Urban One, Inc. Q1 FY2021 Earnings Call

Ladies and gentlemen, thank you for standing by. And welcome to the Urban One 2021 First Quarter Earnings Call. As a reminder, this conference is being recorded. We will begin this call with the following safe harbor statement. During this 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. This call will present information as of May 12, 2021. Please note that, Urban One disclaims any duty to update any forward-looking statements made in 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 this conference will be made available from 12:00 p.m. Eastern Standard time today, May 12, 2021, until 11:59 p.m. May 13, 2021. Callers may access the replay by calling 1866-207-1041 or 402-970-1041 with the access code is 1059321. Access to live audio and a replay of the conference will also be available on Urban One's corporate website at www.urban1.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 Thompson, Chief Financial Officer. Mr. Liggins, please go ahead.

Thank you very much, Operator. Also joining me are Karen Wishart, our Chief Administrative Officer, Jody Drewer, CFO for TV One, and Kris Simpson, our General Counsel for the company. You all have got the press release for the first quarter results. We are pretty happy with our performance in Q1 and very excited that this is the quarter that we will put behind us and start to lap our COVID comps. Even with two months of negative COVID counts, our strong months last year, we actually posted stronger EBITDA in Q1 compared to 2019. We are starting to see significant rebound activity for Q2 in our radio business, and our other units continue to perform well. So we're very optimistic about the full year. I will now turn it over to Peter to go into the specifics of the numbers.

Thank you, Alfred. Net revenue was down by 3.6% year-over-year for the quarter ended March 31st, 2021, approximately $91.4 million. Core radio revenue, excluding political, was down 13.7% year-over-year in the first quarter. January was down 28.4%. February was down 19.9%, and March was up 8.8%. So we saw sequential improvement throughout the quarter. Including political, national ad sales for Q1 were down by 23.7% year-over-year, while local ad sales were down 21.5%. By category, entertainment was down approximately $2 million, driven by the lack of concert event and movie activity. Financial was down by $1.7 million; services was down by $1.4 million, driven by lower tax, legal, and recruitment client spending. Retail was down $1 million; food and beverage was down approximately $900,000, driven by lower spend from fast food and other restaurants. The outlook for radio in the second quarter is obviously stronger with Q2 pacing currently up by more than 70% as we lap our most difficult quarter from 2020. Adjusted EBITDA for Q1 was impacted by $1.4 million of expenses related to the Richmond casino project. Despite which, as Alfred said, we posted a higher adjusted EBITDA than in the first quarter of 2019. Net revenue for Reach Media was up by 16.8% in the first quarter, driven by increased advertiser demand for the African-American audience and government business related to COVID-19 and the launch of a Macy's podcast. Adjusted EBITDA of Reach was up by approximately $1.9 million year-over-year. Net revenues for our digital segment increased by 64.7% in Q1, with strong demand from brands to spend with black-owned and certified diversity publishers contributing to the growth in direct advertising sales at iONE Digital. This drove adjusted EBITDA growth for the quarter of approximately $3.2 million year-over-year for our digital segment. We recognized approximately $46.2 million of revenue from our cable television segment during the quarter, a decrease of 2.6%. Cable TV advertising revenue was down 1.6%; cable TV affiliate revenue was down by 2.8%, with rate increases of approximately $1 million offset by churn of approximately $1.7 million. Cable subscribers for TV One, as measured by Nielsen, finished Q1 2021 at $49.4 million, down from $51.4 million at the end of Q4. And CLEO had 29.8 million Nielsen subscribers. We recorded approximately $1.7 million of cost method income less administrative expenses for our investment in the MGM National Harbor property for the quarter compared to $1.4 million last year and $1.7 million in 2019. Operating expenses, excluding depreciation, amortization, impairments, and stock-based compensation, decreased to approximately $65.2 million in the first quarter, down 0.6% from the prior year. We saved approximately $1 million in employee compensation expenses and $650,000 in reduced travel and office expenses due to our cost savings initiatives year-over-year. We also saved approximately $1.1 million in lower program content amortization expense of our cable television segment. These savings were offset by an increase of approximately $1.3 million in marketing spend to promote programming at TV One. The increase in corporate selling, general, and administrative expenses was primarily due to an increase in professional fees related to the Richmond gaming opportunity. Radio operating expenses were down 11.4%. The radio SG&A expense line was down 9.9%, driven by lower employee compensation, variable expenses, and discretionary marketing and promotions. Radio program and technical expenses were down 14%, mainly from lower employee and talent compensation and reduced music royalties. Reach operating expenses were down 12.1%, mainly due to lower employee compensation and a favorable reversal of bad debt expense. Operating expenses in the digital segment were up by 12% driven predominantly by variable expenses related to the increased revenues. Cable TV expenses were up 5.2% year-over-year. Programming content expense decreased by approximately $1.1 million. The sales and marketing expenses were up by approximately $1.9 million, driven by the increased media campaigns to support programming. Operating expenses in the corporate and eliminations segment were up by 23.9%, primarily due to the increase in professional fees for corporate development activities related to potential gaming and other similar business activities. For the first quarter, consolidated broadcast and digital operating income was approximately $36.4 million, a decrease of 3.3%. Consolidated adjusted EBITDA was $28.8 million, a decrease of 10.6% year-over-year. Interest expense was approximately $18 million for the first quarter compared to approximately $19.1 million for the same period in 2020. The company made cash interest payments of approximately $13.9 million on its extending debt in the quarter. The benefit from income taxes was approximately $10,000 in the quarter and the company received a cash refund of taxes of $32,000. Net income was $7,000, rounded to $0.00 per share compared to a net loss of approximately $23.2 million or $0.51 per share for the first quarter of 2020. Capital expenditures were approximately $804,000 compared to approximately $1.4 million last year. As previously announced on January 25, 2021, we successfully refinanced all of the company's existing debt, cash on hand, and $825 million of senior secured notes at a rate of 7.375% due February 1, 2028. As of March 31, 2021, total gross debt was $825 million. The ending unrestricted cash was $56.8 million and net debt was approximately $768.2 million compared to $134.6 million of last twelve months reported adjusted EBITDA, giving a total net leverage ratio of 5.71 times. And with that, I will hand back to Alfred.

