Q2 2023 Urban One Inc Earnings Call
Speaker 1: to hold.
Okay.
[music].
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Okay.
Ladies and gentlemen, thank you for standing by and welcome to urban one's first half 2023 conference call. During this conference call urban one will be sharing with you certain projections or other forward looking statements regarding future events or its future performance urban one cautions you that certain factors, including risks and uncertainties refer.
Two in the 10, Ks 10, Qs and other reports it periodically files with Securities and Exchange Commission could cause the company's actual results to differ materially from those indicated by its projections or forward looking statements.
This call will present information as of December 7th 2023. Please note that urban one disclaims any duty to update any forward looking statements made in the presentation.
In this call urban one may also discuss some non-GAAP financial measures in talking about its performance. These measures will be 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 dot urban one dot com.
A replay of the conference call will be available from 12 o'clock noon today running through midnight December 14th callers may access the replay by dialing 18662071041 International Dialers may call for zero to 90 7008.
Four seven the replay access code is 3718185 access to live audio and a replay of the conference call will also be available on urban one's corporate website at www Dot urban one dotcom.
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 maybe relied upon.
I'll 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 welcome everyone to our first half conference call.
For 2023 with me also in addition to Peter Thompson as Kris Simpson, who is our general counsel and Jody drew or who is our chief financial officer at TV one.
Yeah.
Our earnings got.
The Q1 and Q2.
Commentary.
Radio in the first half of the year.
Was what was decent and is showing softness in the second half.
Of the year.
<unk>.
Cable TV business struggled in the first half of the year due to ratings and churn in 80 new.
Q1 in particular, however that has actually stabilized going into.
The back half of the year, so they flip flop.
Our digital business is actually up.
Moving along as planned and is surprising to the upside.
In Q4, and with all of that we are comfortable continuing to reaffirm our full year EBITDA guidance of the range of $1 $25 million to $128 million of EBITDA.
This is also.
The first call we've had with our.
Our.
Investment in GM being fully monetize and it's showing in our cash balance and we have.
Then to one large investor conference and gotten a lot of questions about what are our plans for our our cash now that our Richmond referendum for.
The casino investment.
Failed to pass for a second time.
And so we're thinking through all of those things.
Now.
And.
And certainly debt pay down is.
Something that is a consideration and so we're going to be happy to talk more about that in Q&A, if if anybody wants to.
Yes, a bit more granular on it with that I want to turn it over to Peter So he can go into the specifics on the numbers and then we'll open it up to Q&A and.
Bingo.
Thank you all for so for the first six months consolidated net revenue was up three 8% year over year.
The Indianapolis Radio acquisition added approximately $7 6 million and the reach cruise event generated $10 $1 million in the second quarter.
It was absent from 2022, so normalizing for those two items net revenue was down three 9% or down three 2% excluding political advertising.
Net revenue for the radio segment increased eight 3% year over year, but decreased one 3% on a same station basis, excluding political net revenues increased by 1% on a same station basis.
According to Miller Kaplan and on a same station basis, our local AD sales were down four 6% against the market that was down two 7% National AD sales were down two 4% against the market that was down seven 7%.
The radio spot markets were down one 6% in Q1 and down six 8% in Q2.
Spot markets were down seven 5% in Q3, and we finished Q3 down 0.6% overall down 14, 4% on a same station basis and down 12% on a same station basis, excluding political.
For Q4, we're currently pacing down 11, 6% all in.
21, 2% same station and down 10, 1% same station ex political.
National down, 26% local down two 1%.
So we've definitely experienced some softness in market revenues for the second half of the year, Although Q4 local has improved sequentially over Q3.
Net revenue for reach media was $31 million for the first half of the year that included the $10 1 million for the Tom Joyner Fantastic voyage cruise event.
Compared to $21 $1 million last year, adjusted EBITDA was $8 1 million, including $1 $75 million from the cruise and it was down from $8 $6 million last year.
<unk> revenue was down for the first half of the year and affiliate station compensation expense was up.
Net revenue for the cable TV segment was $102 $1 million for the first half of the year a decrease of six 8%.
<unk> TV advertising revenue was down five 8%.
$305 million with an unfavorable rate volume impact $2 million.
And an additional $1 3 million.
Do you have.
Deficiency.
P 25, 54 prime delivery was down 31% in Q1 and down 21% in Q2.
Cable TV affiliate revenue was down by seven 8% or $3 $9 million.
With favorable rate increases of $2 $2 million.
More than offset by $5 $3 million of net churn.
An $800000 of increased launch support.
Net revenue for our digital segment increased by one 8% for the first half of the year, which includes $1 million of revenue from the Indianapolis.
<unk>.
Direct sales from a National New York Office were down as advertisers pulled back somewhat.
Marketing budgets due to recession concerns.
Fewer advertisers committed to black history month, and the <unk> team efforts compared to a year ago.
