Ladies and gentlemen, thank you for standing by and welcome to Urban One's 2022 Year-end Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. During this conference call, Urban One will be sharing with you certain projections and other forward-looking statements regarding future events or its future performance. Urban One cautions you that certain factors including risks and uncertainties referred to in the 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 07/07/2023. 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.urban1.com. A replay of the conference call will be available from 12:00 PM Eastern Time, 07/07/2023, until 11:59 PM, 07/14/2023. Callers may access the replay by calling 866-207-1041 within the US. International callers may dial direct 402-970-0847. The replay access code is 8019907. Access to live audio and a replay of the conference call will 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'll now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter D. Thompson, Chief Financial Officer.

Thank you, operator. Joining us today are Jody Drewer, the Chief Financial Officer of TV One, and Kris Simpson, the General Counsel of the company. We're pleased to share our year-end earnings report mid-year and appreciate your patience as we navigated an unexpectedly lengthy audit. I'm happy to report that we concluded the year in line with our guidance of $165.6 million for EBITDA, and our leverage remains below four times, achieving our target. Before I hand it over to Peter, I want to highlight a few key points. As mentioned in our press release, we successfully monetized our investment in MGM National Harbor, an investment we made back in April that proved to be very lucrative. We invested $40 million, which we later recouped entirely in dividends over time, and our equity in the investment is now valued at $137 million, yielding about 4.5 times our initial investment. Our decision to exit was based on the realization that MGM's 2022 performance was a peak for the property, exceeding our expectations. Considering the current macroeconomic conditions, we believed the likelihood of achieving higher returns in the future was low. Additionally, from that $137 million, we're receiving around $8.8 million in dividends, equating to a 6.4% return on the investment. We believe we could invest that capital more effectively elsewhere, starting with US Treasuries yielding approximately 5%. Given the current economic uncertainty, holding cash makes sense as we plan for possible deployments, including debt buybacks, which we had paused since we hadn't submitted our financial statements. Presently, our bonds are yielding over 10%, making that a more attractive option than staying on the equity side with just 6.4%. We're also preparing to run another referendum for our casino project in Richmond with our partner, Churchill Downs. We are optimistic about this referendum, bolstered by public assurances from Virginia Senate budget negotiators that support its progression. Following City Council approval, we are currently with the Virginia Lottery for the necessary approval before moving to the Circuit Court to schedule the referendum. Early voting is set to begin on September 22, 2023, and if all goes well, we will require cash to support this initiative. Our partnership with Churchill Downs now reflects a fifty-fifty equity investment, and we are pleased to have such a well-capitalized and engaged partner. Additionally, we announced a few months ago our acquisition of four Houston radio stations from Cox Media Group for $27.5 million and have made agreements to spin off two stations for a total of $10.5 million. Thus, our net investment in this acquisition will be about $17 million. We expect this move to generate at least $5 million in cash flow, resulting in a solid acquisition multiple. Looking at potential future radio acquisitions, the market is currently trading at around a 5 EBITDA multiple. Acquiring radio assets at around a 5.5 multiple could yield close to a 20% return, which is again more favorable than the return from our MGM investment. We are also monitoring developments regarding Paramount's potential sale of the BET Media Group, including BET and VH1. While we are not prominently mentioned in discussions, we are actively participating in the process and seeing how our assets align with theirs. For our 2023 outlook, we anticipate EBITDA to surpass our pre-pandemic figures from 2019, excluding MGM dividends, and we feel confident about achieving that. We expect leverage to remain below four times, estimating about 3.7 by year-end, and given the economic context, we are optimistic about reaching these targets. Now, I will turn the call over to Peter Thompson for more specific details on our financials.

