still have a couple more here. So, using your guidance, and again, thank you for providing guidance, you said that you expect to come in above where you were in fiscal year 19.

while adjusting out the roughly $8 million MGM dividend that you received. So that gets me to roughly, let's call it like just north of $130 million of EBITDA. I just want to kind of sanity check that make sure I'm doing that math right there.

No, I have 133.5 with MGM in and MGM I think was 6.6.

So I think you I think it's like high 120 120 126 127 Primm

I think it's like high 120, 126, 127. Okay, okay, 126. Yeah, yeah.

Okay, so 126, 127. And then if I subtract out, call it between 60 and 65 million of interest expense.

126, 127. And then if I subtract out, call it between 60 and 65 million of interest expense and some CapEx.

It looks like you guys on an EBITDA minus interest minus capex basis should still be comfortably free cash flow positive in fiscal year 23. Is that a safe assumption? Yeah, I've got a kind of mid-sixty.

in free cash flow. Depending on where CapEx comes out, we've got a couple of EU projects consolidating in Indianapolis and in Charlotte, but probably you don't get to spend all of that this year. That's why mid-60s free cash flow is what we're coming for this year.

Okay perfect that's that's right around where I was getting to thank you and then the second question um so Churchill Downs thank you thank you for the clarity on you know what size the equity check might be and and a little bit about what your thought process is that could you give a couple more details on what the operations of that might look like.

So I know obviously with MGM Casino, that was very much, you guys were essentially silent partners, not like you had a hand in operating the casino. You left that to them. Is the Churchill Downs project going to be similar, or are you going to be taking a more hands-on approach with this opportunity?

They'll be the operator. We're just going to own it 50-50 with them and they'll be responsible for operating. However, they'll use their corporate expertise to work with us to build a management team locally at the property. They've got a number of partnerships with other people.

including one with Rush Gaming and Chicago and Best Planes. I think they've got one in Miami with Delaware North. I think it's Miami. So, you know, they've got good thing about them they've got experience with having

large partners, meaning, you know, not somebody who owns 7%, but somebody who owns 50% along with them. Right now, so, but we will be relying on them to be the operator. Okay, got it, got it. Okay. Thank you. And then finally, and I'm hoping you can answer this.

So obviously you just released the fiscal year 22 10k. Do you and I know this is officially the fiscal year 22 conference call. Do you know when you might release the first quarter 2310 cube? We haven't set a day. I think we'll know more next week.

Okay, great. Thank you very much for holding the call and answering the questions. Have a great day, guys.

Thank you. Our next question will come from the line of Matt Swope with Baird. Go ahead.

Good morning, guys. Peter, could you...

Could you give us a sense for out of that large cache number you mentioned, what the past hit will be around MGM and any other sort of...

unexpected or unusual uses that we should think of coming out of that cash number.

Yeah, you just went a bit out, as you said it, but I think you're asking is there any tax leakage on the MGM sale, right?

That's right, yeah. Yeah, minimal because we got enough NOLs to cover it. So it's roughly a $100 million gain. And what it'll do, it'll burn through our NOLs faster. So it'll probably accelerate this becoming a federal taxpayer from...

2027 to 2026, somewhere in that region. So the good news is we'll have the cash on the balance sheet and there'll be minimal tax leakage. And as a reminder ladies and gentlemen if you do have questions please take this opportunity now to press 1 then 0 on your telephone keypad.

We'll go next to the line of Brad Kern, a private investor. Go ahead. Hi, thanks for taking the call and appreciate all the information today. The first one is on the Richmond casino. What's the likelihood in your view of a favorable rule?

Are you doing any polling yourselves or tracking any sort of local polling that you can maybe give us some color on? And for what work are you doing to improve local sentiment for the project among likely voters conditioned on the casino?

It's a 50-50 partnership, but who's going to be controlling the decisions? Should you decide? I think it has your name on it, so who are you? Who's going to be making the decisions when you get down to the tough ones? There'll be joint decisions. If we disagree, there's a dispute resolution mechanism.

50.85 to 49.15 sentiment continues to be divided in the city. And we got to do a better job of telling voters how the money that the casino will generate is going to be spent. We didn't do that last.