Streaming revenue from a radio station inventory was up however increased traffic acquisition costs sales and marketing expenses offset those revenue increases and adjusted EBITDA was $9 9 million for the first half compared to $12 $3 million for the same period last year.
For the six months period ended June 2023, consolidated adjusted EBITDA was $67 8 million down $21 $7 million were down 24, 3% from last year.
$1 million of the decrease is from the sale of MGM.
The Indianapolis acquisition added about $1 $8 million.
But radio and reach segments were down by $1 1 million combined.
Digital segment was down by $2 $4 million in cable TV was down $13 8 million.
Due to the advertising revenue decrease subscriber churn.
And some increased content amortization costs.
Cable subscribers for TV, one as measured by Nielsen.
Finished Q2, 'twenty three at $45 1 million compared to $46 5 million at the end of 2022, Cleo TV had $42 5 million Nielsen subs.
Operating expenses, excluding depreciation and amortization stock based compensation and impairment of long lived assets increased to approximately $172 $8 million for the six months period ended June 30th.
Up 16, 2% from approximately $148 7 million.
The comparable period in 2022.
There was an increase of approximately $8 $3 million related to reaches cruise event.
$1 $2 million in other radio event expenses.
$4 $6 million in cable TV content amortization.
Million in employee compensation expenses $3 $8 million in contract labor talent costs, and consulting fees $2 $7 million in core professional fees $2 $2 million in variable expenses.
And a $1 million in travel and entertainment marketing and office expenses.
<unk> increases.
Were partially offset by a decrease of approximately $3 $3 million and the employment agreement Award expense and also a decrease of $1 6 million corporate business development costs.
Approximately $5 9 million of those increased expenses related to the Indianapolis Radio acquisition.
Included in the totals, but I just mentioned above.
Radio operating expenses were up by $6 $4 million with the Indianapolis cluster added about $5 $4 million of that increase.
Atlanta's birthday Bash event added about $1 million of expense.
Operating expenses were up $10 4 million with $8 3 million of that from the cruise and $1 million.
Two of additional affiliate station compensation and $750000 in additional talent compensation.
Operating expenses in the digital segment were up by $3 million.
Driven predominantly by variable expenses related to traffic acquisition, an older audience extension, which were up by $1 $3 million and also add production and marketing, which was up by one $6 million.
Cable TV expense was up by $6 $4 million with the content amortization.
The largest partner up by $4 6 million.
Operating expenses in the corporate and elimination segment were down by $2 2 million, including a favorable variance of $3 3 million for the non cash TV, One employment award charge of $1 6 million for reduced corporate business development, which.
This was offset by increases in professional fees and some employee compensation.
Impairment.
Our goodwill intangible and long lived assets was $38 $9 million for the first half of the year $16 $8 million of that was associated with the sale of K R.
FM radio broadcasting license in Houston, and noncash impairment charges of $22 $1 million were recorded for radio broadcasting licenses, primarily in the Philadelphia market.
On April 21st 2023 Radio one entertainment holdings closed on the sale of a 100% of the MGM National Harbor Entrust company received approximately $136 $8 million at the time of the settlement of the put interest representing put price.
Other income net was $96 5 million for the first half primarily as a result of the gain on that sale.
The company repurchased $25 million of its 2028 notes.
Average price of approximately 89, 1% of par in the first quarter, resulting in a net gain on retirement of debt of approximately $2 $4 million total gross debt balance is now $725 million down from $825 million at the start of 2022.
Interest expense decreased to approximately $28 million for the fourth quarter down 11, 8% from last year due to the debt paydowns.
The provision for income taxes was approximately $22 million for the first half when the company paid cash income taxes in the amount of $1 $3 million.
Net income was approximately $67 4 million or $1 42 per share compared to $32 $8 million or <unk> 64 per share for the first half.
The prior year.
Capital expenditure was approximately $4 $1 million in the first half.
Company repurchased 274901 shares of class B common stock in the amount of $1 $4 million.
As of June 32000.
23, gross debt was $725 million ending unrestricted cash was $237 million, resulting in net debt of approximately $494 3 million.
Compared to $143 $5 million of LTM reported adjusted EBITDA pro forma for the MGM sale Lts.
LTM adjusted EBITDA was $139 $1 million.
Giving a total net leverage ratio of 355 times at the end of the period and with that I'll hand back to Alpha.
Operator could you open them.
Up for questions.
Thank you, ladies and gentlemen, if you do wish to ask a question. Please press one of them zero on your telephone keypad you can withdraw your question at any time by repeating the one zero command and if you're using a speakerphone. Please pick up the handset before pressing those numbers again, if you have a question. Please press one zero at this time.
And my momentarily.
Well go to Brad West Fort Baker. Please go ahead.
Hi, Thanks for the call and for taking my question.
First one I had was.
How would you think about the IRR on.
Open market debt purchases versus other uses of cash proceeds do you think that that sort of a 12% ish IRR is a high enough return to justify cash deployment, there and you know when you think about your cost of capital.