Thank you, Peter. I wanted to call to everyone's attention. I don't know if you've seen it much in the advertising press. But there is a very, very positive advertising climate for African-American owned media companies. Corporations like Procter & Gamble and General Motors have made significant pledges to increase their investment in African-American owned media specifically. And also, within the last week, the Interpublic group of ad agencies and now Group M advertising, two very large advertising holding companies, have also committed to increase their spend with African-American owned media. We will benefit greatly from that. These are tailwinds that started in the aftermath of the protest over the George Floyd murder and the Black Lives Matter movement of last year. I got a lot of questions about whether or not we thought that momentum was one-time, whether it was sustainable, or whether it really was a sign of positive momentum that would create systemic change. I can certainly say that all signs are pointing to continued momentum, larger commitments, and a real desire to create a more equitable playing field as it relates to media investment. So that's very positive. The Group M and the Interpublic announcements all came within the last week. I've been involved in high-level conversations with these corporations and these advertising agency holding companies. So I'm well aware of the intent and the commitment that they're laying out. And it all starts at the top. When the CEOs decide that this is a commitment that they want to make to multicultural media and diverse owned media, then that's a big statement. Secondly, I want to talk about our Richmond, Virginia Casino opportunity and initiative. As I mentioned before, we Urban One in partnership with Peninsula Entertainment made a proposal to the city of Richmond to build a $600 million casino resort in the city. It was an initiative based on our desire to further expand into the gaming arena since we had such a great experience with our investment at MGM National Harbor. We started off with six different companies that responded to the RFP on February 22. It is now down to just two of us, Urban One and the Cordish Companies. We are spending a lot of time trying to win this and get it over the finish line. I guess you could say since there are two of us, we have a 50-50 shot. But we are currently in discussions with the state. So is the other party. However, we have got very different proposals. Our proposal is on the south side of Richmond in an industrial area that doesn't really impact neighborhoods and actually has widespread support from the largely minority neighborhoods and populations that surround it because of the amenities that our project would bring. The competing project that's sponsored by the Cordish Companies is in north Richmond in a trendy restaurant bar area called Scott's Addition that has the exact opposite population. Ultimately, it's going to come down to where the city sees itself wanting to spark further economic development. So stay tuned on that. We should hear something by the end of the month. But this is the first time you'll see it flowing through our P&L. We had $1.4 million of what we call chase costs, those are costs for the RFP, lobbyists, and printing the initial architecture designs and renderings that you need to put together to show what your project is advertising, etc. If we are chosen, which we'll know by the end of May or beginning of June, then we'll have to go to City Council to get approved to be put on the ballot for a referendum that will happen in November, where the citizens of Richmond will then vote on whether to approve a casino resort at the chosen location, our location. There will be additional costs that will come from running the referendum and then more architectural costs. So we're estimating our chase cost could be, if we win, up to $4 million or so. If we don't win, there will be half that, but it's pretty exciting to get this far. You can go to onecasinoresort.com to get updates and information. There's lots of videos about what we're planning there. As I've said before, should we be lucky enough to be chosen, this particular opportunity could create another revenue and EBITDA stream that would rival the size of our radio group or our cable television operations. So, it would be a pretty significant diversification opportunity for the company.

