Ladies and gentlemen, thank you for standing by and welcome to Urban One’s First Half 2023 Conference Call. During this conference call, Urban One will be sharing with you certain projections 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 December 7, 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 o’clock noon today running through midnight at December 14th. Callers may access the replay by dialing 1-866-207-1041. International dialers may call 402-970-0847. The replay access code is 3718185. 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 very much, operator. And welcome everyone to our first half conference call for 2023. With me also in addition to Peter D. Thompson, is Kris Simpson, who is our General Counsel and Jody Drewer, who is our Chief Financial Officer at TV One. We’ve released our earnings. We’ve got the Q1 and Q2 commentary. Radio in the first half of the year was decent and is showing softness in the second half of the year. The cable television business struggled in the first half of the year, due to ratings and churn and ADU, Q1 in particular. However, that has actually stabilized going into the back half of the year. So, they flip-flopped. Our digital business is actually moving along as planned and is surprising to the upside in Q4. And with all of that, we are comfortable continuing to reaffirm our full year EBITDA guidance of the range of $125 million to $128 million of EBITDA. This is also the first call we’ve had with our investment in MGM being fully monetized, and it is shown in our cash balance. And we have been to one large investor conference and gotten a lot of questions about what are our plans for our cash now that our Richmond referendum for the casino investment failed to pass for the second time. And so we are thinking through all of those things now. And certainly, debt paydown is something that is a top consideration. And so we are going to be happy to talk more about that in Q&A, if anybody wants to get a bit more granular on it. With that, I want to turn it over to Peter, so he can go into the specifics on the numbers and then we will open it up to Q&A and go from there.