How do you think about the way that you would deploy that.
That cash when you think about returns.
Yes.
The other.
Historically, we have looked at just sort of what that yield to worst is and thats, where youre seeing that 12%, but in today's environment. The fact of the matter is we're earning about 5% on our cash right now so it's the delta between that 5% in that 12 <unk>.
It's not quite the double digit return.
But a couple of things.
First of all finding places to put money to work at a 20% IRR, it's hard right.
We.
We've done two radio acquisitions in the last.
In the last year and.
We liked the pencil out our cash investments.
And the <unk> and we feel good about that particularly the Houston one in particular.
It was really strong.
However, and we think that our our casino investment would have been something.
In the twenties.
Be it that would've been Pedro along there.
Return of capital process, we wouldn't have been seeing cash coming through the door after that.
Like to do from a from a radio acquisition.
Yes.
So that's kind of how we look at it but irrespective.
Of that we want to get our debt down right now.
Now I think that we're not.
We're probably looking at.
<unk>.
We've historically done our open market purchases and like kind of blocks of $25 million authorization, right now and kind of weighted.
Intuit I suspect that we'll probably do.
I'll take a similar approach.
But.
We're going to pick up.
A quantum that we'd like to.
Pay down and go after it and continue to look for.
Other opportunities to own or excuse me to earn 20% plus.
On our money, but I've talked to a lot of people.
Out there that are investors professional investors find in finding those opportunities.
In today's environment, it's tough so, but we keep looking.
Yeah that makes sense.
Share count perspective.
I mean, how committed.
As you look around for those types of 20%.
Or whatever that might end up.
Yeah.
How committed are opportunities how committed are you to the media business to radio and TV versus other diversifying ventures, I mean, clearly you've shown a lot.
Look anything like what are you considering yeah. I mean look we were in the radio business only right and then we got into the syndicated business. When we bought reach media then we created TV one gallon got into the cable TV business and we created urban one excuse me.
Interactive one and we got into that digital business and we're publisher for the most current right. We're not we're not like the other radio companies where the.
The bulk of our business is pod casting.
Our streaming and then we've gotten to the gaming business and so we generally like to look for.
For businesses that are tangential.
The assets that we have meaning that you have.
The assets that we have had the ability to make us be more successful or can help us enter those businesses are actually be successful in those businesses than we might.
Speaker 2: be more successful, or can help us enter those businesses, or actually be successful in those businesses.
Speaker 2: than we might, you know, otherwise be and it's worked out, right? You know, I mean, we got into the gaming business with MGM because we were a media company based in Washington, D.C. and they were, you know, building, you know, a resort casino here.
Their wives B and.
And it's worked out right now.
We got into the gaming business with MGM, because we were a media company based in Washington D C and they were building now.
Our resort casino here, so thats kind of the stuff that.
Speaker 2: kind of the stuff, you know, that that we look at. So we're open to looking at other businesses. But, you know, we like to have a competitive, you know, advantage in some, you know, in some, in some skill set.
We look at so we are open to looking at other businesses.
But we like to have a competitive.
Vantage and some.
And some and some skill set.
Speaker 2: Yeah, I generally do not want to, you know, I wouldn't want to do anything where we're just out of our depth of knowledge, right? You know, to me, that's, you know, high degree of execution risk, you're gambling, etc. You know, and so, um, so that's, you know,
Yes, I generally do not want to.
I wouldn't want to do anything where we're just out of our depth of knowledge right now.
To me that's how.
A high degree of execution risk Youre gambling et cetera, you know and so.
So that you know.
That's kind of kind of how we look at it and and.
But there could be some consumer based businesses I mean, if there was a you know I mean.
You had a one line.
Digital.
<unk> apparel retailer opportunity right that's something.
And I'm just talking off the top of my head now.
That's something.
Where our marketing platform could be helpful.
Even though we're not in that business I'm, not saying, we're not looking at any business like that but that's an example of something that's not in our core business, where we would probably take a long hard look at but I can also tell you, though as it relates to our other core businesses.
We have to figure out.
What we're doing strategically and an ever changing environment right now.
How do we how do we get some advantages some scale advantages and programming content advantages in our TV business. The radio acquisitions that we've made we're very synergistic because we're consolidating in markets. So I think you got to continue to look at how to you.
Uh huh.
Having fortify those businesses as as the ecosystem continues to change because we're going to be in those businesses right now.
And so you've got a.
We got to figure out how to flourish, but now what we try to be really careful.
About what we do I would say that our number one priority.
Yes.
Okay.
B in a defensive posture.
From the standpoint of making sure we continue to de lever and if we can get an opportunity where we think we can earn a 20% return pretty pretty pretty confidently now.
Then we'll take a hard run at it.
The casino investment, even though it didn't.
It Didnt pay back for a while we're pretty confident that if we spent $560 million.
Building.
That it would return $100 million of EBITDA, and we would get that kind of return now based on what we knew about.
The central Virginia market so.
