Urban One Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 27, 2025

There are 9 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Urban One twenty twenty four Fourth Quarter Earnings Call. As a reminder, this conference is being recorded. We will begin this call with the following safe harbor statement. 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 referred to in the 10 Ks, 10 Qs and other reports it periodically files with the Securities and Exchange Commission could cause the company's actual results to differ materially from those indicated by its projections or forward looking statements.

Operator

This call will present information as of 03/27/2025. 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.urbanone.com. A replay of the conference call will be available from 02:00PM Eastern Daylight Time, March twenty seventh, twenty twenty five, until 11:59PM Eastern Daylight Time, April third, twenty twenty five.

Operator

Callers may access the replay by calling (800) 770-2030. International callers may dial direct (609) 800-9909. The replay access code is 3407726. Access to live audio and a replay of the conference will also 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.

Operator

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 Thompson, Chief Financial Officer. Mr. Liggins, please go ahead.

Speaker 1

Thank you very much, operator, and welcome to our fourth quarter conference call. Also joining us as usual is Jody Drewer, who is the Chief Financial Officer at TV One and also Karen Wishart, who is our Chief Administrative Officer. As the press release stated, we ended up coming in at the middle of our guidance for adjusted EBITDA at $103,500,000 That number in Q4 was boosted by a pretty strong performance with our political advertising efforts. However, we did see continued headwinds in our cable TV business due to churn and under delivery. That actually has started to stabilize in Q1.

Speaker 1

So that's good news. Unfortunately, the radio business continues to see downdrafts in Q1 with pacings currently minus 13.6. However, they are improving going into Q2 with pacings down just 1.7. We're optimistic that things will continue to improve in our radio business. But with the downdraft, we've been taking precautions with our cost containment and further debt reduction.

Speaker 1

We had a staff reduction in Q4 of about 5%, which is about 64 people of our workforce, which is save us about $5,000,000 a year. Going into 2025, it's going to be all about cost containment and also a continued debt reduction standing in a pretty strong liquidity position as of the end of the year with about $137,000,000 of cash on hand. We are prepared to offer $2,025,000,000 dollars guide even though it's early in the year, but we are going to guide to $75,000,000 of adjusted EBITDA from down from the $103,500,000 in 2024. It's going to be a combination of the weaker radio, primarily driven by a lack of recurring political advertising. We're going to be down a bit in TV, but again, we feel like that is stabilizing as well.

Speaker 1

So a $75,000,000 guide for 2025, down from the $103,500,000 in 2024, continued cost containment and debt production. We're going to be able to talk about more when we get to the Q and A section. If anybody has questions right now, I'm going to let Peter go through the numbers from 2024 in the quarter. So, Peter?

Speaker 2

Thank you, Alfred. So consolidated net revenues were down 2.7% year over year for the three months ended 12/31/2024, approximately $170,100,000 Net revenue for the Radio Broadcast segment was $47,700,000 an increase of 14.5% year over year. Excluding political, net revenue was down 5.1 year over year. According to Miller Kaplan, our local ad sales were up 0.1% against our markets that were down 5.2% and national ad sales were up 35.4% against the market that was up 28.4. Political advertising drove the growth in the national marketplace and for our stations and was our largest advertising category for the quarter.

Speaker 2

Second largest category for us was services, which was up 12%, driven predominantly by legal services. Healthcare, retail, auto, financial, food and bev were down year over year. Telecom, travel and transportation categories were up. Net revenue for the Reach Media segment was $9,600,000 for the fourth quarter, down 10.7% from prior year. Adjusted While Reach benefited from $1,000,000 in political advertising, client attrition and lower average unit rates offset those dollars.

Speaker 2

Net revenues for the digital segment was down 3.1% in Q4 of $20,500,000 Direct national sales were down driven by decreased advertiser demand. However, political advertising was $2,400,000 and both connected TV and podcast revenue were up from prior year. Adjusted EBITDA was $5,300,000 which was an increase of 50.7%. We recognized approximately $39,800,000 of revenue from our Cable Television segment during the quarter, which was a decrease of 15.9. Cable TV advertising revenue was down 21.4%.