Can we go to the line for Q&A please? We have a question from Rafe Leeman from Eaton Vance. Please go ahead.

Hi. It's Rafe. Thanks. So you mentioned on the pacings for, I guess, quarter up 70% in Q2. That sounds great. You, like others in the space, your actual numbers for Q1 ended up being better than the pacings, and that's kind of what people had said is that things were coming in later and then the actual numbers are actually doing better than the pacings. Is that continuing? Do you think that will occur again where there's a little bit of a delay and you'll still do even better than the pacings? Or is that kind of normalized in terms of return?

It certainly seems that way. However, predicting the timing of when revenue comes in has become much more challenging. During the pandemic, cancellations occurred at an alarming rate. As conditions began to improve, the numbers initially looked quite poor but gradually got better throughout the month and the quarter. For instance, in the first quarter, January saw a decline of 28%, February was down 20%, but by March, there was an increase of 8%. I expect we'll continue to see bookings coming in later and improving, but as we approach normalization, the rate of that improvement may begin to slow. We're observing a strong economy, especially in our national businesses, such as Reach Media, where we are facing inventory shortages and are sold out. This puts us in a situation where rates are increasing, and in this sense, inflation can be seen as beneficial. Demand is outpacing supply in digital, and there’s also significant demand in TV. Local radio is not as strong as those platforms, but it is definitely improving. So, in response to your question about whether we expect to exceed the 70% growth for Q2, I’m not certain. Do we have a forecast, Peter?

We do. And it is slightly better than that, but it's not dramatically so. As I look at the pacings, I think we called out in your quote for that April finished up about just under 90%, 89% up.

Yes.

May’s pacing, up about 75%. June's pacing up about 49%. If we were calling it now, we'd say it's mid-70s.

Mid-70s, yes. A tick over the 70 mark. I would say that when we budgeted for our radio business, we did not budget to be back at 2019 levels. We budgeted to be somewhere between 2019 and 2020, and we are on target for that revenue performance. Yes, and so we feel comfortable about that. It's too early for us to say whether or not we're going to overperform that. But right now, we feel pretty good about it. Our Q4 last year was tremendous because of political. Peter and I were talking about it earlier. I think we're going to be feeling good tracking along until we get to Q4, right? Because it was such a big quarter for us. But we still think that we can hit the metric that I just described to you.