Got it and so you just touched on this but you've mentioned in the past that you are looking for.
Efficiently.
Opportunities to achieve more efficiency on the linear TV business given the <unk>.
<unk> is there with sort of melting subs so.
How are you thinking about that.
I know that.
I don't have the answer yet we were one of the.
Four five parties that were interested in.
The <unk> media group when it was being shopped in a process.
We made an offer our offer was not.
At the level that.
Yes.
Paramount wanted to trend back that.
And I don't.
Evidently nobody made an offer at that level. This reason.
They stopped the process, but there would have been a great deal of synergy there right.
From a programming cost standpoint advertising sales standpoint.
And so we looked at that.
Hum.
Quite frankly, we also have been kind of just pivoted our attention to Richmond referendum.
Yes that election was November 7th and now failed. So we're now coming up for water excuse me coming up for air in the middle of doing our budgets for next year.
We haven't we didn't have a bunch of M&A idea projects is sitting on the sideline that we were considering simultaneously.
As we were doing there.
During the referendum.
Effort and so now we're going to get a budget done.
Look at paying down some debt and then figure to figure out what the opportunities are so that's yeah.
So theres nothing on deck this moment.
Makes sense, maybe just a higher level question right you have four different classes of shares.
I think that.
When youre looking at the overall capitalization of the business and the.
Declining multiples in the in your core businesses.
The enterprise value multiple and it's tough to even see what those are in the space right now given all of the <unk>.
Stress across some of your peers you guys are in a pretty nice position relative to them, but.
How.
How do you think about it I mean is there a value in having those that sort of.
Trolling.
Vote voting shares or do you think that you could potentially achieve a higher valuation where you're just too.
Collapsed those to just one share class and simplify simplify that like is that a remnant of maybe.
Fire.
Outlook on the world or is that something that you view as important going forward to have that sort of.
Four different share classes with different.
Yes.
Yes, yes.
<unk>.
So look I.
You say doesn't have value.
The answer is yes, it does have value, particularly in this environment, whereas sort of environment annuity certified African American controlled company.
At times, we've been African American owned which is also a different designation because.
Identifiable African American ownership has been over 50% of the family controls about yes.
About 50% of the economics.
Of the company.
But we benefited greatly from the minority certification.
Being out there.
And we've been certified for a long time, so I do think that there is absolutely value. There there are lots of companies that we want to do business with.
With the minority owned companies.
And controlled minority controlled companies.
Because of the diversity efforts, but here's what I can also value if we flattened the share structure and had one class of shares.
Zero confidence that investors are going to pile into our stock and give us any sort of multiple uplift just not not happen right I'm not seeing it in any companies across the sectors that we're in whether it's radio companies or whether it's cable.
Cable network companies.
I don't think.
The mid single digit multiples.
Radio and cable TV programmers because anything to do with you have there the share structures right. It has everything to do with People's view on those industries.
Okay. That's interesting I mean, I just think of it from us.
From a defensive stance.
Thank you Kevin.
Yeah.
While the equity multiple may not be exposed to the higher on that alone I mean, there haven't been a there's been a lot of research on.
Discounts for a controlled businesses and when you are.
Our levered business that people are looking at LTV I would think you'd want to do anything you can too.
As much as much.
Much cushion as possible.
And then lastly, yes, yes.
We create cushing by paying down our debt or issue an equity and we've never had any problem issue an equity no.
I mean, we.
Don't have them in place now, but in the past we've had our ATM programs into place and in place and I forgot what 'twenty or 'twenty one.
It was I forgot it was one year.
In 'twenty one fairly active.
Issuing I think we should almost $50 million worth of equity yeah.
<unk> got some significant lift from DNA African American focus and control of the company because of the whole sort of mean, there was a moment in time, where in our view.
Stocks companies like ours, where we're running we took advantage of it.
So if we need more equity capital we're willing to.
Two.
To issue shares to give ourselves more cushion.
Okay.
And.
And then so then the financial question.
For 2024.
Do you have expectations yet for.
You know what the contribution of political advertising might be in your expectations and your ex political EBITDA kind of range for looking at year end.
We're going through it right now we're in the middle.
Our budgets it won't be as.
As robust as 22, because we had the Georgia Senate run offs, there and we got a lot of money for that.
<unk>.
But.
We think political for our radio business will give us.
Some sort of double digit.
Millions of let's call it $10 million of.
Of revenue.
And again.
Early start on our budget.
And it was.
It was kind of like 18 in.
In 'twenty, two but we got literally $6 million in Atlanta alone.
22, largely.
Due to the Senate races.
$118 18 in 2006 was in Atlanta, and then we did 13 in 2013 22, Gaggy progressed lack of which foreign offices in Atlanta, So it's still and so what happens in Atlanta on another six in the previous cycle right.
Okay. Thanks for taking my questions appreciate it I appreciate it.
And next we'll go to Matt Swope with Baird. Please go ahead.