Speaker 2

Delivery declined 36% in total day persons 2,554. We had approximately 6% fewer units converted to ad inventory, about 4,000 more units allocated to ADU to help mitigate the delivery impact. And that was partially offset by favorable AVOD and Fast revenue of $1,300,000 Overall, that resulted in an ad revenue decline of $5,800,000 Cable TV affiliate revenue was down by 9.9% driven by the increased subscriber churn, which was a $3,300,000 loss, partially offset by $1,300,000 in subscriber rate increases and the launch of NOW TV. Full year subscriber churn was minus 9.5%. Payable subscribers for TV1 as measured by Nielsen finished Q4 at 37,200,000 compared to $39,100,000 at the end of Q3.

Speaker 2

And CLTV had 36,400,000 Nielsen subs. Operating expenses, excluding depreciation and amortization and stock based compensation and impairments of goodwill, intangible assets and long lived assets decreased to approximately $91,100,000 for the quarter ended 12/31/2024, which was a decrease of 13.8% from prior year. The overall decrease in operating expenses was primarily due to lower corporate SG and A expenses driven by a reduction in the CEO's TV One award and lower overall expenses in the digital segment due to lower sales and marketing related costs. Radio operating expenses were down 5.4% or $1,900,000 driven by a favorable adjustment to the bad debt reserve. Reach operating expenses were down by 7.8% driven by lower talent and staff incentive based compensation.

Speaker 2

Operating expenses in the Digital segment were down 16.1%, driven by lower sales and marketing costs and lower performance paid compensation. Operating expenses in Cable TV segment, up 4.1% year over year, driven by increased rating service costs and connected TV support costs. Operating expenses in the Corporate and Elimination segment were down by approximately $10,200,000 primarily as a result of due to reduction to the CEO's TV One award. Consolidated adjusted EBITDA was 26,900,000 for the fourth quarter, down 0.9%. Consolidated broadband digital operating income was approximately $38,600,000 an increase of 1.7%.

Speaker 2

Interest income was approximately $1,100,000 in the fourth quarter compared to 2,500,000 last year. Decrease

Speaker 1

was due

Speaker 2

to lower cash balances and interest bearing investment accounts. Interest expense decreased to approximately $11,500,000 quarter, down from $14,200,000 last year due to the lower overall debt balances as a result of the company's debt reduction strategy. The company made cash interest payments approximately $347,000 in the quarter. And during the quarter, the company repurchased $15,400,000 of its twenty twenty eight notes at an average price of 69.8% at par, bringing the balance down to $584,575,000 at year end. In January 2025, the company repurchased an additional $17,000,000 in notes at a price of 62.5%, bringing the current balance on the debt to $567,575,000 20 4 point 2 million dollars in non cash impairment charges were recorded in the fourth quarter '4 million dollars of that was associated with the TV One brand name and $20,200,000 was for goodwill associated with the TV One reporting unit.

Speaker 2

The primary factors leading to the impairments were a decline in projected gross market revenue and operating profit margin for TV One. Provision for income taxes was approximately $27,600,000 for the fourth quarter and the company paid cash income taxes in the amount of $130,000 Capital expenditures for the quarter were approximately $1,300,000 Net loss was approximately $35,700,000 or $0.78 per share compared to a net loss of $11,000,000 or $0.23 per share for the fourth quarter of twenty twenty three. During the three months ended 12/31/2024, the company repurchased 1,386,544 shares of Class A common stock in the amount of approximately $2,100,000 at an average price of $1.5 per share, of which 908,894 shares of Class A stock were held in treasury stock as of 12/31/2024. During the three months ended 12/31/2024, company repurchased 703,292 shares of Class D common stock in the amount of approximately $700,000 at an average price of $1.02 per share. During the three months ended 12/31/2023, the company did not repurchase any shares of Class A or Class B common stock.

Speaker 2

As of December 31, total gross debt was approximately $584,600,000 and ending unrestricted cash balance was $137,100,000 resulting in net debt of approximately $447,500,000 compared to $103,500,000 of LTM reported adjusted EBITDA for total net leverage ratio of 4.33 times. On 03/16/2025, company began investigating an incident involving an unauthorized third party who had gained access to and infiltrated certain information from our information technology systems. Upon discovery, we activated our incident response team, which is comprised of internal personnel and external cybersecurity experts. As of today, the incident has not impacted the company's operations or ability to conduct business in the ordinary course. This time, the incident has not had a material impact on the company's financial condition and the results of operations, while our investigation is ongoing.