Thank you, Alfred. And before we enter numbers, let me talk a little bit about the delayed filing and the MGM restatement. Since the inception of the MGM deal, we've been carrying our stake in that as an equity investment at that cost. However, once the put option that we had became exercisable, we should have reclassified the investment as a debt security available for sale. So really it's a technical change in that and how we should have carried it on the balance sheet. And once you end up in that bucket, that is a debt security available for sale, you should then revalue it every quarter and we didn't do that. And obviously, we knew what it was worth. And I think we've done a decent job of telling our investors what it's worth, but when the put crystallized, that the end state value of $136.8 was known, but we have to go and hire an outside valuation specialist to appraise the asset for each quarter of 2021 and 2022 using multiple methodologies, which took some time to work through. Separate from this, but also contributing to the delay in filing, ours is required additional documentation around the company's ASC 606 revenue recognition policies. And that required us to bring in a consultancy firm to write a bunch of technical accounting memoranda. We're not a big shop. We didn't have the resource to do that internally. And so we had to go and find someone to write those technical accounts and memos for us. And then finally, there was significantly increased substantive order testing around journal entries and other things as a result of a lack of reliance on internal controls, but in prior years, had been deemed sufficient but weren't this year. And all of that meant that it took many additional weeks of work to get the accounts signed off, which had been frustrating both for the company and the investors. And I thank you all for your patience and support. I've been speaking to as many of the investors as I can just to try and keep people appraised of what's going on. And we appreciate you being patient and bearing with us while we worked through all of that. Turning to the numbers themselves. Consolidated adjusted EBITDA was $31.7 million for the quarter, which was down 2.3% from last year. Full year consolidated adjusted EBITDA was $165.6 million, in line with the company's guidance and up 10.2% year-over-year. Fourth quarter consolidated net revenue was up 1.6% year-over-year. The Indianapolis radio acquisition added approximately $4.2 million, and there was the absence of the Reach cruise event which generated $7 million last year in the fourth quarter in ‘21. Normalizing for those two things, net revenue was up 3.9%, or down 1.4% excluding $6.6 million of incremental political advertising. Net revenue for the radio segment increased 23.8% year-over-year and by 14.1% on a same-station basis. According to Miller Kaplan and on a same-station basis, our local ad sales were on par with the market at minus 1%, and national ad sales outperformed, we were up 41.9% against the market that was up 17.4%, helped by heavy political spending and also our corporate sales effort. We recorded $8.1 million in net political ad revenue, of which $7.2 million was radio compared to $1.5 million in the prior year. Government and public was our biggest radio advertising category for the quarter, up 97.6%, healthcare was up 53.6%, auto was up 86.3%, retail was up 12.7%, entertainment was up 8.9%. Services, financial, telecoms, food and beverage, travel and transportation were down in the quarter. Q1 2023 Radio revenue, excluding digital, was up 2% on a same-station basis or up 3.1% same-station, excluding political. Q2 is currently pacing down 5% excluding digital on a same-station basis, or down 0.9% excluding political. So we're holding well on a same-station basis, ex-political. Net revenue for Reach Media was $11.9 million in the fourth quarter compared to $12.3 million last year excluding the cruise event. Adjusted EBITDA was $3.1 million, down from $3.8 million in last year. Our full year adjusted EBITDA increased by 13.3% to approximately $15 million. Net revenues for our Digital segment increased by 24.1% in the fourth quarter to $24.2 million. The direct sales team had an exceptionally strong finish to the year, driven by continued demand to reach Black audiences at scale and increased midterm political revenue. Adjusted EBITDA was $1.9 million for the quarter and $21.8 million for the year, up 24.1% year-over-year. Our Radio, Reach, and Digital segments saw our audio business had combined Q4 adjusted EBITDA of $20.8 million for the quarter, up 12% year-over-year. We recognized approximately $49.7 million of revenue from our Cable Television segment during the quarter, a decrease of 8.2%. Cable TV advertising revenue was down 8.4% with a favorable rate volume impact of $900,000 offset by unfavorable timing variance of $1.7 million in free video on demand and $1.6 million unfavorable AVU burn-off. Cable TV affiliate revenue was down by 7.4% with a favorable rate increase of $1.2 million being offset by $2.4 million of net churn and $650,000 increased financial support. Cable subscribers for TV One as measured by Nielsen, finished Q4 at $46.5 million compared to $43.6 million at the end of Q3, and CLEO TV had $41.8 million Nielsen subscribers. You're having trouble hearing us. Okay. Sorry, I just heard the sound quality is poor. We turned the air conditioning off