Yes, good morning, Alford and Peter maybe just to continue on some of the same themes.
Alfred where would you like your leverage to be you've given us some numbers in the past, but where are you comfortable where you think you are sort of out of harm's way, regardless of what the economy does.
I don't want milk as harm's way it keeps changing.
Yeah.
I would say that.
Uh huh.
Okay.
I like our leverage with a three handle on it I think we're probably going to finish the year at call. It three eight something like that and.
Aye.
Yes.
I would like us to.
Margins get down into the low threes.
Yes Sal.
But I don't you know I've.
I've got I've got no interest in levering up the company.
<unk>.
To take a swing.
<unk>.
Yes, some something that I think is good.
There was a time when you can lever up these companies and make the assumption that your leverage is going to come down really quickly and.
Therefore, you can take some execution risk on something but thats when youre dealing with businesses.
<unk> that are growing.
On a consistent basis, meaning that the macro.
Economic profile of these businesses the market is growing and that used to be the radio business and that used to be the TV business and you can count on that those arent those business. These aren't those businesses any longer so yes.
Yes.
We have a mindset that we wouldn't do that so that's the reason I kind of started off the conversation today.
Today talking about we are looking at debt pay downs.
I appreciate that and you guys have definitely done about as good a job as anybody in the industry at that.
I appreciate it I mean look we got a lot to lose the family has a lot to lose.
If you if you have a misstep right and.
And with 40 plus years old and.
And so where sometimes the equity holders aren't aligned with that.
With the debt holders, but.
We are aligned with the debt holders.
In this instance, because it's really about.
Say from preserving your viability right.
Sure no that makes sense.
Thank Peter about the buyback part of this I guess a couple of questions with all the kind of I guess, one would be could you give us a cash update as of where it is today, but then too would be what's the minimum cash you need on the balance sheet at times, it's been like five or $10 million right do you need to have more cash on the balance sheet from that.
What we were talking about.
A week or so ago I think probably.
50 is a decent number could it be lower than that yeah. We got some lumpy payments from a coupon standpoint, obviously that goes down if we buy back debt, but obviously the semi annual coupon as chunky and then some of the TV one programming deals can be can be somewhat chunky.
Probably a range is 30 to 50.
In terms of what we really need on the balance sheet. So obviously, we've got a lot more than that.
Cash on hand today, I think it's $227 $5 million approximately.
And that.
As obviously after we've made the Houston acquisition, which was $27 5 million.
That's why that's why we're on that.
Sorry go ahead.
I'd say as you think about the bond buyback.
<unk> abilities, given that kind of that you could you could do something like 150 or 175, even just just going off the numbers you just said.
Does it make any sense just to do a broader tender for a much bigger number are you restricted at all by the fact, we haven't.
But you haven't put you through Q out yet if do you have to get before you can do some of this yes.
If we were doing open market repurchases I think we would need to do it after Q3, unless we transacted with someone who signed a big boiler. So so we were protected in that sense. So so there might be an opportunity to go and find a block.
Sign up with us.
Sure.
Sign up with a big boiler island do some sooner than later.
Failing that we will file Q3 before the end of the year and then we'll put a plan in place I think as Alfred was saying.
Historic.
<unk> is bringing to authorize blocks of $25 million in half.
B.
If I go out in the market and find those.
Those blocks I think we'd probably take that path to your point, if we were going to be $150 million. Then I think we would probably look at the tender I don't think we're going to go that I don't think we're going to go that route.
Not decided yet, but I think allison directional direction, saying, you know blocks blocks of up to 25.
C a R.
Got you that's not that's certainly helpful and then and then Alfred.
Is the casino idea dead dead at this point or I.
I know at times, you've looked at places other than Richmond would you look at would you look at something else again yeah.
Yeah, absolutely I mean, we.
It's a great business, we made a lot of money.
Our MGM investment as we May like four five times are.
Our investment.
There's risk right.
Overbuild interest rates are higher now.
So that.
It was going to put pressure on the returns and it's a political process right now and we think that when Gaye.
Gaming.
Getting gaming licenses are as a political process and.
And we think we have some.
Advantages there.
As I mean, I think we're really the only sort of.
African American on the organization.
Really focused on investing in this industry that I know of.
On a.
On a significant level. So yes, we would absolutely look at other.
Stuff.
I don't know whats going to happen.
Fifth license is going to go somewhere in Virginia.
Haven't gotten focused yet to see if there's any way that we can participate on any level I don't know, which city. It would go to.
Who the players with the.
There is potentially.
Potentially I gaming, that's going to come to the state of Maryland, It's been it's public knowledge that legislators there are looking to try to move a bill out of the General Assembly.
This session.
And that's very different in sports betting.
And because sports betting is not profitable, but I gaming.
As I had no idea how the.
We're planning to administer.
<unk>.
Gaming structure and licenses so what I'm, what I'm seeing is that they'll probably do is send out a bill that would actually put.
A question on the ballot surpass it references the referendum to get past and then figure out what the structure would be.