Yes. And then the other thing to point out is digital obviously is our strongest growth area at the moment from a radio standpoint. So when we talk about our pacings, we're including the digital business in that, the radio digital business in that. When we report out and break down advertising, we pull all the digital into the digital segment. So just to be careful that we're talking about the same thing, the plus 70 number includes our radio digital performance.

Okay, thanks. That's helpful. Can you provide any update on the events and what the timing looks like for that?

Our biggest event that we got, two big events. One Birthday Bash in Atlanta is scheduled to resume in June. We're doing it in the old Atlanta Braves stadium that now I think is a Georgia state facility. It holds 50,000 or 60,000 people, and we're setting it up to be socially distanced for 15,000 people. The business model for this year actually could see it be quite profitable. Should we hit that benchmark? So that is happening at reduced capacity. And then we have our Fantastic Voyage cruise from Reach Media scheduled for Q4. Right now that's all planned and set to go. That would be a significant driver as well. Profit expectations would not be at historical profit levels, but not far off of it. As long as cases keep coming down and vaccinations keep happening and the economy keeps opening, you'll see us continue to return to events. Two of our biggest events are happening at this point in time this year.

Terrific, terrific. If I could maybe just do one more and then I'll jump out. Just any update in terms of the financing on Richmond. I think you've been pretty clear on the last call that I guess you can write up to a $75 million common equity checkout of this everyone’s silo, but it might not be that much and main program so any updates there?

Yeah. Look, it's moving around. The reason it's moving around is because we're negotiating with the city, which moves around the numbers in the project. But a couple of things, we've got robust demand from almost 60 local investors that have signed up to invest alongside us in this project. The idea is that we sell off at least 10% of this to people who actually live in Richmond. These people are signed up with giving us numbers, etc. and so that is helpful to reduce whatever our numbers are. Our original equity commitment was $75 million. So that equity commitment would have been $75 million minus the 7.5% for their 10%. I pledged to put some personal money into it as well. The local investment number could go up. We could look at alternative ways to finance it. The pandemic was helpful in making us smarter about the tools that we could use to raise capital. We were very lucky and excited to have gotten that refi off. We have two ATM programs for both classes of shares in place. We've used at least one of them, the Class As. We haven't used the Class Ds. I would say we will be very conscious of how to finance this and avail ourselves of all capital opportunities to also focus and think about our continued goal of deleveraging. That's super important. Even though our current leverage level is at a place given the pandemic that we haven't seen before, we realize that it's not where it needs to be. No. We're not going to do anything that stretches us too thin. We would look at also other outside ways to raise capital outside of selling equity and taking the local investors too. Deleveraging is still a very important effort for us, and we're not losing sight of that. If we were lucky enough to be chosen, I think that I don't know what's going to happen to our securities, but they should respond positively because it will be a significantly accretive event, although it will be out in terms of when it comes to fruition, just when in that license, we'll build significant value in and of itself.

Terrific. Thanks so much.

Our next question is from the line of Todd Morgan. Please go ahead.

Great, thank you. And thanks for all the color as usual. I just had two follow-ups on the operating side. I guess first of all very broadly, given the positive start to the year and your comments here, I know you said the fourth quarter is a little bit of a tougher comp. But is it fair to say that your broader thoughts about EBITDA for the full year that you talked about in the past? I would think you're feeling a little bit better about the achievability of that at this point? Just given the strong…

If you recall our road show and refinancing, we didn't provide official guidance, but we anticipated that Q4 would be significant for us, especially since it was a non-political year. The soft guidance we shared regarding EBITDA is still relevant. However, I should mention that if we don't secure the Richmond license, we will likely face a one-time loss of around a couple of million dollars, which would affect that figure. On the other hand, if we do win the license, it will contribute to our investment, and we will likely exceed our target.