here and moved the microphones around. Hopefully, that will be better. We recorded approximately $2.6 million of investment income from our stake in the MGM National Harbor property for the quarter, up 30% from the prior year. Operating expenses, excluding depreciation, amortization, impairments, and stock-based compensation, were approximately $104.2 million in the fourth quarter compared to $105.6 million in Q4 of 2021. Event expenses decreased by $6.9 million due to the absence of the Reach cruise event, which returned in May of this year. Cable TV content amortization decreased by $5.3 million and the non-cash charge for the CEO's Employment Award decreased by $3.5 million. Employee compensation increased by approximately $5.6 million, including incentive compensation across the organization for superior annual performance against plan. Revenue variable expenses increased by $4 million. Travel, entertainment, and office expenses increased by $2.2 million and outside services including contract, talent, and consulting fees increased by $2.5 million. About $3.3 million of those increased expenses were related to the Indianapolis radio acquisition and are included in those totals. Radio operating expenses were up by $4.8 million with the Indianapolis cluster adding just over $3 million of that increase. Expenses related to revenue increases such as sales commissions and bonuses drove the rest of the increase. Our Reach operating expenses were flat, except for the cruise event. Operating expenses in the Digital segment were up 36.9%, driven predominantly by variable expenses related to traffic acquisition costs, which were up $2.3 million, and ad production and marketing, which was up $2 million and content and streaming music royalties, which was up by $1.7 million. Cable TV expenses were down $4.9 million with content amortization expense down by $5.3 million due to some write-downs in prior years that didn't recur. Operating expenses in the Corporate and Elimination segment were down by 4.7%. It was a favorable variance of $3.5 million for the non-cash TV One employment award charge, which was offset by increases in employee compensation including annual performance bonuses, outside legal fees, third-party software license fees, travel and entertainment, recruiting, and marketing. For the fourth quarter, consolidated broadcast and digital operating income was approximately $47.6 million, an increase of 7.9%. During the quarter, the company repurchased $25 million of its 2028 notes at an average price of approximately 86.4%, resulting in a net gain on retirement of approximately $3 million. An additional $25 million of the 2028 notes was repurchased in the first quarter of 2023 at an average price of approximately 89.1%, bringing the total gross debt balance down to $725 million today, down from $825 million at the start of 2022. So we've now paid down $100 million of the debt. Interest expense decreased to approximately $14.6 million for the fourth quarter, down 8% from last year due to the debt pay downs. The company made cash interest payments of approximately $625,000 in the quarter, including the accrued interest on the retired notes, and the semiannual interest payment was paid on February 1st, 2023. A non-cash impairment of $10.3 million was recorded for our radio market broadcasting licenses in Cincinnati, Dallas, Houston, and Raleigh and also for our Philadelphia market goodwill balance. Provision for income taxes was approximately $3.9 million for the quarter. The company paid cash taxes in the amount of approximately $1.1 million. Net income was approximately $856,000 or $0.02 a share compared to $5.3 million or $0.10 a share for the fourth quarter of 2021. Capital expenditures were approximately $1.5 million. The company repurchased 13,577 shares of Class D common stock in the amount of $57,000. As of December 31, 2022, total gross debt was $750 million. The ending unrestricted cash balance was $94.9 million, resulting in net debt of approximately $655.1 million, which compared to $165.6 million of LTM reported adjusted EBITDA Gives a total net leverage ratio of 3.96 times. Pro forma for the Indianapolis acquisition, total net leverage was 3.91 times. On 03/08/2023, the company issued a put notice with respect to 100% of its interest in MGM National Harbor, LLC. On 04/21/2023, we closed on the sale of the put interest. The company received approximately $136.8 million of proceeds at the time of settlement. During the quarter ended 03/31/2023, the company also received $8.8 million representing the company's annual distribution from MGM National Harbor with respect to fiscal year 2022. Pro forma for the MGM put, total net leverage was 3.21 times, including $145.5 million of cash receipts from MGM and excluding the LTM adjusted EBITDA for the MGM stake of $8.8 million. On 04/11/2023, the company announced it had signed an asset purchase agreement with Cox Media to purchase the Houston radio cluster. Urban One will divest two stations to comply with FCC ownership regulations. The transaction is subject to FCC approval and is anticipated to close either late in the second quarter or early in the third quarter of 2023. And until that time, we and CMG will continue to operate our respective stations. And then finally, with the MGM proceeds, our current cash balance today is approximately $235 million. And with that, I will hand back to Alfred.