Thank you, Alfred. So for the first six months consolidated net revenue was up 3.8% year-over-year. The Indianapolis radio acquisition added approximately $7.6 million, and the Reach cruise event generated $10.1 million in the second quarter that was absent from 2022. So, normalizing for those two items, net revenue was down 3.9% or down 3.2% excluding political advertising. Net revenue for the radio segment increased 8.3% year-over-year, the decrease of 1.3% on a same station basis. Excluding political, net revenues increased by 1% on a same-station basis. According to Miller Kaplan and on a same-station basis, our local ad sales were down 4.6%, against a market that was down 2.7%. National ad sales were down 2.4% against the market that was down 7.7%. The radio spot markets were down 1.6% in Q1 and down 6.8% in Q2. Spot markets were down 7.5% in Q3. And we finished Q3 down 0.6% overall, down 14.4% on a same-station basis and down 12% on a same-station basis excluding political. For Q4, we’re currently pacing down 11.6% all in, down 21.2% same-station, and down 10.1% same-station, excluding political, with national down 26%, local down 2.1%. So we definitely experienced some softening in market revenues for the second half of the year, although Q4 local has improved sequentially over Q3. Net revenue for Reach Media was $31 million for the first half of the year. And that included the $10.1 million for the Tom Joyner Fantastic Voyage cruise event, and that compared to $21.1 million last year. Adjusted EBITDA was $8.1 million, including $1.75 million from the cruise. That was down from $8.6 million last year. Advertising revenue was down for the first half of the year, and affiliate station compensation expense was up. Net revenue for the cable television segment was $102.1 million for the first half of the year, decrease of 6.8%. Cable TV advertising revenue was down 5.8% or $3.5 million, with an unfavorable rate volume impact of $2 million, and an additional $1.3 million of ADU deficiency. P25-54 Prime delivery was down 31% in Q1 and down 21% in Q2. Cable TV affiliate revenue was down by 7.8% or $3.9 million with favorable rate increases of $2.2 million, more than offset by $5.3 million of net churn, and $800,000 of increased launch support. Net revenue for our digital segment increased by 1.8% for the first half of the year, which includes $1 million of revenue from the Indianapolis acquisition. Direct sales from our national New York office were down as advertisers pulled back somewhat on marketing budgets due to recession concerns and fewer advertisers committed to Black History Month and the Juneteenth efforts compared to a year ago. Streaming revenue from our radio station inventory was up. However, increased traffic acquisition costs, sales and marketing expenses offset those revenue increases. And adjusted EBITDA was $9.9 million for the first half compared to $12.3 million for the same period last year. For the six-month period ended June 2023, consolidated adjusted EBITDA was $67.8 million, down $21.7 million or down 24.3% from last year. $4.1 million of the decrease is from the sale of MGM. The Indianapolis acquisition added about $1.8 million but radio and Reach segments were down by $1.1 million combined. Digital segment was down by $2.4 million and cable TV was down $13.8 million, due to the advertising revenue decrease, subscriber churn, and some increased content amortization costs. Cable subscribers for TV One, as measured by Nielsen, finished Q2 ‘23 at 45.1 million compared to 46.5 million at the end of 2022. CLEO TV had 42.5 million Nielsen subs. Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of long-lived assets, increased to approximately $172.8 million for the six months period ended June 30th, up 16.2% from approximately $148.7 million incurred for the comparable period in 2022. There was an increase of approximately $8.3 million related to Reach’s cruise event, $1.2 million in other radio event expenses, $4.6 million in cable TV content amortization, $5 million in employee compensation expenses, $3.8 million in contract labor, talent costs and consultant fees, $2.7 million in corporate professional fees, $2.2 million in variable expenses, and $1 million in travel, entertainment, marketing and office expenses. These increases were partially offset by a decrease of approximately $3.3 million in the Employment Agreement Award expense, and also a decrease of $1.6 million for corporate business development costs. Approximately $5.9 million of those increased expenses related to the Indianapolis radio acquisition. And that’s included in the totals that I just mentioned above. Radio operating expenses were up by $6.4 million with the Indianapolis to add in about $5.4 million of that increase. Atlanta’s Birthday Bash event added about $1 million of expense. Reach operating expenses were up $10.4 million with $8.3 million of that from the cruise, $1.2 million of additional affiliate station compensation, and $750,000 in additional talent compensation. Operating expenses in the digital segment were up by $3 million driven predominantly by variable expenses related to traffic acquisition and audience extension, which were up by $1.3 million, and also, ad production and marketing, which was up by $1.6 million. Cable TV expense was up by $6.4 million with the content amortization, the largest part of that up by $4.6 million. Operating expenses in the corporate and elimination segment were down by $2.2 million, including a favorable variance of $3.3 million for the non-cash TV One employment award charge and $1.6 million for reduced corporate business development, which was offset by increases in professional fees and some employee compensation. Impairment of goodwill, intangible and long-lived assets was $38.9 million for the first half of the year, $16.8 million of that was associated with the sale of KROI-FM, the radio broadcasting license in Houston. And non-cash impairment charges of $22.1 million were recorded for radio broadcasting licenses, primarily in the Philadelphia market. On April 21, 2023, Radio One Entertainment Holdings closed on the sale of 100% of the MGM National Harbor interest. Company received approximately $136.8 million at the time of the settlement of the put interest, representing the put price. Other income net was $96.5 million for the first half, primarily as a result of the gain on that sale. The Company repurchased $25 million of its 2028 notes at average price of approximately 89.1% of par in the first quarter, resulting in a net gain on retirement of debt of approximately $2.4 million. Total gross debt balance is now $725 million, down from $825 million at the start of 2022. Interest expense decreased to approximately $28 million for the fourth quarter, down 11.8% from last year due to the debt pay-downs. The provision for income taxes was approximately $22 million for the first half, and the Company paid cash income taxes in the amount of $1.3 million. Net income was approximately $67.4 million or $1.42 per share compared to $32.8 million or $0.64 per share for the first half of the prior year. Capital expenditure was approximately $4.1 million in the first half. And the Company repurchased 274,901 shares of Class D common stock in the amount of $1.4 million. As of June 30, 2023, gross debt was $725 million, ending unrestricted cash was $230.7 million, resulting in net debt of approximately $494.3 million compared to $143.5 million of LTM reported adjusted EBITDA. Pro forma for the MGM sale, LTM adjusted EBITDA was $139.1 million, giving a total net leverage ratio of 3.55 times at the end of the period. And with that, I’ll hand back to Alfred.

Thank you, Peter. Operator, could you open up for questions?

Certainly. Thank you. We’ll go to Brad Kern with Fort Breaker. Please go ahead.

Hi. Thanks for the call and for taking my question. First one I had was, how do you think about the IRR on open market debt purchases versus other use of cash proceeds? Do you think that the sort of a 12%-ish IRR is a high enough return to justify cash deployments there? And when you think about your cost of capital, how do you think about the way that you would deploy that cash when you think about returns?

Yes. Historically, we have focused on the yield to worst, which is currently at 12%. However, in the present environment, we're only earning about 5% on our cash. This creates a gap between that 5% and the 12%. While it's not quite a double-digit return, there are a few points to consider. Firstly, finding investment opportunities that yield a 20% internal rate of return is challenging. For instance, we have made two radio acquisitions in the past year, and we typically aim for cash investments to yield in the 20s, which we feel confident about. The Houston acquisition, in particular, was very strong. Additionally, we believe our casino investment could have been in the 20s as well, but it would have required a longer capital return process, unlike the quicker returns from our radio acquisitions. That’s our perspective. Regardless, we aim to reduce our debt. Historically, we have conducted our open market purchases in blocks of around $25 million and have weighted into it. I suspect we will continue with a similar strategy. We intend to identify a specific amount to pay down and pursue it, while concurrently seeking additional opportunities to earn over 20% on our investments. I've spoken with many professional investors, and finding these opportunities in today’s market is challenging. Nevertheless, we will keep searching.