Speaker 1

Thank you, Peter. Operator, could you ask the audience if any questions are coming forward?

Operator

Our first question will come from the line of Aaron Watts with Deutsche Bank. Please go ahead.

Speaker 3

Hey, Alfred, Peter. Thanks for having

Speaker 1

me on. Hey, Aaron.

Speaker 3

Few questions, if I may. I guess, first, just to clarify, your 1Q radio pacing down 13.6%, what was the equivalent performance that lines up with that for the fourth quarter? Was it the radio advertising down 8%? Is that the right way to think about it?

Speaker 2

Yes. So I gave core ex political. And so you'd need to strip out the you'd strip out the political from Q4. I'm just looking back through my notes.

Speaker 3

Sorry, I missed that. And then maybe while you're looking at how I thought I wanted to add

Speaker 2

that. So excluding political net revenue is down 5.1.

Speaker 1

Okay, thanks.

Speaker 3

Nice. All right. And then could you give us a little more insight into what drove the weakness from that down '5 and 4Q into the first quarter? Was it broad softness, particular categories? And then a similar question on where you're seeing the improvement as you look ahead to 2Q and what's pushing that theme?

Speaker 1

Yes. So, look, it's absolutely broad softness. I've spent a significant amount of time with our national rep and our teams. And in Q1, you're basically seeing negative double digit pacing across local, national and network radio. And now there was political in Q1, but not a ton of it.

Speaker 1

And so I think that you're absolutely seeing advertisers probably reacting to an uncertain economy. I think I just read something from the CEO of Walmart talking about consumer behavior being choppy and skittish. The improvement for us is coming and when I say improvement, it's still negative, right? But it's negative 1.7% and we're seeing a bounce back in improvement in our Ohio markets, which are starting to lap a significant comps as it related to sports betting revenue. And Peter, you were going to add local?

Speaker 2

Yes, locals bounced back more strongly in Q2, right? So national's a little better in Q2 than it was in Q2, but local is strongly better than in Q2 than it was in Q1. So it's positive local at the moment is pacing up in Q2, whereas it was down 10% call it in Q1.

Speaker 1

And we're also and we're seeing improvements in national as well, be it again still negative.

Speaker 3

Okay. That's encouraging. And carrying that out a little further with your near 25 guide, what are you assuming for the core radio broadcast segment from a top line perspective? Do you think you can trend back towards neutral Alfred or are you still assuming it's going to be down a little bit for the year?

Speaker 1

Yes. I mean, that guide is also right on top of our internal budget. And I think Peter got the

Speaker 4

Yes.

Speaker 2

I mean, if you strip out the political, Aaron, then we've assumed that the core grows a little bit in that number. So if you took out every dollar political and didn't replace it with something else, it would look worse than what we've got. So we've assumed some growth in local and national ex political and obviously digital.

Speaker 3

Right, right. Okay. Let me squeeze one more in and I appreciate the time. There's been a lot of talk around deregulation across the broadcasting space. I'm curious what opportunities you see that potentially opening up for you on the radio side, whether that's as a seller or a buyer.

Speaker 3

Do you think we could see some material consolidation in the space on the heels of kind of this new positioning from the FCC?

Speaker 1

Yes. Look, I've been pretty vocal about I believe that you're going to see further consolidation in the radio sector. You need to see it. And we have over the years been both buyers and sellers. Recently, we've been more of a buyer consolidating in Indianapolis and Houston.

Speaker 1

But we have gotten we've trimmed our portfolio a number of times and gotten out of places that where we weren't successful and weren't working for us and put that capital to work in either debt reduction or more accretive acquisitions. And so I think you'll see us continue with that. I think that we're probably in better shape than a number of other folks in the sector in terms of our leverage profile, which I think gives us an advantage to be proactive in terms of opportunity. So but you still have to be careful, right? Even with consolidation, you're still dealing with a negative trend line on the top line revenue number.

Speaker 1

So it's very tricky. And because of that factor that even if you get dereg having new capital come into the industry will probably be a challenge, right. And so I think that people will look to see if there are swap opportunities that can be executed in order to put people in better positions in various different markets. I've always seen that as challenging for people to align on what's a good swap. You just don't see a lot of it.