Great. Thank you. Operator, I'd like to open the line up for Q&A, please.

We will now take questions from Aaron Watts with Deutsche Bank. Please go ahead.

Hi, everyone. Thanks for hosting the call. It's great to connect with you. I have a couple of questions. Peter, I apologize for putting you on the spot, but your audio was a bit unclear at the start of your remarks. Could you please repeat the same-station core advertising performance for the radio segment in the fourth quarter and the first quarter, as well as the second quarter's pacing?

In the first quarter of 2023, excluding digital, the radio segment increased by 2% on a same-station basis. If we remove political revenues, it rose by 3.1%. Overall, it may appear that we had an 11% increase in the first quarter due to the Indianapolis acquisition. Currently, the second quarter is tracking down by 5% on a same-station basis, though there was a significant amount of political revenue last year, totaling a couple of million dollars. When excluding that political revenue, the same-station performance for the second quarter is down by 0.9% for radio as reported. After accounting for the Indianapolis acquisition, we expect to see growth in the low to mid-single digits.

Okay. Got it. Thank you for repeating that. As you look ahead to July, how do you feel about the current environment compared to the first half of the year? Are there any signs of improvement in advertiser willingness to spend, whether at the local or national level, or does it seem consistent with your experiences from April to June?

There's definitely a downturn in advertising currently. I recently attended the Cannes Lions advertising conference, and it’s clear from major holding companies that this trend is particularly strong in national advertising. While local advertising shows more resilience, the news and economic data indicate overall strength. However, advertisers are pulling back, possibly due to concerns about future conditions. We recognize an advertising recession is occurring, though our interest in diverse-owned media is keeping us relatively strong. Demand has decreased, but we’re still performing better than non-diverse-owned companies. This is also why we believe it’s wise to hold onto cash at the moment; we’re uncertain about what the future holds. I suspect that if a recession occurs, it will likely be mild. We may already be experiencing an advertising recession, even if there isn't a broader economic downturn yet. Our radio business is facing significant political challenges as well, with $20 million in political spending at play.

It was $13 million last year. That was the prior presidential cycle; it was over $20 million, now it’s $13 million. Yeah, still significant.

Significant, excuse me. We are preparing to be okay regardless of what the economy does, but I feel better about where things are going today than I did in January.

Okay. That's helpful context. Thank you for that. Second question, and I'm sorry if you already disclosed this. But with the stations you're picking up from Cox, are you able to share what the multiple you paid was on that purchase?

No, I mean, we paid $27.5 million. I think I just said that we think with add backs and things of that nature that we will have at least $5 million of EBITDA.

Sorry, I don't know if you caught up with the NAV spins.

Yeah. So let's say their EBITDA was less than $5 million; we think with add backs, we'll have at least $5 million. By add backs, I mean we can remove duplicate expenses starting day one, and there isn't much of that. We're not changing formats. What surprised us, to be honest, was that we managed to sell the two radio stations for an acceptable price, which we didn't anticipate given the market conditions. We found two buyers, and while we don't think the prices were outstanding—they're probably the lowest prices for stations in Houston—we still feel good about the sales considering the overall tepid M&A activity in radio. So, we're looking at about $17 million in Houston.