By the way our deal with MGM getting give us access to any online activities or revenue. So no online sports betting if I gaming Cam we wouldn't have participated in it.
Only the bricks and mortar operation.
We think we have any sort of light claim and.
And so that was that was yet another reason to go ahead and monetize.
So yes, we would look at other stuff, but they're not those.
Those opportunities don't grow on trees.
And.
Got it and then maybe just a last quick one for Peter.
The Houston radio sale, that's in your divestiture trusts to Spanish broadcasting.
We saw that you extended the timeline on that is there any is there any pressure on that deal does that does that does that.
Any other impact on anything else youre doing in Houston or any other issues.
There's a there's a there's a finite amount of time that the trust as authorized by the FCC.
But it was that gave us a two year window to get that done. So the extension that we so one station has already been sold and closed on with MF.
And the timeline that we extended.
For the second stage for Spanish Broadcasting I think.
The schedule is for it to all be wrapped up by July or something like that so well within the quarter.
It's well within the first year right, so, but there but there is a two year window that we have with the trust, but we suspect that it will be.
Closed out well in advance of that.
And theoretically you could extend that a little more if you wanted to even yeah.
Yeah, you could.
Got it great. Okay. Thanks, guys I appreciate the questions, yes, thanks, Matt.
And next we will move to a Ken question Mojo with Wellington. Please go ahead.
Good morning, and thanks for taking my questions and not to rehash Matt's question, but I appreciate you're still digesting the Richmond outcome I'm just kind of curious if you have any thoughts as to timing for that license or any kind of milestones or biomarkers that investors should be looking for in terms of when that gets revisited.
I mean, it's a process that's going to probably play out in the General Assembly this year again.
We're nowhere in terms of whether or not were.
Now.
Looking into it right and we have now.
We really just kind of came up like I said for air after.
No.
And so, but but I assume that something will happen.
And.
This session.
I do know that there is a group of folks that want to propose and I know that Theres a state Senator that is going to propose a bill to put it somewhere in northern Virginia like rest in our Tysons. So you've got the northern Virginia, Northern Theres going to be a push for northern Virginia I'm hearing in the city of Petersburg as interested again, we'd like to.
To try to get it there.
Did last go around.
Gal.
We wanted a second vote enrichment and so we lobbied against that.
So I just don't have I don't have any information on what the state of play is other than people are positioning themselves.
For this legislative session.
<unk>.
And I don't know whats going to happen, but.
I suspect that you'll see a direction, one way or the other coming out of this legislative session.
Appreciate that color and then just thinking about the adjacent investment opportunities are the prospective opportunities to invest further afield from radio and even gaming.
You alluded to.
Do you have any additional constraints that you'd be putting on yourselves in terms of like size or maybe a higher IRR threshold or leverage cap just given the sort of additional risk of moving further afield.
We don't think about that.
And al.
If we look at each deal on its merits.
Yeah.
I can tell you that.
I mean, we're not a venture capital fund, we don't we're not sitting here, making a bunch of early stage.
We have investments in.
Then startup companies that we think are going to be.
That would be 10, baggers right, we generally have.
Kind of wanted to invest in things that we thought were going to deliver.
Our cash return.
EBIT, Bob if we could ultimately bring into the company and count right.
I mean, because you could look at investment.
Lots of people in the investment business make money.
On companies that actually don't make money right like and just increase in value.
Because of whatever reason we've never.
Because we come from cash flow generative businesses, we have a bias towards cash on cash returns you know.
So.
So my sense is if youre going to look for a much higher return than 20 plus percent on something you probably going into something that's more speculative new Asian.
An early stage and that's just that's just not how R. R.
Our mindsets have worked.
Around here because of the nature of the businesses that we're already in.
Fair enough for Bagger will do.
So last one for me.
There were a few recent instances.
Asset sales in the broader industry, where noncommercial operators came in kind of picked up pops that pretty interesting multiples I'm just kind of curious if you have any stats that are noncore to you that might be seen as strategic to the few non comps that are out there.
Yeah, I mean I've gotten.
Approached recently for one of our markets.
I've actually gotten push for a couple of our markets.
The problem.
And we've said no.
And one of the we.
Thought about it and one of the problems is it.
Does it weaken our position in that market versus.
Something that we.
We want to do that is going to get us a bigger return.
And not mentioned in the market.
But in one of them would make it make us weaker against a competitor there and ultimately we think theres an opportunity to buy the competitor and do really really well. So I don't I don't really want to take the pressure off.
That competitor.
Before they sale before they sell and the money is not enough, it's not big enough right.
Two.
To make a big.
To make a huge dent, it's kind of like.
$7 million $8 million or something like that and we have cash flow already.
And that marks if we peel that asset off it's also going to.
The grade the cash flow.
In that market, maybe run it to zero.
And so yes, so you've got a lot that that even if you just use a five multiple for radio which is.
Probably low.