No that's helpful. That's helpful. And also, this year with production restarting on the TV side, I know you called out expectations that the programming cost levels could rise along with that. Is that unfolding as you kind of previously anticipated? Or is there any change from what you thought previously?

Jody, you want to give him an idea of what the increased programming spending is going to be this year?

I don't have what our total was last year. But yes, we are expecting about a 10% increase in our program amortization based on production being back in and just making commitments or promises to our affiliates to deliver a certain number of over hours.

But it sounds like there's really kind of on track with what you thought before …

Yes.

Okay, no that's perfect. Good quarter. Thank you very much.

Thank you.

Thank you. The next question is from Patrick Wang from Voya Investment. Please go ahead.

Yeah. Good morning. Thank you for the questions. Congratulations on the bidding. Can you just talk about from six onto two, so what you eliminate the other fours? What's the consideration from the city cancel regarding this project?

There were several factors that led to the elimination of the other four proposals, and they were not all eliminated for the same reasons. The level of experience and belief in their business plan was one factor, site control was another, and size and scope of the project was a third. The Pamunkey Indian Tribe proposed a $350 million project located very close to ours, but they were eliminated because they were not partnered with a recognized existing gaming operator and they had the lowest project proposal in terms of value. Bally's was eliminated due to approval issues with state and local authorities that the city couldn't control, as well as neighborhood opposition. Gold Nugget was eliminated because they had a backup contract on the Bally's site but did not actually hold an option on it. Now we are down to us and Cordish, and the decision will largely depend on location preferences, the ability for that location to pass a referendum—as citizens will vote on it—and what the city selection committee thinks about who will deliver the highest quality product. These will be the key considerations, alongside the economic factors that will be presented to the city.

Right. In terms of the underlying real estate that's a former Philip Morris site. Do you actually have a contract or buy the land? Or are you going to lease the land?

Yeah. We have an option to buy it.

Okay. And the timing you said is May to June, so that's just around the corner. Is that city council?

Honestly, I suspect, we'll know if we've won or lost in the next two weeks.

Okay, great. If you win, do you have to divest your MGM Harbor, minority interest for conflict interest?

No. We do not.

Yeah. Okay, great. Another question is regarding radio advertising. Traditionally, it's more local. And you talked about the increased interest from advertisers for minority-owned media. What's the component right now between the mix between national and local? And how much would that increase your national advertising too?

Yeah, look, our local radio business is about 27% national? Or is it higher than that now, Peter? Is it at 30% now?

It's around 30.

It's around 30. I can't tell you how much it's going to help, right? That depends on how many clients each of these ad agencies have at any given time. They've given us percentage targets for where they want to go, but that percentage target leaves out what the sum total spend is. I can just tell you that it has been helpful. It's continuing to be helpful and people are making commitments, and that's only good news for us.

Okay. Have you considered just joining the KAKC media platform because some of the competitors talked about recently?

We're already part of it.

Okay.

Yes. KAKC is basically the de facto only national rep in the radio business.

That's under script. Right?

I'm sorry?

That's under script?

No. KAKC is owned by iHeart.

Okay. Okay. I'm thinking about the KAKC TV on the TV side. Okay.

Yes. You're thinking about the KAKC television networks, no, different company.

Yes. Got you. Last question is regarding the ATM program. You said the A has been used up. So I think during the quarter you have $9.5 million or the shares that…

I said we've used it. I didn't say it was used up. I said we've used it. As for the only shares that we've issued. I'm sure we still have outstanding capacity on it. But we also stood up a Class D for the UONEK shares that we have not availed ourselves of as of yet.

What's the size of that D ATM?

Is it 50 or 25?

It's the shelf is 50, but we're putting a pros up to 20, incremental 25.

Yes. So we have a $50 million shelf registration but our pros up that we'll register is going to be for $25 million.

Okay. That's shares not dollar right?

That's a dollar amount.

That's a dollar amount. Okay. And how much you have left under A?