I've always said that people should look at our company as, you know, as a baseline, you know, and decide whether or not they're comfortable with our existing operations and our balance sheet and look at the casino as upside, like gravy.

That is where we sit. That is helpful. Assuming that is approved, would you anticipate the payback will be on the casino for modeling purposes in terms of number of...

tables and slots and gross gaming revenue across each of those. There are some preliminary figures you can throw out.

You should assume that the gaming revenue, this is, you know, the state has its own gaming analysis for each of the proposed casino licenses. There are five different jurisdictions. The one for Richmond, Virginia is a little better than $300 million of gaming revenue. The other is the one for Richmond, Virginia is a little better than $300 million.

it could do better.

Okay, that's really helpful. And then on the radio and TV side...

Do you anticipate any potential slowdown in appetite for DEI advertising, particularly given the affirmative action ruling? What are you hearing from your advertising partners? Everybody's asking that question. I was Bryan, are we seeing countless analogies, and what's your thought of 2010 credits by

gut is that if the political climate changes Significantly now in in the country that

is that if the political climate changes significantly in the country that sort of proves that the

progressive and inclusionary politics will take a hit. However, I believe that many of the corporations that have committed to DE&I efforts. Now that he has decided to start HEPA and founder of U

believe in it and are doing it because it's good business in today's world. I mean, one of the things that you cannot run from is the changing face of America. You know, that's just what's happening. Black and brown and Asian populations are growing.

and different types of consumption for media and how you communicate with them and talk to them etc. They will become more and more of a force from a consumer standpoint and it's no different than any other customer you got to cater to that customer. And so and that's the conversation that I'm hearing among advertisers now.

or fear of some sort of government regulation or retribution.

causes good corporate citizenship.

But that's my general view. But you never know. I mean, forgot who it was, but Donald Trump on his way out the door pardoned, I forgot a number of rappers or whatever. I forgot who it was. Who would have thought, right?

Was it Lil Wayne? I don't remember what it was. So maybe if he wins the presidency, maybe he all of a sudden decides it's a good business as well. You never know. But that's my view. I mean...

Look, the progressive wing of the Democratic Party right now has got a lot of people talking about fairness and equity and justice. And the traditional faction of the Democratic Party is, yeah, those are things that we believe in too, right? And so that helps with this way.

I appreciate that thoughtful response. On a related note, your core audience, are you seeing the sort of existential time for that?

the radio listenership and secular pressures there.

Consumption trends or how can you just talk about consumption trends of your core audience versus competitors? Everything in traditional media is going down and seeing less consumption. The numbers are going down as well and those users are going to be distributed. How often do you look to yourself when it goes up?

And so, but radio, radio feels safer and better and less.

and in less of a free fall than the pay TV ecosystem does. But I think what we're also seeing is with radio, we're dealing with less rating points right now. But if you looked at our revenue, Peter, you did that analysis. Our revenue is really kind of on par.

fairly significantly post-pandemic as you might imagine given different working patterns and commuting patterns. So I'm gonna give some credit to one of the uh you know

I had a conversation with him in Cannes at this advertising festival, and we were talking about the radio business. And he hammers the point that radio still has 90% reach. And he hammers the point that radio still has 90% reach.

even though the numbers may be small, there's a 90% reach in America, and reach in television continues to decline. Historically, advertisers have paid more for less in television. And I think Peter's analysis would say that we're doing pretty good on pricing versus where audience.

has done. So that's the world we're living in. And I don't know what the answer is. Nobody except Netflix is making money and streaming right now. Maybe Discovery turns the corner here. I think they were supposed to turn the corner this quarter, next quarter.

but people are starting to dial back on their investments in streaming. Radio is kind of hanging in there, you know, but there was a time when I was a lot more worried about radio and I was really good that we were in the cable television business.

Today I feel really good that we're diversified among all of these things and radio feels like it's hanging in there. And we're making our cable TV business hang in there right now with the way that we're managing it. But I do feel like we need to do something strategic there. Whether it's... It's Super

picking up more distribution, programming investments, some sort of consolidation opportunity.