Okay. Thank you for that. And one last question. You mentioned your liquidity a couple of times and it is a nice cushion to have given the uncertain economic backdrop. As you move forward here, you bought back bonds, but you also have this potential casino project. How should we think about the uses of that cash, whether it's debt paydown going towards a casino initiative or potentially more M&A activity, whether that's on the radio side or otherwise?

If we win the casino referendum, we will need to determine the exact amount of equity we will invest, which is currently uncertain. Let's assume it's $80 million each for us and Churchill, factoring in some debt, although we might opt for a different financing approach based on costs. This will likely mean a larger cash outlay starting in Q4 when we close on the land acquisition. After that, we may take a more opportunistic approach. Our bonds are trading at a discount, around $90 million, yielding 10.5%, which represents a good capital use. If we can find radio acquisitions that offer better returns, we should consider those seriously. Additionally, as we approach a leverage ratio in the low threes, we need to evaluate what other capital returns we can pursue. There are significant projects we currently have that will need our attention to see how they develop.

Okay. All right, great. I appreciate the time as always.

We'll next go to the line of Ben Briggs with StoneX Financial Incorporated. Go ahead.

Good morning, guys. Thank you for holding the call and taking the questions. So a lot of mine got answered but I still have a couple of more here. So using your guidance and again thank you for providing guidance, you said that you expect to come in above where you were in fiscal year 2019 while adjusting out the roughly $8 million MGM dividend that you received. So that gets me to roughly, let's call it like just north of $130 million of EBITDA? I just want to kind of sanity check that and make sure I'm doing my math right there.

No, I have $133.5 million with MGM in, and MGM I think was 6.6%. So I think it's like high $120 million, $126 million.

Okay, $126 million.

Yeah.

Okay. So $126 million, $127 million. And then if I subtract out, call it between $60 million and $65 million of interest expense, and some CapEx, it looks like you guys on an EBITDA minus interest minus CapEx basis should still be comfortably free cash flow positive in fiscal year 2023. Is that a safe assumption?

Yeah, I've got us kind of mid-60s in free cash flow. Depending on where CapEx comes out, we've got couple of figures, pointers, consolidating in Indianapolis and in Charlotte, but probably we don't get to spend all of that this year. So that's why mid-60s of free cash flow is what we're come to putting out for this year.

Okay, perfect. That's right around where I was getting to. Thank you. And then the second question. So Churchill Downs, thank you for the clarity on what size the equity check might be and a little bit about what your thought process is there. Could you give a couple more details on what the operations of that might look like? So, I know obviously with MGM casino, that was very much you guys were essentially silent partners, not like you had a hand in operating the casino. You left that to them. Is the Churchill Downs project going to be similar, or are you going to be taking a more hands-on approach with this opportunity?

They will be the operator. We will co-own the property fifty-fifty with them, and they will handle the operations. They will leverage their corporate expertise to help us build a local management team at the property. They have several partnerships, including one with Rush Gaming in Chicago and Des Plaines, and another one in Miami with Delaware North. The advantage is that they have experience working with large partners who hold significant shares, not just small percentages. However, we will depend on them to operate the property.

Thank you for your insights. I have a question regarding the recent release of the fiscal year '22 10-K. Can you provide any information on when the first quarter '23 10-Q might be released?

We haven't set a date yet. I think we'll have more information next week as we work through some details regarding the timing. We're aware that we have an extension from NASDAQ until September 27, 2023, and we don't want to use the entire period. However, I believe we'll have an update next week that will clarify the timing for the filing.

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

Thank you.

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

Good morning, guys. Peter, could you give us a sense for, out of that large cash number you've mentioned, what tax it will be around MGM and any other sort of unexpected or unusual uses that we should think of coming out of that cash number?

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

That's right. Yeah.