Yes. That makes sense. I appreciate that perspective. I mean, how committed, as you look around for those types of 20%-plus return or whatever opportunities, how committed are you to the media business to radio and TV versus other diversifying ventures? And clearly you’ve shown a case for gaming. Like what are you considering?

Yes. Initially, we focused solely on the radio business before expanding into syndication with the acquisition of Reach Media. We then launched TV One and entered the cable television sector, followed by creating Interactive One to tap into the digital space. Essentially, we primarily operate as a publisher, which sets us apart from other radio companies that heavily invest in podcasting or streaming. Our venture into the gaming industry was a result of our media foundation in Washington, D.C., particularly through our partnership with MGM as they developed a resort casino here. We aim to explore businesses that complement our existing assets—those that enhance our chances of success in new ventures—and this strategy has proven effective. We remain open to exploring additional opportunities but prefer to leverage our competitive advantages and expertise. We are cautious about entering unfamiliar territory, as it entails significant execution risks. For example, if a chance arose with an online digital Urban apparel retailer, our marketing platform could prove beneficial even though it's outside our core business. While we’re not currently pursuing such opportunities, it's a model we would consider closely. Regarding our main businesses, we must navigate strategic decisions in a rapidly evolving landscape, focusing on gaining advantages in scale and content for our TV sector. Recent radio acquisitions have been synergistic due to consolidating markets. It's crucial to strengthen our operations as the ecosystem changes since we intend to remain in these sectors. Our primary focus is to maintain a defensive posture by continuing to reduce our debt. If we identify an opportunity with a clear potential for a 20% return, we'd pursue it vigorously. While our casino investment took time to yield returns, we were confident that our $560 million investment would generate around $100 million in EBITDA, given our understanding of the central Virginia market.

Got it. You mentioned previously that you're seeking efficient opportunities to enhance efficiency in the linear television business, especially considering the challenges with declining subscriptions. How are you approaching that?

I don’t have the answer yet. We were among the few parties interested in the BET Media Group when it was being sold. We made an offer, but it was not at the level that Paramount wanted. Apparently, no one else made an offer at that level, which is why they stopped the process. There would have been significant synergy related to programming costs and advertising sales. We also shifted our focus to the Richmond referendum. The election on November 7th failed. Now, we are regrouping as we work on our budgets for next year. We didn’t have a list of M&A projects on standby while we were focused on the referendum. Currently, we are finalizing our budgets, looking to pay down some debt and identify potential opportunities. Therefore, we have nothing in the pipeline at this moment.

Makes sense. Maybe just a higher level question. You have four different classes of shares. I think that when you’re looking at the overall capitalization of the business and declining multiples in the core businesses, the enterprise value multiple, and it’s tough to even see what those are in the space right now, given all of the stress across some of your peers. You guys are in a pretty nice position relative to them. But how do you think about that? I mean, is there value in having that sort of controlling voting shares or do you think that you could potentially achieve a higher valuation where you just to collapse those to just one share class and simplify that? Like, is that a remnant of maybe a prior outlook on the world or is that something that you view as important going forward to have that sort of four different share classes with different voting rights?

Yes, it has value, especially in the current environment. We are a minority-certified, African-American controlled company. At times, we've been African-American owned, which is a distinct designation because identifiable African-American ownership has been over 50%. The family holds about 50% of the company's economics. We have greatly benefited from our long-standing minority certification. There is definitely value in that, as many companies seek to engage with minority-owned and controlled businesses for their diversity efforts. However, I want to emphasize that if we were to simplify our share structure to just one class of shares, I have no confidence that investors would flock to our stock or provide any increase in valuation. This isn't something I observe in any companies we are associated with, whether in radio or cable networks. The low multiples for radio and cable television programmers are not linked to their share structures but rather reflect broader perceptions of those industries.

Okay. That’s interesting. I just think from a defensive stance, while the equity multiple may not be significantly higher on that alone, there’s been a lot of research on discounts for controlled businesses. And when you have a leveraged business that people are assessing based on loan-to-value ratios, I would think you’d want to do everything possible to maintain a strong cushion. And then, lastly...