Because that landscape is changing and so we got to figure that. But the good news is we're at a leverage level now where we're going to have time to do that. We're going to have time to make those investments. We're going to have time, you know, we're not going to be under any pressure, you know, that will make us have to operate in a non.

effective, non-strategic way. I think that we're going to have the runway to make the turn. Sure. On the balance sheet, I mean, we've talked about the... You talked about the economics of the casino. In the world where in the 50-50 shot where it doesn't... I mentally...

You mentioned on the call that it's leveraged in the low 3s that there's other forms of capital return you might be looking at. So how are you thinking about that versus potential strategic Pick up that point.

strategic actions on the radio and TV set or other industries, whether it's gaming or otherwise. Yeah, look, we match. I think for us it's...

Strategy is often very overused in terms of a rationale as to why you do something. Something, you know, strategy...

The strategy has to be accountable to what your current return options are. I don't think you make a strategic decision and not match that up against what's the best use of capital. So I would not, if we can buy our bonds and retire our debt.

an outside return, right? You know, it should get you, it should have you create value. And the value that it creates needs to be better than what else you can do with the capital. That's the lens under which we look at stuff. And it's worked for us.

Does that make sense? I guess I'm just wondering at some point is there a leverage level that you, I know the stock isn't terribly liquid, is there a leverage level that you start to think about?

You shift from debt reduction to whether it's share buybacks or whatever it is to return that cash. We were buying back shares last year. We bought back $25 million worth of shares at $5.30.

and I go up, we're sitting down, you know, but it's kind of, you know. I think given the macro that we're just, you know, we got some strategic options ahead of us, that'll be what, that'll be on the plate at some point, but it depends on how revenue goes, how we feel about it.

We're not going to buy back our stock and earn a 5% return over paying down our debt and earn 10.5% return.

Okay, thank you. And last question for me is just asking, when you mentioned the 3.7 times leverage by end of year, is that, I assume that's next. We set 3.7. Okay.

Right, 3.7, that's on a net basis? Yeah. And that's, is that pro forma for any other uses of cash or what is inclusive, what is, what are the underlying assumptions in the 3.7? It assumes that we win the Richmond referendum and we buy the land that Alfred referred to in 4th quarter, so that cash goes out the door.

and it assumes that we close on the acquisition in Houston. So that net $17 million goes out the door as well, but we pro forma and call it $5 million of...

I've either dialed from that transaction. No additional debt buybacks in that number? No. Modeled into that number? Ok.

That's all my questions. I appreciate it. We'll go next to the line of Matthew Sanchafer with Messer Oh. Go ahead. Okay.

Hi guys, thank you for sneaking me in here near the end. Just a couple of housekeeping questions. What are you guys planning to spend on content this year? That number was obviously pretty high in 2022. Yeah, it was high in 2022. I was just looking, I think mid-50s, Jody's here with us. She can speak to it if you'd like, but I think we're looking at cash.

Okay, great. I think I can normalize is better than last year from a cash standpoint

Okay, great. Thank you. Were there any unusual cash expenses in the radio or digital segments in the fourth quarter specifically? Those margins took a little bit more of a hit than I might have been expecting. It's starting to sound a little different here.

I'm sorry if we went through that during the first part of the call when the AC was on, but I missed it. Yeah, there were a few things, Matt. There was some noise in the number. So obviously we had the high watermark year, so bonuses were higher than they otherwise normally would be. So there was some of that. In margins, in digital.

We talked a little bit about the fact that we're impacted by high traffic acquisition costs, that was $2.3 million. Also higher content costs at digital and ad production costs. So those margins compressed.

Other than that, there wasn't anything particularly material.

Okay great. And then that mid 60s free cash flow number you mentioned, does that include the MGM dividend this year or are you rolling that up into the sale price? That is in the sale price. So that mid 60s. Hang on a second. Good point. Let me just double check before I speak on that.

And then the that mid 60s free cash flow number you mentioned does that include the MGM dividend this year or you roll them that up into the the sale price That is that is in this sale price, so that's not so that mid 60s Second good point. Let me just double check before I speak on that shouldn't have

Yeah, we have actually no, sorry, that does include it. My guys rolled up into the 8.7 of receipts. Is in the mid 60s.