Yeah, minimal because we got enough NOLs to cover it. So it's definitely $100 million gain. And what it will do, it will burn through our NOLs faster. So it probably accelerates us becoming a federal taxpayer from 2027 to 2026, somewhere in that region. So the good news is we'll have the cash on the balance sheet and there'll be minimal tax leakage.

We'll go next to Bradd Kern, a private investor. Please proceed.

Hi. Thank you for joining the call and for all the information provided today. My first question is about the Richmond casino. What do you think is the likelihood of a positive vote? Are you conducting any polls or tracking local polling that you can share insights on? What efforts are you making to improve local sentiment for the project among potential voters? Additionally, since it's a 50-50 partnership, who will be in charge of making decisions, especially the tough ones?

Yeah, there'll be joint decisions. If we disagree, there's a dispute resolution mechanism. But we're fifty-fifty partners and we got to agree. Otherwise, we go to our dispute resolution mechanism. We've got a fifty-fifty shot; the referendum, we lost it 50.85 to 49.15. Sentiment continues to be divided in the City. And we got to do a better job of telling voters how the money that the casino will generate is going to be spent. We didn't do that last time. We got to work with the City on that's not our unilateral call. I think that we've got to articulate the other aspects of the resort, not just the casino part, their entertainment vehicle. We got to do a better job of getting out to our voters. But it's fifty-fifty. I've always said that people should look at our company as a baseline and decide whether or not they're comfortable with our existing operations and in our balance sheet and look at the casino as upside, like gravy. And so that's where we sit.

Okay. That's helpful. Assuming that is approved, what do you anticipate the payback will be on the casino in terms of the number of cables, slots, and gross gaming revenue? Are there any preliminary figures you can share?

You should consider that the gaming revenue estimate for the proposed casino licenses across five different jurisdictions indicates that Richmond, Virginia's gaming revenue is slightly over $300 million annually. It is likely that a 30% margin can be achieved on that. Therefore, you could anticipate around $100 million of EBITDA from the property, if not more. At a minimum, you should expect it to be $100 million, with the potential for better results.

Okay, that's really helpful. On the radio and TV side, do you anticipate any potential slowdown in appetite for DEI advertising, particularly in light of the affirmative action ruling? What are you hearing from your advertising partners at this point?

Everybody's asking that question. My general feeling is that if the political climate changes significantly in the country, then progressive and inclusive politics may take a hit. However, I believe that many corporations committed to diversity and inclusion efforts genuinely believe in them and pursue them because they are beneficial for business in today's world. One undeniable reality is the changing demographics of America. The Black, brown, and now Asian populations are growing at a much faster rate than the traditional Caucasian population. This isn't about a race conflict; it's simply the economic landscape of the country. Consequently, there will be different consumption patterns and media preferences among these groups, as well as different ways to communicate with them. They will increasingly become a powerful consumer force, and addressing their needs is essential for any business. This is the conversation I'm hearing among advertisers. However, if the government shows indifference toward diversity and inclusion, I believe some corporations may scale back their initiatives. Generally, pressure from the government or the fear of regulation tends to foster good corporate citizenship. That's my overall perspective, though things can always change.

I appreciate that. That's a helpful response. On a related note, are you noticing any significant changes in radio listenership among your core audience? Are the consumption trends improving, or can you discuss how your core audience's consumption trends compare to those of your competitors?

Everything in traditional media is declining and experiencing reduced consumption. However, radio appears to be faring better and feels more stable compared to the pay-TV sector. That said, we are noticing a decrease in rating points for radio at the moment. If you examine our revenue, Peter, you conducted that analysis. Our revenue is essentially consistent; what was the analysis you performed?

When you look at audio, looking across the radio segment reach and digital audio, we're still above pre-pandemic levels of revenue and EBITDA despite the fact that the universe of listeners has gone down fairly significantly post-pandemic as you might imagine given different working patterns and commuting patterns.