I think we got, top of my head, about 19, but I'd have to double-check. So we have significant capacity still under the second $25 million.

Okay. Thank you very much.

Thank you.

And our next question is from Ben Brogadir from Odeon. Please go ahead.

Thank you for taking my question. I want to clarify the purchase price and potential accretion for Richmond. If everything goes well, could it become an equal contributor to your Radio and TV EBITDA? I’m thinking it would be between $100 million and $130 million at a $600 million purchase price, which seems quite low compared to other gaming transactions. Am I seeing this correctly? Also, does the $600 million include the land, or would that be an additional cost?

Actually, the $600 million includes land, includes everything. It actually includes some soft costs like interest and everything else too. Yes, that's kind of the math right now that how we're looking at it. But all of this stuff is contingent upon gaming studies that the state hires a company to project what gaming revenue would be by market, given the structure that they've set up in terms of the number of licenses, etc. Then we hire people to come in and drill down on the market and give us an estimate of what they think the market size will be based on household income, population, etc. And then you overlay a tax rate that whatever the state is going to charge you. You overlay what the local city charge is going to be, and then you layer in whatever else you are going to do in sort of a host community agreement, where you also make some financial commitments. Then you layer over an expense structure, which your operating partner has a very strong and deep knowledge base because they run casinos and it spits out an EBITDA number. Yes, that EBITDA number is $100 million or better. But I will caveat all this is that gaming studies have been wrong, right? You can miss them, some do better, some do worse. National Harbor was actually right on target. That's not a little better. When we first saw that business plan, I think it said that gaming revenue was going to be in the 6s and cash flow EBITDA was going to be $175 million. Gaming revenue has been in the low 7s and they've done a couple of hundred million dollars of EBITDA. When MGM did Springfield, that study was wrong and they missed the mark. For us, that's the math we look at, but we'll capitalize it and think about the risk from the perspective of what's our downside, right? How far off could this be? And it still be an accretive opportunity for the company. That will inform how much we're willing to spend and bid, etc. to also protect our downside. But yes, that's kind of the math right now.

I understand. Thank you for providing that context. I have a follow-up regarding the ATM program you are executing. It clearly impacts equity by diluting it. I'm interested in your thoughts on enhancing liquidity or securing capital for these projects. What is your reasoning for diluting equity while it's priced at $2.50 a share, especially in relation to the current interest rate environment and fixed income options? It seems equity is relatively inexpensive, and I'm trying to comprehend the rationale behind it.

That's a good question. Look, I still think we have too much leverage. I knew for sure we had too much leverage when we were levered at 6.7 times. Now that we're a turn lower coming out of a pandemic, I still think it's too much leverage and should go down. We bought back a lot of shares over the years. I think we bought back half the company, probably more than half the company now, probably at an average rate of $1, right? It was $0.80. We had always said that in order to delever or to fund projects that we think could build value, we were potentially a seller of stock at $3 levels on the Ds. We were a seller of stock at the As at these higher levels. We haven't been a seller where it's at now, but we were a seller in the 6s and 7s. How I think about that is that's a positive trade for us, given what we bought shares back for in the past. If you still think you have too much leverage, which I do, I don't think this company should be living in the high 5s in terms of leverage. So that's how we think about it.

Just jumping in for saying the previous gentleman's question I just checked on the $21.9 million available on the Class A ATM out of the $25 million. So still substantial room there.

Appreciate all that context and color. Makes sense. Just last one for me. Obviously, you guys are extremely busy on the gaming initiative. When you think about kind of your broadcasting assets and stations, kind of radio TV, you guys have done some selective asset optimization on the M&A front. Do you think that your portfolio is kind of where you want it to be as it stands today? And how do you view the current M&A landscape? Thanks very much.