Speaker 1

But the state of the industry might and the dereg might make people more motivated to do that. So I would say that it is absolutely a net positive because in declining industries you need to create economies of scale. And so and I also think being bigger in these local markets makes you more of a digital force for local advertisers because you're covering off more formats, you've got more audiences that you're touching and we're seeing significant amounts of digital revenue come into the Miller Kaplan and local markets. In fact, in about half of our markets we're seeing more digital revenue than national spot rep, which really came to light during our fourth quarter budget process for the first time. So having more girth in the local market is going to allow us to compete better digitally, I believe as well.

Speaker 1

So net positive is still challenged because you're not I don't think you're going to see a flood of capital come in to execute this consolidation. So people are going to have to figure out how to work it with them between themselves. But I also think that the current debt holders in the industry are eager for some sort of solution for folks' balance is balance sheets and will be constructive in trying to see consolidations happen. So it helps the industry and helps the players in it.

Speaker 3

Very helpful perspective. Thanks as always, Al.

Speaker 1

Thank you.

Operator

Our next question comes from the line of Ben Briggs with Stonex Financial Inc. Please go ahead.

Speaker 5

Good morning, guys. Thank you for the time and thank you for taking the question. So, I've got a couple here, most of them around kind of what capital allocation plans are for fiscal twenty twenty five. So thank you for the guidance. You mentioned that cost reductions and debt buybacks are going to be a focus for 2025.

Speaker 5

And I think the market will definitely be glad to hear that. I'm curious if there's any plan for stock repurchases or is most of it going to be debt?

Speaker 1

We have been repurchasing stock. We've got a plan in place. It's a small plan that basically just buys kind of like the daily limits. I think we probably repurchased in the last year $5,000,000 6 million dollars of stock in comparison to $150,000,000 What's our total debt repurchases? We did $140,000,000

Speaker 2

last year and then another $17,000,000 this year, right?

Speaker 1

Yes. So almost $160,000,000 of debt repurchase. Yes, I think you'll continue to see that kind of outsized ratio of how we deploy that capital. So 95% of our money will go to continued debt reduction. And so that's I think we're also looking at M and A opportunities as the previous person was questioning about dereg and having cash available to us if we can find acquisitions that accomplish the same thing that are deleveraging, which is our goal.

Speaker 1

So we keep that in mind, but we're not going to just have it sitting around in the hopes that an acquisition comes along. With that said, we've always been mindful and thoughtful about how we repurchase debt, right? So we'll look in, we'll buy it in $10,000,000 or $15,000,000 or $20,000,000 chunks. We're not a repurchaser at any cost either, right? Like we've definitely tried to be opportunistic on the pricing of it because that benefits the company long term.

Speaker 1

And so if we just go into the market and indiscriminately buy debt then it runs away from us. And so you never know exactly when we're going to be a buyer and when we're not going to be a buyer because we definitely set out for periods even when we had open windows because we didn't like the price.

Speaker 5

Okay, got it. That's very helpful. Have there been any I know you disclosed the buybacks through January. Has there been any debt buybacks since then? There were a few good sized trades that

Speaker 1

were approved. No. We intentionally set out while the window was closed. We didn't put a plan in place and we were out of the market for the last we've been out of the market since that January repurchase.

Speaker 5

Okay, good to know. Thank you. And then second thing is kind of more operational with the business. And I know previous calls you guys have discussed with it.

Speaker 1

But can you give a

Speaker 5

little clarity or can you just kind of re explain to me, I guess, what exactly as far as revenue is concerned, what goes into your digital segment? I know there's kind of a little bit of a few different things that go in there. And I've gotten a couple of questions from investors this quarter on what exactly goes in there. So if you could just

Speaker 1

remind me, I'd appreciate it.

Speaker 2

Yes. And look, it's a timely question because one of the things that has been going in there is the Connected TV revenue. And we just yeah, and look, that's a growth area. And we've decided going forward from January 1 that we're going to report that through the TV segment. So that would be a change.