I want to acknowledge Bob Pittman, a leading CEO in the industry, with whom I spoke at the advertising festival in Cannes. We discussed the radio business, and he emphasized that radio maintains a 90% reach in America, while television reach continues to decline. Historically, advertisers have paid more for less in television, and based on Peter's analysis, we're performing well regarding pricing relative to audience shifts. Although I don't have a clear solution, it's evident that only Netflix is currently profiting from streaming; perhaps Discovery will soon find success. However, there's a trend of reduced investment in streaming. Fortunately, radio is holding its ground, and I used to be more concerned about its future, feeling secure in our cable television business. Today, I'm glad we have a diverse portfolio, and radio seems stable. We're managing our cable TV business effectively, but I recognize the need for a strategic approach, such as enhancing distribution, investing in programming, or exploring consolidation opportunities, as the landscape evolves. The positive aspect is that we're currently at a leverage level that allows us time for these strategic investments without the pressure to make hasty, ineffective decisions. We will have the opportunity to navigate this transition effectively.

Sure. Regarding the balance sheet, we’ve discussed the economics of the casino. In a scenario where things don’t go as planned, you mentioned that our leverage is in the low 3s, and that we might be considering other forms of capital return. How are you approaching that in relation to potential strategic actions in radio and TV, or in other industries like gaming?

We align all our decisions with our current return options. Strategic decisions should always be compared to the best use of our capital. For instance, if we can buy back our bonds and reduce our debt to achieve a 10.5% return, we wouldn't make a strategic choice that results in only a 5% return. Paying down our bonds is a better option. A strategy should ideally generate a greater return than any other alternatives for our capital, and that's the framework we use to evaluate our actions.

I am wondering if there is a certain level of leverage where you start considering transitioning from reducing debt to alternatives like share buybacks or other methods of returning cash.

Maybe.

Given the current macro environment, we have some strategic considerations ahead of us. These will be addressed eventually, but it depends on the performance of our revenue and EBITDA, as well as our overall perspective on the situation.

And share buyback analysis goes through the same return rigor that buying a radio cluster does, us buying more cable assets, us investing in the casino. If we're not going to buy back our stock and earn a 5% return over paying down our debt and earning 10.5% return.

Thank you. My last question is just about housekeeping. When you mentioned the 3.7 times leverage by the end of the year, is that what you meant?

We said 3.7 times.

Right, 3.7 times. That's on a net basis? And is that pro forma for any other uses of cash or what are the underlying assumptions in the 3.7 times?

It assumes that we win the Richmond referendum and we buy the land that Alfred referred to in the fourth quarter. So that cash goes out the door and it assumes that we close on the acquisition in Houston. So that net $17 million goes out the door as well, but we pro forma and call it $5 million of EBITDA from that transaction.

And no additional debt buybacks in that number? Modeled into that number?

No.

Hi guys. Thank you for sneaking me in here near the end. Just a couple of housekeeping questions. What are you guys planning to spend on content this year? That number was obviously pretty high in 2022.

It was indeed high in 2022. I believe it was in the mid-50s, and Jody is here with us if he wants to add anything. From what I have, our cash expenditure is projected to be in the mid-50s range.

Did you say mid-50s? I'm sorry, I'm having a little sound issue.

Yeah, mid-50s.

Okay, great.

I think it normalizes better than last year, from a cash standpoint.

Okay, great. Thank you. And were there any unusual cash expenses in the radio or digital segments in the fourth quarter specifically, as margins took a little bit more of a hit than I might have been expecting? And I'm sorry, if you went through that during the first part of the call, when AT was on, but I missed it.

Yeah, there were a few things, Matt. There was some noise in the number. So obviously, we had the high watermark year, so bonuses were higher than they otherwise normally would be. So that was some of that. In margins in digital, we talked a little bit about the fact that those were impacted by higher traffic acquisition costs; that was $2.3 million, also higher content costs in digital and ad production costs. So those margins compressed. Other than that, there wasn't anything particularly material.