If you if you if you lose a $1 million of cash flow.
And somebody gives you eight like Youre net $3 million, it's not it's not worth it right. Yeah. So I mean, if we needed the cash or something.
<unk>.
That's a different story, but today, we don't need.
The cash for it so but yes, we've gotten we've got a couple of those inbounds, but nobody knows we've got nothing that somebody wants to pay $20 million for.
Understood. Thanks, so much for your time operating theater.
Yes.
And again, it's one zero to ask a question next we'll move to Marlene parallel with bank of America.
Hi, Alfred Peter Hope all is well.
<unk> answered most of my questions, but just a quick follow up.
This $3 four.
355 leverage that you mentioned that for <unk> is that correct.
Correct, Okay, and then by end of the year, you'll be around three eight.
Is that actually maybe some incremental debt reduction or just some moving around in cash.
Well the factories.
The EBITDA, yes, yes, sorry, the fact that it's moving upwards between.
Where we're at now.
Between Q2, and the end of the year was that the question or no.
355 for <unk> and I was just asking if the around three eight by year end considers any incremental debt reduction or is it just not moving around a bit okay. No. Its cash it's cash moving around and then obviously the back half as we said is going to be softer because of the lack of political so keep so Q4 when you.
LTM and then we.
Roll into Q4, we're going to be missing.
$8 million of political so so we'll just have a lower LTM EBITDA by the time, we roll into Q4.
Got it and then I think it was the last call you had mentioned free cash flow may be in the mid $60 million area and that dependent kind of where capex comes out to them, obviously with a number of moving parts, whether it be Richmond or anything else are you still thinking about it in that context for the year and then any comments on.
Capex potentially for next year that you'd be willing to look here.
I think it's lower than that now.
There was $5 million of referendum costs, and then as proud cleaning up all the material weaknesses, we've had to hire a bunch of consultants and that's kind of a $4 million.
Ryzen at the moment just to remediate.
Bunch of this stuff. So that's so those two things.
$910 million of cash so I think I think it's slightly.
It's slightly less although both of those are one time only right. So.
That's where that's worth pointing out.
On Capex.
We don't know we're going through the budgets as Alfred said the one the one so there were a couple of big things, we need to consolidate and Indianapolis and thats going to cost.
Some some millions of dollars to put those facilities to go out and buy new equipment. So I think at the moment, we might be looking at it.
10 ish million Capex for next year, we normally run at 7% so that would be a little higher for next year, but it is preliminary and we tend to.
Manage the Capex and a very tight manner. So that maybe some other things that we choose not to do next year. If we if we need to spend the money on the Indianapolis facility.
Great. That's all I have thank you.
Great. Thank you.
And next we'll go to Hell Steiner with BNP Paribas. Please go ahead.
Hi, guys. Thanks for taking my question I was hoping could you just spend a little time talking about the TV network side of the business and maybe just run through.
With the.
Focusing really on the affiliate fees in terms of what could be the timing of any like carriage renewals, if theres any big ones and just maybe what your strategy is heading into all of that.
Carriage renewals, we just renewed Verizon they were up in October and we just renewed them for another couple of years.
Our next carriage renewal is not till the end of 'twenty five.
Jody.
In the third quarter and the <unk>.
Third quarter 'twenty five.
<unk>.
So.
We got we had a small one we thought we got one small streamer that we did a one year extension on that we've got to come out of it it's small but.
Our our big deals don't come up too.
The first one is the end of 'twenty five and in the next one is the end of 2006 begin into 'twenty seven.
97% of our club base of accounts.
<unk>.
Thanks.
Awesome.
Okay.
Got it got it that's great.
Okay. That's very helpful. I guess, just how can.
Could you just maybe give a little color about how you think about sort of just what like you're sort of positioning is in sort of the bundle right. I mean, there's just a lot of talk about that a concern about that and how the bundle sort of evolves and just if you could give any color about what you think your position as an ability to stay in there would help.
I mean, we feel good about it I mean, we've always been an independent network I mean, we've never been part of a big group.
Yes, I mean, I think that the environment has changed but there is also.
Ben.
A move towards you know.
More diverse.
The content of which we have I do think that fact that were.
An African American owned entity is.
As important.
And so.
I mean, we've got great relationships with.
Yes.
With all of the operators, except for we're not on dish.
And then we're not on Youtube TV Hulu at this point in time, so we've got to try to figure that out but.
<unk>.
I mean, I'm not going to be sure I mean, I know that at the end.
The environment has changed dramatically, but we.
Nothing has led us to believe that.
Operators still don't see TV, one and now Cleo as valuable including the renewal that we just did two.
Two weeks ago.
Okay got it and I mean, a lot of what you said is what I would have imagined. So I really appreciate that color and say that affirmation I guess on the digital side of the business I get obviously slowing a little bit with some of the cyclical pressures, but could you maybe speak a little bit more about just your ability to kind of grow that business and if there is.
Maybe the properties out there that could be more targets to easily add in.