We have actually no, sorry, that does include it. My guys rolled up into the 8.7 of receipts. Is in the mid is in the mid sixties. Okay.

And I guess just generally on the digital side of things, you mentioned a higher traffic acquisition costs, there's some guidance for what looks like kind of persistent lower margins going forward. What do you think about that competitive landscape overall? It feels like, as you guys know, it feels like every radio station, and not just radio obviously, but every radio station company has been trying to get into that business in a significant way. What do you think is driving?

the higher traffic acquisition costs. Yeah, go ahead. Yeah, our digital business is different than everybody else's race business, digital business. You know, we, our digital business is largely as a content publisher, you know, where we sell

video ads and display advertising, probably roughly 40% of our revenue. This year will be digital video. We've got some streaming revenues. Forgot what it was. I know it's at least 5%. I don't know if this is, excuse me, at least $5 million.

I don't know if it's going to be a little higher. It's about 5.7. It's in the five. Yeah. And we've got a bit of podcast business, but the Cumulus and Odyssey models and our...

podcast driven. I heart has got their I heart media streaming platform and they've got a big podcasting business. We're much more of a publisher. You know, and then town square does digital services, right? You know, so they act as a local small digital average.

American targeted audience in the space. So we're the scale player in that space.

And I don't know what the prognest is going for. I hope it continues to remain profitable. We've got to figure out how to see if we can grow that margin. Digital publishing is a tough business. You can see from Buzzfeed and Box and a bunch of these other advice.

They're having a tough way to go. We've been doing better. We've gotta figure out how to manage through that. But it's a better business than the podcasting business.

Yeah, so, in my viewpoint. Okay. Yep.

So in my viewpoint, okay?

Great. Thank you. Thank you, Matt. We'll go next to the... Pardon me? Yeah, it's 1106. I was going to say, we've got time for one more. Can we do one more? Yeah. One more question, operator. We'll go to the line of Marlene Pereira with Bank of America. Go ahead.

Thank you for taking my call and squeezing me in. Most of them have been answered. But quick question. You had mentioned BET at the top of the call. So any other information on that or thoughts or what that could potentially look like in terms of the impact on leverage? I mean it's a competitive process. You know, we're under an NDA.

I just figured some people people ask us if we're interested in it, you know So I just figure I'd mentioned that we are in the process I couldn't yeah, we're not you know far enough along on anything at this point in time to comment and you know You know, we wouldn't be allowed to comment anyway, you know, but I just get tired of people asking me Are you guys you know looking at this?

or what you kind of see the environment to be over the next year.

You know, look, we like our leverage, you know, four below. We like it here. If we have to write a hundred plus million dollar check over the next 12 months for the casino, that could change our leverage profile.

I'm sure Peter has the numbers, but $100 million goes out the door with no cash flow coming in for, call it 24 to 30 months, is going to raise your leverage.

But I'm also assuming that we...

But I'm also assuming that we win a casino referendum that.

we're probably gonna get some credit for that in our equity value, and who knows, maybe we'll raise some more equity, don't know how we'll think about that. But I would suffice it to say we sleep good at night when our leverage is, you know.

below four, we like that. Yeah, look, it probably pops up above four in Q1, excluding the pro forma for RNGM that the cash wasn't received until Q2.

So I guess we'll get pro forma numbers in Q1. But excluding the pro forma is probably north of 4. Then it drops down, you know, hopefully mid threes and as Alfred said we hope to finish about 3.7 times this year. Then if I look at a long range plan, it's out in the low threes and eventually in the mid twos.

There's lots of comps out there. Last I looked, I thought the average radio multiple was kind of like five and a half or something like that. So again, you know.

comps out there, last I looked I thought the average radio multiple was kind of like five and a half or something like that. So again, you know, that's

That's what I think I remember saying. It's variable within that, right, depending on who you look at. Yeah. I think that was about the mean. Fair enough. Great. Well, thank you very much. Thank you. Thank you, everybody. We look forward to talking to you at a point in the near future.

Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T Event Teleconferencing. You may now disconnect.

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I I.

The F.