Speaker 2

And part of the thinking there is, as linear TV is more challenged, you see to strip out that growth area and report it as digital is going to give a false a falsely negative position of the TV business. So we're going to kind of repatriate that revenue and those impressions back to TV One. And we think that's right because they really are attached to the TV business rather than digital content verticals. So up until now, we report CTV through digital, now we're going to report it through TV. And then all of the digital impressions go through digital.

Speaker 2

So it can be adverts on content verticals, can be pre roll, can be banner, podcast revenue, streaming is the other big one. And that's worth talking about. We had a really good deal through Katz and that got renegotiated down. So call it $7,500,000 of revenue that we were getting from Katz on the podcast inside, what it was reported as digital is going to be a significantly less, so the incrementally lower, probably $4,000,000 lower. It was podcasting and streaming.

Speaker 2

Sorry, yes, streaming and podcasting. So essentially Sorry, and the main part of that is streaming. If I said podcasting, I'd flip them in my head is both to get streaming is the bigger part.

Speaker 1

So essentially we had an output deal where they basically bought all of our available inventory that we had and that got renegotiated. Everybody's got cost reductions and so today and that affects us in a big way. So we're out now rebuilding our streaming partners. So instead of just giving all of our impressions to one entity, we're actually plugging into multiple entities and it's going to take us a while to build that back up. But the net is we're going to see that revenue probably reduced by half of what it was.

Speaker 1

And that's going to affect the digital revenue number.

Speaker 2

Yes. And point out CTV plus that. So you're going to see our digital segment look weaker as a result of those two things?

Speaker 1

So in the most recent Miller Tapins, we're getting annihilated in digital and a big part of that is our streaming number.

Speaker 5

Okay. That's all very helpful. As you report going forward, since you're recategorizing some of that revenue, are you going to report are you going to adjust prior period numbers as you I don't

Speaker 2

think we're planning to adjust prior period.

Speaker 5

Okay.

Speaker 2

But we I can give look, if it's materially different, I can probably give color on the earnings call so people can understand the differences.

Speaker 5

Okay. That is very helpful color. Thank you guys. And I'll talk to you soon. Thank you.

Operator

Our next question comes from the line of Marlane Ferreira with Bank of America Securities. Please go ahead.

Speaker 6

Great. Thank you for taking my question. Question. Dave, based on your full year EBITDA guide of $75,000,000 how should we think about free cash flow for the year? If you can provide any context on some of the puts and takes that would affect that, that would be great.

Speaker 2

Yes. So obviously the good bad news is EBITDA is going down. Good news is we got less debt interest payments. So that's about $41,000,000 CapEx, we're penciling out at $10,000,000 There's a big project going on to consolidate the Indianapolis office post acquisition that's kind of $5,000,000 of the $10,000,000 So that's a little higher $10,000,000 is a little higher than we would normally do, but it's probably a solid number. TB1 programming not a huge difference there.

Speaker 2

And so long story short, at the moment we're looking at around $25,000,000 free cash flow generation off of $75,000,000

Speaker 6

Great. Thank you, Peter. And then coming back to the cost saves containment, you mentioned about $5,000,000 that you'd be saving from some staff reductions. So how should we think about cost savings $4.25 that will hit the numbers as well as cost to achieve?

Speaker 1

Yes. We are actually in the we wanted to get through getting our accounts filed year end, etcetera. And we're back focused on what other cost save opportunities that we have. We don't have a number yet. We do feel like we have more opportunity to reduce costs.

Speaker 1

We did our first round in Q4 and made it effective by the January, but we haven't gotten there yet. Yet. But you can expect more. Don't know how much more yet, but we're looking at every available opportunity.

Speaker 6

Got it. And so just to confirm, for the $75,000,000 of EBITDA for the year?

Speaker 1

It does not that number does not the $75,000,000 does not include any new or projected cost saves that might come. We made it simple this year. That number is our that's our actual budget, where we think we're going to be at and it doesn't take into account any further cost reductions in it. I mean I know that I think iHeart had given a guide for 2025 which included their expected cost save. We had already taken out our cost save and when we went through the budget process.

Speaker 1

And so anything new would actually help that number going forward.

Speaker 6

Great. And then last one for me. Is there any are there any like assets or parts of the business that might be considered non core and potentially could be result in like an asset sale?