I think that the answer is no. Our assets should ultimately be combined with a larger radio platform to get more scale, particularly in the markets that we already operate in. The swap we did with Entercom to get out of St. Louis and get larger in Charlotte has been great. The business is just a lot more stable when you've got larger shares and you're in multiple formats. It's also becoming more of a scale business competing against iHeart, Entercom, and Cumulus. Now that there is not radio deregulation on the horizon, our company probably is best positioned to be one of the central platforms in the consolidation. That's absolutely what I think should happen in radio. I've said it before. Why aren't we focused on it now? Because nobody wants to do anything because nobody has any idea what their real EBITDA is. You're coming off of COVID. Cumulus used to do $210 million or $216 million of EBITDA and they went down to like $80 million something last year. Now they're projected to bounce back to somewhere between $112 million and $120 million. I don't think that they think that's their EBITDA equilibrium, right? So nobody wants to do a deal. Nobody wants to buy, and nobody wants to sell right now because you just don't know what assets are worth. But as soon as we get through that, I think we should be focused on doing something.

Makes sense. Appreciate that. I'm going to sneak in one more. You mentioned kind of target leverage. Do you have a number in mind there?

Something in the 4s.

Great. Appreciate all the context in answering the questions. Thank you guys.

Thank you. And the next question is from Umesh Vandry from Legal & General. Please go ahead.

Hi, guys. Thanks for taking the question. Just a quick follow-up on the last one. Did you sort of imply that you would be the consolidator? Or you'd be more seller in this consolidation of the media assets?

That's a good question. I've always said that we are willing to be on either side of a transaction that created value and made sense. I like the radio business. Quite frankly, prior to COVID, it had actually stabilized. The Entercom deal was interesting because I was like we either need to leave Charlotte or you need to leave Charlotte. I said I'll do either. In fact, they were actually going to buy our stations in Charlotte 2.5 years ago and then they backed away from it. We ended up buying them. I'm always willing to be on either side of the transaction. If I had to handicap it, there are not a lot of radio operators left, people who know the business, know how to run radio stations, like running radio stations, and don't mind the business. Given the current landscape, we would probably be the surviving entity just because I don't see iHeart going to be able to do anything substantive, neither Entercom nor Cumulus. But again, I'm willing to look at it either way. But if I had to handicap it, we're the surviving entity. And I'm happy to be that and I'm happy to be the management solution for that because we like the business. We know the business. The radio business has actually helped us get into these other businesses. We wouldn't have been able to get into the cable business if it hadn't been for the radio business. The radio business is absolutely helping us get into the gaming space. But if there are opportunities, if there were markets that made sense for us to leave or swap around because we created value, we have no intention of exiting the business altogether. The business that we're creating has a lot of opportunity and upside. I don't want to give the impression that we are a seller from the standpoint of leaving the business. We would be a seller or a swapper of assets in order to create value, which we can then use to delever or deploy into other areas that we can grow faster. Does that make sense?

That makes sense. And I think obviously alluded to that because it seems like wholesale large transactions is a little bit difficult just given the ownership role. It seems like more sort of market by market swapping or buying selling a couple of stations that seems like that's more of the trend?

Yes. I mean, there really are no buyers. I mean if somebody put a radio company up for sale today, I think that happened. I mean, I think there was a process for Townsquare at one time, and it didn't ultimately materialize. Ultimately materializing the major shareholder getting just getting bought out. I don't think there's anybody who wants to go out and just buy big radio companies. But for a company like ours, there are significant synergies to match up in markets where we're not full yet. So, Indianapolis, Dallas, Cincinnati, Washington D.C., there's significant cost savings. If you look at us and another company like a Cumulus between corporate and the seven markets that we overlap in I think there's a lot of cost and revenue synergies there. I think that somebody needs to take advantage of that.

That's helpful. I just want to follow up on your previous question. I believe you mentioned in the roadshow that EBITDA for the full year is around $130 million. It seems that number is still accurate based on what you are saying. With that EBITDA figure, it appears you should be generating a substantial amount of free cash flow. What are your plans for that cash? Are you considering keeping it on the balance sheet to invest in the potential casino or to buy back debt? How do you view that?