Ladies and gentlemen, thank you for standing by and welcome to Urban One's 2022 year-end earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. Your next potentially covered session will begin then.

from those indicated by its projections or forward-looking statements. This call will present information as of July 7, 2023. Please note that Urban 1 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 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.urban1.com. A replay of the conference call will be available from 12pm Eastern Time, 7-7-2023 until 1159pm, 7-14-2023.

Callers may access the replay by calling 866-207-1041 within the U.S. International callers may dial direct 402-970-0847. The replay access code is 801-9907.

Access to live audio and a replay of the conference call will be available on Urban One's corporate website at www.urbanone.com. The replay will be made available on the website for seven days after the call. No other recordings or copies of this call are authorized or may be relied upon. I will now turn the call over to Alfred C. Liggins.

Chief Executive Officer of Urban One, who is joined by Peter D. Thompson, Chief Financial Officer.

Thank you very much operator and we also have Jody Drewer the Chief Financial Office of the TV1 with us and Chris Simpson who is the General Counsel of the company who is also joining us.

Finally, our year-end earnings report in the middle of the year. Thank you everyone for bearing with us as we got through an unexpected lengthy audit. But we're happy to report that the year ended as expected with us right on top of our year-end guidance of $165.6 million.

monetized our MGM National Harbor investment, we did that in April . It ended up being a fantastic investment for us. We invested 40 million dollars of cash in the project. We ended up pulling that 40 million dollars out in dividends over the length of time that we held it.

won a high watermark for the property. That was not expected. It was well ahead where we had expected it to be. We also felt that given the macroeconomic environment and a number of other things, that it probably was not particularly likely that we were going to do better than that going forward. Things can happen, we don't know for sure.

6.4% return and we thought that we could do better than 6.4% investing that capital in other things. And the first place we started was, even though we're not doing better, is with US Treasuries where we're getting about 5% on that money. So the fact of the matter is we're not giving up.

a ton of current income right now holding that in treasuries. And we're sitting on a bunch of cash right now as we live through an uncertain economic time, hoping that the uncertainty actually moderates. Feels like maybe there's not going to be a recession, but who knows?

So even that, you know, is a better investment than just continuing to hold the equity and get a 6.4% return. We are in the process of gearing up to run another referendum in Richmond for our casino project with our new partner Churchill Downs. We believe that there...

is an exceptionally high likelihood that we will be running that referendum. We've got some assurances, some public assurances by the Virginia Senate budget negotiators that a Richmond referendum or this casino referendum being blocked.

to potentially move to Petersburg as a non-negotiable item for them. That was recently in the news press in Virginia. So we've got some real support there. City Council has voted it out. We're at the Virginia Lottery now for approval and then we'll go to the circuit court to get the referendum scheduled.

is different now. We are not the sole equity provider at this point in time. It's a 50-50 equity investment with us and Churchill Downs. They're a great, well-capitalized company. The CEO is very engaged in this. We couldn't be luckier to have them as a partner. We also recently, I don't wanna say recently, a few months ago, announced the acquisition of the CEO .

that acquisition for about $17 million and some change. We expect that that cash flow from that acquisition will equate to at least $5 million as we step into it. So a very attractive multiple that we were able to acquire that once you factor in the...

the amount of money that we got for the spends. We also think that there are a number of other potential radio acquisitions that are out there. Right now radio, the radio companies are trading kind of like in the fives in terms of an EBITDA multiple. And so if you were to buy radio.

in a five and a half times multiple, you're talking about close to a 20% return, which is also better than our 6.4% that we were getting on the MGM investment. So there are a number of things that we think that we can do going forward that will ultimately net us a better return. So whether it's paying down debt at 10%, whether it's buying radio in the fives, you know,

Our name is not never mentioned, but we are involved in that process. You know, with a number of other parties still doing our diligence on it. Don't know where we land, but we're engaged. We think that we have a lot of work to do.

exceptionally complementary assets with the TV one and Clio assets that could potentially create a lot of value. However, we remain disciplined from an acquisition standpoint, we're fully aware of the challenges that the pay TV ecosystem has. One of the reasons why we think that

finding scale in this business could make a lot of sense as well. So we're doing our work and staying engaged on that. 2023 guidance. We are expecting 2023 EBITDA to come in better than our...

seven-ish by the end of the year. And given the macroeconomic backdrop, I think we'd all feel pretty good about that as an outcome should that come to pass. So with that, I am going to turn it over to Peter Thompson to go more specifically into the numbers.