Speaker 1

Yes. I mean, the answer is maybe we have some small things. You know what I mean? But you need buyers and those don't exist right now. And so, yes, in the media M and A landscape in both television cable networks, you haven't seen much activity.

Speaker 1

You've seen a number of failed processes on the cable television network front. And so again, we've always been economic animals, meaning that if somebody were to make us an offer on pieces of our business that would ultimately be accretive to us from a deleveraging standpoint and would help us significantly move the needle, we would absolutely consider it. On the other side, on the acquisition side, we're not really considering anything that also doesn't de lever us, right? Because we've got enough scale to be relevant now. Now it's really about getting the balance sheet to what I call a safe position.

Speaker 1

And I think that that safe position has got to be leveraged that's in the mid-3s, low-3s maybe even. But yes, you need buyers.

Speaker 5

Which is

Speaker 1

what I said earlier when we talked about dereg and the capital coming into the business.

Speaker 6

Great. Thank you, Alfred. That's all I have.

Speaker 1

Yes. Thank you.

Operator

Our next question comes from the line of Hal Steiner with BNP Paribas. Please go ahead.

Speaker 7

Hey, guys. Thank you for taking my question. A lot of my questions were already asked, but I just have a few quick things. I guess, do you want to hold at least like $100,000,000 of cash? Or is there sort of like a minimum cash balance you want to kind of keep on the balance sheet?

Speaker 7

Or would you sort of be likely to drop below that as you kind of continue to focus on gross debt reduction?

Speaker 1

Yes. No, we don't have a minimum amount of cash that we

Speaker 3

are targeting to keep on

Speaker 1

the balance sheet. We've got an undrawn $50,000,000 revolver. So we could definitely see our cash balances be able to drop and still be fine from an operating standpoint. Again, our cash deployment has been opportunistic, right? Like meaning, if we can buy our debt at an attractive price, then we'll do it.

Speaker 1

If the price is not attractive, then we sit out. And so those that strategy has led us to have more cash on average than probably people might otherwise think that we should, but it's not because we're hoarding to cash, it's because we just don't want to go out and bid up things just because we've got cash, right? And so because every time we have bought debt, it's when we're in the market goes up, when we're not in the market, it goes down. And again, the best thing for the company is to try to manage that in the most efficient way possible to continue to get the most deleveraging possible. It's not a cash hoarding strategy.

Speaker 7

Yes, understood. Then I know you've talked a lot about sort of the deregulation environment, but I guess one angle or something that I've been looking at and I'm curious your thought is I think like WBD and Comcast have both been kind of working on maybe cable network companies or cable network spin codes sort of coming to market. I guess I'm just curious how you think about that, those entities coming into market and maybe providing some route valuation read through. And I'm just curious how you think about like any combination or partnership angles there with your TV business efforts?

Speaker 1

I mean, everybody got all excited when Comcast announced they were doing SpinCo because they think that that's going to they're going to be the end buyer of all of the stranded cable assets. I don't know that to be true, right? And I think the biggest problem that you're going to have with cable assets is AMC is trading that last I looked it was trading at 4.5 or it was trading at like five times cash flow. Nobody wants to sell cable cash flow at five times. They'd rather keep it, right.

Speaker 1

And nobody really wants to buy it at seven or eight times. So I don't necessarily believe that those entities are going to be the end buyers for people's assets. I do think, Jody, you tell me, we've seen churn moderate, right? Yes. I think we're forecasting what mid single digit churns down from like 11% last year.

Speaker 1

So I had a conversation in New York with a broadcaster. I had lunch with them.

Speaker 2

And that

Speaker 1

I had a conversation with the broadcaster and he said that, hey, I've been talking to people and a lot of people think that sort of churn or table penetration is going to net out, bottom out at like 40%. And I guess that would be like 40,000,000 households. That was his view. And I guess the point I'm trying to make is churn has started to ease up. There are some people believe that it is going to bottom out at some point in time.

Speaker 1

And if that happens, that will that I think will create more opportunity for people wanting to acquire these assets because you know what the knife is falling, right? Like you know what you're going to own and can try to and can better project what the earnings from that are going to be. But I don't think just because you got these spin codes out here that all of a sudden you're going to see a bunch of consolidation. I could be wrong. I haven't talked to anybody at Comcast about it.

Speaker 1

I haven't asked them. I just now. I just don't think people can make that assumption.