And any color you can give me there would be helpful.
But I'm happy that is profitable right now.
Yes, Youre right Theres ad.
Revenue pressures and.
So.
Yes digital is so tricky right. So right now you got to add you got you got you got AD revenue pressures, but I think we've been doing decently.
And that slowing environment.
The tricky part about digital and particularly with acquisitions is that the <unk>.
<unk> size has changed so dramatically depending on how the big platforms.
Google our meta beside the prioritize people's content.
Changed their algorithm so you could go out and buy something.
Very few of these digital platforms have their own natural organic go to their dot com traffic right like theyre getting their traffic from some other source our platform I think.
Read something in Buzzfeed.
Last conference call when they were talking about their AD revenue came down significantly and why and I think I remember the number one thing they pointed out was that.
The big platforms are prioritizing their own content.
Their own verticals.
Over a third party and its reduced their ability to monetize.
Their content. So what does that mean for acquisitions you go out and buy something that you think has whatever 10 million unique visitors and.
500 million page views and then six months later and algorithm has changed and that's been cut in half.
That that happens that's happened to us on a smaller scale.
<unk>.
And so you've got to be really really really really careful when you look at digital acquisitions.
We look at something every year.
<unk>.
<unk>.
And we we're nosing around a public company. This year that ended up doing a deal.
Yes.
Yes somewhere else.
So, yes, we want to figure out how to do that.
To.
To scale it but it's.
Yeah, it's tricky.
I understand.
Thank you for that color.
And lastly, and then operator, we're going to open it up and one more question.
But.
And lastly, a lot of these at these digital acquisitions. These guys don't make any money right. So they want they want you to say, yes, they want either and remember I said earlier that we tend to be cash flow buyers right. So they want they want you to give them a value and they don't make money.
It's a problem you know Buzzfeed bought.
<unk>.
This.
This company complex, which was like.
When the top urban.
Content publishers.
And the space had a big brand for a long time was doing $100 million of revenue a loss of $11 million and Buzzfeed pay 300 million Bucks for them.
Yeah, and I'd just like we just we just.
We can never do anything like that now.
Yes, no I understand if you might if I could just ask one before you switch. The last question I was just going to ask on the.
But in terms of the indenture.
You need to do make.
And offer to repurchase the bonds.
With the amount of excess proceeds, but I guess your belief would be through doing debt buybacks and maybe any other sort of investments you'll be able to youll fulfill you'll have no excess proceeds back extra excess proceeds left by the time. It is you would have to make that repurchase offer is that correct.
We don't know, but there is a number of things that we've invested in that count towards those investments that are Jeff.
And.
Sure.
Radio assets right like our Houston transaction counts there are some programming investments that we've made.
That count.
So so so we're not sitting there right now with $137 million of.
Investable basket that we got.
We got to deal with it something significantly less than that.
Already.
As Peter said to me yesterday, we're not going to go out and make a stupid acquisition. Just so we don't have to offer.
To buyback bonds at par, that's not going to happen.
But to your point.
We're probably at something close to.
$80 million of the $1 37 already like shelter, if you will for stuff that we invest in on a.
On a regular basis.
And I don't know, what what's going to happen between now and April.
Thank you guys so much for the questions.
Yeah.
Thank you and our last question here will come from Brian <unk> with Spark Baker. Please go ahead.
Hi, Thanks for going to me again, just so on the use of cash.
Cash you brought in Churchill Downs as a partner would you be open to being sort of a.
A minority partner and another whether it's a.
Another gaming endeavor or some others.
D partner, where you're not like we're not in control of the investment that you're sort of a either a capital solution provider and maybe there's even something strategic.
How do you think about those opportunities yes, yes, yes, we would look at something like that however, we are a bit spoiled because our MGM deal gave us like a.
Yes.
Our cash return off the bat off the top of gaming revenues. So that was one of those unique situations, where we put money in and we got money out like kind of like.
The first year.
And we look at one deal with.
<unk>.
Or a small public gaming company.
They wanted us to them, that's like 20 or 25 million Bucks in it.
But yes.
Yes, they had a subordinated under a whole bunch of stuff in.
It was like really traditional equity investment.
And they were.
It was they were up valuing it from what they are their value was.
So.
We didn't like it now and.
So we are spoiled like so we would like you know, yes, we would look at being a minority investor.
I think that would be one of those situations, where if we ended up making a real equity investment and we're sitting behind that.
And then it's got to be paid down and there is no.
Dividends are restricted payments going out to.
The equity for a significant period of time, where you'd want.
Not a 20% return you'd want something go.
Much higher.
But we've seen two investments like that.
And we pass on above.
Sure.
Okay. Appreciate it yeah the.
The discipline makes sense.
Yeah.
Thanks, a lot. Thanks, Brent thanks, everyone I appreciate the time.
And that does conclude the conference for today. Thanks for your participation for using AT&T teleconference. You may now disconnect.
Yeah.
Okay.