Yes, we create a financial buffer by reducing our debt or issuing equity. We haven't had any issues with issuing equity in the past. While we don't currently have any programs in place, we have utilized ATM programs before. In 2021, we were fairly active in issuing equity, raising nearly $50 million. Our stock experienced a significant boost due to being an African-American focused and controlled company during a time when stocks like ours were gaining attention. We took advantage of that opportunity, and if we need more equity capital in the future, we are prepared to issue shares to strengthen our financial position.

Okay. Regarding the financial aspect for 2024, do you have any expectations for the contribution of political advertising and what your projections are for the political EBITDA range for the upcoming year?

Yes, we are currently in the process of finalizing our budgets. This year's budget will not be as strong as that of 2022 since we had the Georgia Senate runoffs, which brought in significant funding. However, we anticipate that the political aspect of our radio business could generate around $10 million in revenue. This is just the initial estimate based on our budget, which was approximately $18 million in 2022, but we received about $6 million from Atlanta alone in 2022, primarily from the Senate races.

That was in ‘20. 18 in ‘20 of which 6 was in Atlanta and then we did 13 in ‘22.

Thank you for clarifying, of which 4.5 was in Atlanta, so still half was in Atlanta, the 6 in the previous cycle in Atlanta.

And next we go to Matt Swope with Baird. Please go ahead.

Yes. Good morning, Alfred and Peter. Maybe just to continue on some of the same themes. Alfred, where would you like your leverage to be? You’ve given us some numbers in the past, but where are you comfortable, where you think you’re sort of out of harm’s way, regardless of what the economy does?

I’m not sure, as the definition of harm’s way keeps evolving. I believe we have a leverage figure with a 3 in front of it, and we’re likely to finish the year around 3.8. I would prefer to see us lower that to the low threes, but I’m not interested in increasing the company’s leverage for a potential opportunity that seems appealing. There was a time when companies could take on more leverage with the expectation that it would drop quickly, allowing for some risk-taking in execution. However, that was when these businesses were consistently growing, and the market was expanding. That was true for radio and TV businesses, but it’s no longer the case. Therefore, our approach is to avoid that strategy, which is why I started the conversation today by mentioning our focus on reducing debt.

No, I appreciate that. And you guys have definitely done about as good a job as anybody in the industry at that.

I appreciate it. We have a lot at stake, and the family has a considerable amount to lose if there’s a misstep. We are over 40 years old, and sometimes the interests of equity holders do not align with those of debt holders. However, in this case, we are aligned with the debt holders because it is crucial to ensure safety and maintain our viability.

Sure. That makes sense. Peter, regarding the buyback aspect, I have a couple of questions. First, can you provide an update on the cash position as of today? Additionally, what is the minimum amount of cash you need to maintain on the balance sheet? At times, it has been around $510 million. Do you require a higher cash balance than that?

Look, we were talking about that a week or so ago. I think probably 50 is a decent number. Could it be lower than that? Yes. We got some lumpy payments from a coupon standpoint, obviously that goes down if we buy back debt, but obviously the semi-annual coupon is chunky. And then some of the TV One programming deals can be somewhat chunky. Probably a range is 30 to 50 in terms of what we really need on the balance sheet, so obviously we’ve got a lot more than that. Cash on hand today, I think it’s $227.5 million approximately. And that is obviously after we’ve made the Houston acquisition, which was $27.5 million. So, that’s where we are on that.

As you consider the situation, we have a significant amount of cash on hand today, approximately $227.5 million, even after the Houston acquisition of $27.5 million. From a coupon standpoint, this will decrease if we buy back debt, but the semi-annual coupon is substantial. Some of the TV One programming deals may also be sizable. We probably require a range of 30 to 50 on the balance sheet, so we are well above that.

Go ahead.

I was going to say, as you think about the bond buyback possibilities, given that kind of that you could do something like 150 or 175, or even just going off the numbers you just said, does it make any sense just to do a broader tender for a much bigger number? Are you restricted at all by the fact that you haven’t put your Q3 out yet? Like, do you have to get some physicals out before you can do some of this?

Yes. If we were to pursue open market repurchases, it would likely be after Q3, unless we entered into a transaction with someone who signed a significant agreement. In that case, we would have some protection. There might be an opportunity to secure a large block sooner rather than later. After that, we’ll file our Q3 results before the end of the year and set a plan in motion. As Alfred mentioned, our historical approach has been to authorize blocks of $25 million and actively seek those blocks in the market. Therefore, we would probably follow that route. Regarding the possibility of doing $150 million, we might consider a tender offer, but I don't believe we will proceed in that direction. Nothing has been decided yet, but I think Alfred's suggestion is to focus on blocks of up to $25 million and evaluate our situation from there.