Speaker 7

Got it. Makes sense. Thank you guys for taking my questions.

Speaker 1

Thank you.

Operator

Our next question comes from the line of Matt Swope with Baird. Please go ahead.

Speaker 8

Thanks. Good morning, Alfred and Peter.

Speaker 2

Good morning.

Speaker 8

Peter, could you give an update on where your cash balance stands at this point?

Speaker 2

Yes. As of this morning, it was $117,000,000

Speaker 8

So, Alfred, just sort of listening to you talk about possible capital allocation and things, I guess, to be a little bit blunt, I mean, your bonds are all the way down to $50,000,000 now, which doesn't make a lot of sense to me, honestly. Why not I guess, one, could you find any M and A that gave you a better return than buying your bonds back here? And two, why not do something bigger? You guys have run with a very, very low cash balance in the past. Why not take almost all of that cash, maybe do a broad tender or something and buy back as many bonds as you possibly could, maybe at a slight premium to where the market has been today?

Speaker 1

Versus taking that cash and buying it at where the market is at, like over time, like I mean, I think the problem with that is you go out and you offer a tender, it's rarely a slight premium, right? Just in negotiate, just doing the bond buybacks, our experience is there's a significant bid ask when we're an active buyer between where people want to sell and between where the market is marking it, right. And so we've done better when we've selectively bought, right, as opposed to just going out, taking all our cash and paying some big premium for the bonds. So we've considered the tender. We're also going to run out of buyers, excuse me, at sellers at some point because our bonds are very concentrated into two big hands that probably own over 50% of the issue.

Speaker 1

So there's going to be a point where you're not going to see sellers at these levels.

Speaker 8

Given that dynamic, is there any thought to doing some kind of liability management exercise or working with your big holders to capture some of this discount, maybe do some equitization? You talk about wanting leverage to be down in the low 3s. You've given an EBITDA guide that's down over 25% year over year. So obviously, where that pushes your leverage a lot higher. Is there any way to do some kind of broader I'll use the word restructuring, which I know is a dirty word, but to maybe provide some equity to some of those holders just to reduce that debt balance a little bit proactively?

Speaker 1

We have no liability management exercise in process. We haven't engaged anybody. People have pitched us on it. We think it's early for us. Our maturity isn't until February 28.

Speaker 1

So we think it's early to begin discussions on some sort of rollover amend extend like iHeart's done, like Beasley's done, etcetera. But the answer to the question is as we get closer to that maturity maybe in another year having those discussions with our holders are absolutely prudent and we would consider all options to accomplish a better leverage profile. But as I said before, there's two players that you got to do that we only have two people that we need to talk to and figure out what's the best route for the company because they have over 50% of the issue.

Speaker 8

Got it. Thanks. I appreciate that commentary.

Speaker 1

And we have consistent dialogue with those players. We're not operating in sort of a vacuum of information flow between us and our debt holders.

Speaker 8

I got it. Thank you. And on the $75,000,000 EBITDA guide, Peter, it's a little bit lower than I was modeling. Would you call that a more conservative estimate or how would you characterize that?

Speaker 2

Yes. Look, one thing you got to think about is the valuation on TB1 went down significantly year over year. And as a result of that, the liability on the CEO's award went down by $10,500,000 and that's in we got a pickup in the adjusted EBITDA as a result of the valuation of TB1 going down. So on a cash basis, you would adjust the 103.5%, you'd take that 10.5% off. So really a baseline is kind of 93% not 103.5%.

Speaker 2

Because of that non cash pickup that's not expected to recur this year.

Speaker 1

I see. Can you

Speaker 8

you mentioned that a couple. Yes, no, that does make sense. Can you just walk us through how that CEO award works?

Speaker 2

Yes. I mean I'll oversimplify it, but it's roughly 4% of any cash proceeds, dividends, sale proceeds from the value of TV One. And I think the valuation of TB1 at the moment is $285,000,000 And then there's some balance sheet adjustments, but the liability currently stands around $10,000,000 on the balance sheet and it has been as high as $25,000,000 in the past. So that's just a reflection on the reduction in the carrying value in the fair value and the carrying value of the TV One asset as the projections have decreased.