Okay, great. Does the mid-60s free cash flow number you mentioned include the MGM dividend this year, or is that integrated into the sale price?

That is in the sale price, so that mid-60s, hang on a second. Good point. Let me just double-check before I speak on it. Actually, no, sorry, that does include it, Matt. That is rolled up into it, the $8.7 million of receipts is in the mid-60s. Sorry.

Okay. And I guess just generally on the digital side of things, you mentioned a higher traffic acquisition cost. There's some guidance for what looks like kind of persistent lower margins going forward. What do you think about that competitive landscape overall? It feels like every radio station company has been trying to get into that business in a significant way. What do you think is driving the higher traffic acquisition costs?

Our digital business stands out from traditional radio operations as we primarily function as a content publisher. We generate revenue through video ads and display advertising, with digital video accounting for about 40% of our revenue this year. Additionally, we have some streaming revenue, which is at least $5 million, though I'm uncertain if it will exceed that amount.

$5.7 million, and it’s in the $5 million.

We have a small podcast business, unlike Cumulus and Odyssey, which are focused on podcasts. iHeart has its iHeartMedia streaming platform and a significant podcasting division. We identify more as a publisher. Townsquare provides digital services, functioning as a local digital advertising agency for small and medium-sized clients in their markets. Our digital business distinguishes itself from others. Nonetheless, it continues to see high demand. We serve the largest audience targeted at African-Americans in the industry, making us a key player in that area. The future outlook is uncertain, but I hope we stay profitable and can find ways to increase our margins. Digital publishing is challenging, as seen with companies like BuzzFeed, Cox, and Vice, which are struggling. However, we have been performing better and need to navigate these challenges. Overall, our business in digital publishing is more favorable than in podcasting.

Great. Thank you.

Thank you, Matt.

We'll go next to the line of Marilyn Pereira with Bank of America. Go ahead.

Thank you for taking my call and squeezing me in. Most of them have been answered. But quick question. You had mentioned BET at the top of the call. So any other information on that or thoughts or what that could potentially look like in terms of the impact on leverage?

It's a competitive process, and we're under a non-disclosure agreement. Some people have asked if we're interested in it, so I just wanted to mention that we are in the process. However, we are not far enough along to provide any comments, and we're not permitted to comment anyway. I get tired of people asking if we are looking into this, so I decided to acknowledge that we are, but that's all the information I can provide.

And then just a quick kind of reframe, given the current environment overall secular and cyclical, how high would you be willing to have your leverage in the current environment or what you kind of see the environment to be over the next year?

We prefer our leverage to be at four times or below, and we're comfortable with that level. If we need to pay out more than $100 million for the casino over the next year, it could affect our leverage. I'm sure Peter has the figures, but if $100 million leaves our accounts without any incoming cash flow for about 24 to 30 months, it's going to increase our leverage. However, I also believe that if we win the casino referendum, we may see an increase in our equity value, and there’s the possibility of raising additional equity, though we haven't decided on that. Overall, we feel secure when our leverage is at or below four times; that's our preference.

It probably pops up above 4 times in Q1, excluding the pro forma for MGM because the cash wasn't received till Q2. So I guess we'll get pro forma numbers in Q1. But excluding the pro forma, it is probably north of 4 times, and it drops down hopefully into the mid 3s. And as Alfred said, we are hoping to finish at about 3.7 times this year. And if I look at our long-range plan, it's out in the low 3s and eventually in the mid 2s, that's assuming we can have our plan.

Got it. And sorry, if I could just give you one last one. Early on the top of the call, you also had said kind of more generally that radio multiples are like 5 times, if I heard you correctly. What...

I mean there's lots of comps out there. Last I looked, I thought the average radio multiple is kind of like 5.5 times or something like that. So again, that's what I think I remember saying EBIT.

It's variable within that, right, depending on who you look at.

Yeah.

Fair enough. Great. Well, thank you very much.

Thank you. Thank you everybody. We look forward to talking to you at a point in the near future.

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