Thank you, Alfred. Before we enter the numbers, let me talk a little bit about the delayed filing and the MGM restatement. Since the inception of the MGM deal, we've been carrying our stake in that as an equity investment at that cost. However, once the put option that we had became exercisable, we were able to get the

We should have reclassified the investment as a debt security available to sale. So really it's a technical change in how we should have carried it on the balance sheet. And once you end up in that bucket that is a debt security available for sale, you then revalue it every quarter. And we didn't do that. And obviously we knew what it was worth.

And I think we've done a decent job of telling our investors what it's worth, but when, you know, the put crystallized that. So the end state value of $136.8 million was known, but we have to go on high on outside valuation specialist to appraise the asset for each quarter of 2021 and 2022 using multiple methodologies.

I think we've done a decent job of telling our investors what it's worth, but when the put crystallized that. So the end state value of $136.8 million was known, but we have to go and hire an outside valuation specialist to appraise the asset for each quarter of 2021 and 2022 using multiple methodologies, which took some time to work through.

Separate from this, but also contributing to the delay in filing, our auditors required additional documentation around the company's ASC 606 revenue recognition policies. And that required us to bring in a consultancy firm to write a bunch of technical accounting memoranda. We, you know, we're not a big shop, we didn't have the resource to do that internally, and so we had to go and find someone to write those technical accounting memos for us. And then finally,

there was significantly increased substantive audit testing around journal entries and other things as a result of a lack of reliance on internal controls that in prior years had been deemed sufficient but weren't this year. And all of that meant that it took many additional weeks of work to get the accounts signed off, which had been frustrating both for the company and the investors. And I thank you all for your patience and support. I've been speaking to.

as many of the investors as they can just to try and keep people in place of what's going on and we appreciate you being patient and bearing with us while we work through all that. Turning to the numbers themselves, consolidated adjusted EBITDA was $31.7 million for the quarter which was down 2.3% from last year. Full year consolidated adjusted EBITDA was $165.6 million in line with the company's guidance and up 10.2% year.

1.4% excluding $6.6 million of incremental political advertising. Net revenue for the radio segment increased 23.8% year-over-year and by 14.1% on a same station basis. According to Miller Kaplan and on a same station basis our local ad sales

were on par with the market at minus 1%. And national ad sales outperformed, we were up 41.9% against the market that was up 17.4%, helped by heavy political spending and also our corporate sales effort. We recorded $8.1 million in that political ad revenue.

Auto was up 86.3%, retail was up 12.7%, entertainment was up 8.9%. Services, financial, telecoms, food and beverage, travel and transportation all down in the quarter.

Q1 of 2023, radio revenue excluding digital, was up 2% on the same station basis, or up 3.1% on the same station excluding political. Q2 is currently pacing down 5% excluding digital on a same station basis. We're down 0.9% excluding political. So we're holding well on a same station basis, like political.

Net revenues for our digital segment increased by 24.1% in fourth quarters at $24.2 million. The direct sales team had an exceptionally strong finish to the year, driven by continued demand to reach black audiences at scale and increased midterm political revenue. Just leave it there, it was $1.9 million from the quarter.

Approximately forty nine point seven million dollars of revenue for my cable television seven during the quarter decrease of eight point three percent Cable TV advertising revenue is down eight point four percent with a favorable rate volume impact of Nine hundred thousand dollars offset by unfavorable time invariance of a million seven dollars

$650,000 of increase Cable subscribers for TV one as much by milsing finish For $6.5 million in the q3

And Clio TV have over 1.8 million viewers themselves. We're having trouble hearing us. Oh, okay. Sorry, I just heard that the sound quality is poor. We turn the air conditioning off here and move the microphones around. Hopefully that will be better. We recorded approximately $2.6 million in investment income from our stake in the MGM.

$105.6 million in Q4 2021. Event expenses decreased by $6.9 million due to the absence of the Reach Cruise event, which returned in May of this year.