Yes. Roughly $70 million is not a bad number to think about for free cash flow for this year. Probably not that much of a confidence that that's around the quantum given or take a bit on the Richmond investment so we could invest the year's cash flow in that project. If we don't, I think we'll keep it on the balance sheet and look for other opportunities. We also have the ability to prepay now up to 10% a year on the note. Up to $82.5 million we could prepay at $103 million on the note. We'll look at that. We will see where we come out on Richmond and then make the appropriate capital allocation decision after that. But to your point, I think our cash and liquidity position at the end of the year will be extremely robust.

How does that align with your previous statement that leverage is too high, and while you aim to reduce leverage, you are still planning to invest all the free cash flow in an entity outside the restricted group? How does that philosophy function?

Well, that was always the plan. When we marketed our refinancing, we talked about gaming opportunities and we got a specific carve-out for additional gaming investments and we talked about Richmond. You heard the gentleman earlier when he asked about the Richmond math. Should we be fortunate enough to be chosen, the math works, right? It's a good transaction and would be accretive to the company and worth doing. You would opt to take a year’s free cash flow and invest it in Richmond. Net-net you're going to improve the company's equity value and lower the risk on its debt. Hopefully, our securities move as well. If they do, then you could also issue more equity and pay down debt. If we only put $70 million in Richmond, we'll probably even have leftover cash to pay down some debt as well. That's how we look at it. If we don't win Richmond, we'll pay down debt and delever even more so than we might otherwise. The theories work hand-in-hand. It wouldn't work hand-in-hand if we didn't think Richmond was a significant opportunity, but we do.

Got it. And then I think like it's this put option that becomes exercisable I think like in 2022 or 2023, I think. I mean I think you sort of indicated that you plan to exercise that.

You are talking about MGM put option?

Yes.

Yes. It's exercisable every year. It's just this year it's exercisable at its highest, at its maximum value which is 7 times whatever their EBITDA is, but it's exercisable every year. Yes we always have the opportunity to put our stake at MGM, and we think that's probably worth north of $90 million and that's another way to delever.

Yes. The multiple is fully baked to the end of this year at 7 times EBITDA with no balance sheet adjustments. It's an annual evergreen. We get the chance to do that every Q1 from here on out.

So is there a plan to monetize that this year? Or what are you thinking?

We haven't discussed it, but I wouldn't recommend monetizing this year because they're likely still managing the impact of COVID on their business and aren't operating at full capacity. I doubt their EBITDA will reach $200 million this year. I could be mistaken, but I wouldn’t advise monetizing it now. Additionally, it remains stable. I believe monetization should occur when there is a need for cash, whether for reducing debt or pursuing another value-creating opportunity.

Okay. Great. Thank you very much.

Thank you. Operator, we've got time for one last question.

And actually, there are no further questions in the queue at this time. I'm sorry Mr. Leeman, just queued up. One moment please.

Sorry, I just popped up.

Sure. As we said one last one.

Can you talk a little bit about the sports betting potential revenue opportunity and whether or not you see that as impacted at all by your success or lack of in Richmond?

We haven't seen as much sports betting advertising activity as other companies because we only have one sports station. We previously had one in Washington but traded it during the Entercom swap. We picked up a sports station in Charlotte, but we also had one in Richmond, which we no longer operate. One of our competitors is currently running that station. This has limited our benefits in this area. However, if we manage to secure Richmond, our perspective on sports betting will change significantly, as we would obtain a sports betting license along with the physical license. The company will likely begin to consider our brand's involvement in sports betting not just from an advertising angle, but also as an operator and in terms of potential partnerships.

Perfect. Thank you.

All right. Operator, thank you very much and everybody, thank you. We'll talk to you next quarter. As always feel free to reach out to us directly.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T teleconference service. You may now disconnect.