Speaker 8

I see. And has cash been paid out on that at all or that's just the liability that moves up and down?

Speaker 2

It has on an annual basis TV One declares dividends and CEO gets his 4% share of those dividends and that's ranged. I think it's around $2,500,000 a year at the moment. It's been as high as just north of $4,000,000 but as the cash flow from that business has reduced, so as the cash payout on the annual dividends flowing from TV One. I

Speaker 8

see. Thank you. And maybe just one last one for me, probably for Alfred. Alfred, is it safe to say that the casino process is off the table for now?

Speaker 1

In Richmond, yes, it's safe to say given that they've actually broken ground on the casino in Petersburg.

Speaker 8

I guess I'm asking even a lot. Yes, at one point you maybe mentioned thinking about it in Maryland as well. Is it, but just given the state of the balance sheet and things, is it over?

Speaker 1

Yes. No, well, we like that business. We are looking for opportunities to invest in it again. Our Maryland effort was not around a bricks and mortar casino, it was around their iGaming legislation. For the last two sessions, they've been contemplating trying to introduce iGaming.

Speaker 1

And we'd like to position ourselves to be in that business and get a license. And so we've been lobbying to be part of the legislation. It died again this year, but iGaming is a great business as well and it's only in six states versus 37 or 38 states that actually have land bricks and mortar casinos operating. So that's been our most recent gaming effort. We are currently not participating in any sort of RFPs for any land based casino developments at all.

Speaker 8

Got it. Well, I'll just reiterate my unsolicited advice. I just I can't imagine you can get a better return on anything than buying your bonds back in the open market right now. But thank you guys very much.

Speaker 1

Yes. I mean, we've been taking that advice. I mean, we spent $150,000,000 in the last year and I appreciate that advice. But again, like I said, we want to make sure that we're prudent about how we buy it. And that's the reason we do it selectively.

Speaker 8

Thanks guys.

Speaker 1

Yes.

Operator

Our next question comes from the line of Ann Silver with Stifel. Please go ahead.

Speaker 4

Hi. It's Ken Silver from Stifel. Ann is my sister. How are you guys doing? Nice to see you again.

Speaker 1

Are you using her phone, Ken?

Speaker 4

Yes, exactly. Anyway, nice to talk to you again. Most of my questions were answered. I guess, let me just ask you, you gave the EBITDA guide, which was definitely helpful. Would you be can you give us a revenue guide for the year also?

Speaker 4

And you sort of did sort of talking about radio and TV a little bit, but

Speaker 2

We haven't talked about given that, Ken. I need to Alfred and I haven't discussed it. I mean, obviously, I can see what we think it's going to be. Okay.

Speaker 1

I

Speaker 2

don't think we can do that.

Speaker 4

That's fine. So let me just ask you, how should we think about reach media for the year? I mean, it was down, I think, like high single digits in 2024. Is that sort of a trend that's going to continue or might it stabilize more?

Speaker 2

Yes, we have it as stabilizing and actually growing a little bit on the bottom line. So top line down a bit, bottom line up a little bit. So we don't see that as being the problem child this year. Okay.

Speaker 4

And then on digital It's

Speaker 2

stable to down a bit, but up on the bottom line.

Speaker 4

Okay. And then on digital, you called out the sort of the headwind with cat. Are there any other obviously, you're going to move some revenues to the TV segment. But besides those two things, is anything else significantly up or down digital?

Speaker 2

Yes. So it's I think there's a couple of other macro things. Our traffic is down significantly over historic levels and that's a function of partly AI, partly the new landscape out there. So we're not getting traffic driven to us in the same way as we have before from Google and Facebook. So you've got some headwinds in traffic, which in turn means we have to go out and buy traffic, which reduces the margins, right, we've got high attack.

Speaker 2

And then demand in general, we've ridden the DEI wave and that's receded. So I think there's a softening in demand there in the digital business as well. So Digiad definitely got some headwinds for us.

Speaker 4

Okay, great. All right. Well, thanks very much. I appreciate it.

Speaker 1

Thanks, Dan. Operator, it's +1 058. We got time for one more question.

Operator

We have no further questions at this time.

Speaker 1

Okay, great. Thank you, everybody. As usual, we are available offline if anybody

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Earnings Conference Call
Urban One Q4 2024
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