Cable TV content amortization decreased by $5.3 million. And the non-cash charge for the CEO's employment award decreased by $3.5 million.

Radio operating expenses were up by $4.8 million. The Indianapolis cluster added just over $3 million of that increase. Expenses related to revenue increases such as sales commissions and bonuses drove the rest of the increase. Reach operating expenses were flat except for the cruise event. News almost 1.3% of

36.9%, driven predominantly by variable expenses related to traffic acquisition costs, which were up $2.3 million, and ad production and marketing, which was up $2 million, and content and streaming music royalties, which was up by $1.7 million.

Cable TV expenses were down $4.9 million with content amortization expense down by $5.3 million due to some write downs in prior years that didn't recur.

Operating expenses in the corporate and elimination segment were down by 4.7%. It was a favorable variance of $3.5 million for a non-cash TV1 employment award charge, which was offset by increases in employee compensation, including annual performance bonuses, outside legal fees, third-party software license fees, T and E.

recruiting and marketing. For the fourth quarter, consolidated broadcast and digital operating income was approximately $47.6 million, an increase of 7.9%. During the quarter, the company repurchased $25 million of its 2028 notes at an average price of approximately 86.4%.

resulting in a net gain on retirement of approximately $3 million. An additional $25 million of the 2028 notes was repurchased in the first quarter of 2023 at an average price of approximately 89.1%, bringing the total gross debt.

balance down to $725 million today, down from $825 million at the start of 2022. So we've now paid down $100 million of the debt. Interest expense decreased to approximately $14.6 million for the fourth quarter, down 8% from last year due to the debt paydowns.

The company made cash interest payments of approximately $625,000 in the quarter, including the accrued interest on the retired notes. The semiannual interest payment was paid on February 1, 2023. A non-cash impairment of $10.3 million was recorded for our radio market broadcasting then licensed to case on.

As of December 31st, 2022, total gross debt was $750 million. The ending unrestricted cash balance was $94.9 million.

resulting in net debt of approximately $655.1 million, which compared to $165.6 million of LTM reported adjusted EBITDA, gives a total net leverage ratio of 3.96 times. Pro forma for the Indianapolis acquisition, the total net leverage was 3.91 times.

During the quarter under March 31, 2023, the company also received $8.8 million, representing the company's annual distribution from MGM National Harbor with respect to fiscal year 22. Pro forma for the MGM put, total net leverage was 3.21 times, including $145.5 million of cash receipts from MGM and excluding the LTM, just to be the D'Ar for the MGM stake of $8.8 million.

And until that time, we and CMG will continue to operate our respective stations.

And then finally, with the MGM proceeds, our current cash balance today is approximately $235 million. And with that, I'll stop there.

I will hand it back to Alfred. Great, thank you. Operator, I'd like to open the line up for Q&A, please. Absolutely. Ladies and gentlemen, if you do have any questions, please press 1, then 0 on your telephone keypad. You'll hear an indication you've been placed into Q, and you may remove yourself from Q by repeating the 1, then 0 command.

You may go ahead. Hi, guys. Thanks for posting the call. Good to hear from you. I've got a couple. Peter, sorry to ask you to do this. At least for me, your line was a little choppy at the beginning of your comments. Could you repeat what, on the radio side, what your kind of same Station Corps advertising took?

performance was in 4Q, 1Q, and then also what you said 2Q was pacing at? Yes, so let me go back. Q1 of 23, excluding digital, which is what we were told, the radio segment, was up 2% on the same station basis. Excluding political, it was up 3.1%.

As reported, it's probably going to look like it was up about 11% the first quarter because of the Indianapolis acquisition. Second quarter... For anyone who has been everywhere in the interim, I do not have any major experience withMayor

is pacing down 5% at the moment on the same station basis. But obviously political, there was a fair amount of political last year, a couple of million dollars. So excluding that same station, we're pacing down 0.9% for second quarter on radio. List of media has been reported

because we're layering in the on top of that. It's probably looking more like we're gonna be up probably low to mid single digits. Okay, got it. Thank you for repeating that. Hey, sorry, and then on the radio segment on a same station basis, 14.1% up for fourth quarter.

Great. And as you sit today, guys, like.

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