Got it. No, that’s certainly helpful. And then, Alfred, is the casino idea dead at this point, or, I know at times you looked at places other than Richmond? Would you look at something else again?

Yes, definitely. It's a strong business. We made a significant profit from our MGM investment, around 4.5 times our initial investment. However, there are risks involved, such as the potential for overbuilding and rising interest rates, which could strain returns. The process of obtaining gaming licenses is political, and we believe we have certain advantages in this area. As far as I know, we’re one of the few African-American owned organizations focused on investing in this field at a substantial level. So, we are certainly open to exploring other opportunities. I’m uncertain about the future, particularly regarding the fifth license that will be issued in Virginia. We haven’t yet concentrated on how we might get involved. We don’t know which city will receive the license or who the other participants will be. Additionally, iGaming may be introduced in Maryland, and it’s publicly known that lawmakers are trying to advance a bill during this session. This scenario differs from sports betting, which typically isn’t profitable, while iGaming is. I’m not sure how they plan to manage the iGaming structure and licenses. It appears they might propose a bill to put a question on the ballot, which would then establish a referendum and clarify the structure. Furthermore, our agreement with MGM does not grant us access to any online activities or revenue related to online sports betting. If iGaming were to come about, we wouldn’t be involved in it. Our claims are limited to the physical operation. This was another compelling reason for us to proceed with monetization. So yes, we would certainly consider other opportunities, but they are not abundant.

Got it. And then maybe just a last quick one for Peter. With the Houston radio sale that’s in your divestiture trust to Spanish broadcasting, we saw that you extended the timeline on that. Is there any pressure on that deal? Does that have any other impact on anything else you are doing in Houston or any other issues?

There is a limited time frame that the trust has been authorized by the FCC. They provided us a two-year period to complete this process. One station has already been sold and finalized with EMF. The timeline we set for the second station for Spanish broadcasting should be completed by July or so. This remains comfortably within the first year. Although we have a two-year period with the trust, we believe it will be resolved well before that.

And theoretically, you could extend it a little more if you wanted even?

Yes, you could.

And next we can move to Kenta Shimojo with Wellington. Please go ahead.

Good morning and thanks for taking my questions. And not to rehash Matt’s question, but appreciate you are still digesting the Richmond outcome. I am just kind of curious if you have any thoughts as to timing for that fifth license or any kind of milestones or mile markers that investors should be looking for in terms of when that gets revisited.

It is a process that will likely unfold in the General Assembly this year. We are not yet clear on whether we are looking into it. We have only just started to breathe after the recent developments. However, I expect something will happen in this session. I know there is a group proposing, and a state senator plans to introduce a bill for it in Northern Virginia, such as Reston or Tyson's. There will be a push for Northern Virginia. I hear the city of Petersburg is also showing interest again and wants to pursue it as they did previously. We sought a second vote in Richmond and lobbied against that. I don’t have specific information about the current situation, other than that people are preparing for this legislative session. I’m uncertain about the outcome, but I anticipate a direction will emerge from this session.

And then just thinking about the adjacent investment opportunities or the prospective opportunities to invest further afield from radio and even gaming that you alluded to, do you have any additional constraints that you’d be putting on yourselves in terms of like, size or maybe a higher IRR threshold or leverage cap just given the sort of additional risk of moving further afield?

We don't focus on that. We're not a venture capital fund and we're not making early stage investments in startups that we believe will provide significant returns. We tend to invest in opportunities that we expect will deliver cash returns or EBITDA that we can eventually benefit the company from. Many investors profit from companies that don't generate income but gain value for various reasons. However, our background in cash flow generating businesses leads us to prioritize cash on cash returns. If you're seeking returns higher than 20%, you're likely looking at more speculative and early stage ventures, which doesn't align with our established investment mindset given the nature of the businesses we operate in.

Yes. Fair enough. Four bagger will do. So, last one for me. There were a few recent instances of asset sales in the broader industry where non-commercial operators came in, kind of picked up pops at pretty interesting multiples. I’m just kind of curious if you have any sticks that are non-core to you that might be seen as strategic to the few non-comms that are out there?

Yes, I have been approached recently for several of our markets. However, we have decided to decline those offers. One of the concerns we had is whether taking those offers would undermine our position in that market compared to other opportunities that could yield a greater return. Without naming the market, one such proposal would weaken our stance against a competitor. We believe there’s a chance to acquire that competitor and significantly improve our position. Therefore, I don't want to relieve any pressure on them before they potentially sell. The offers we've received are not substantial enough, around $7 million to $8 million, which wouldn’t make a significant impact. Additionally, we already have cash flow in that market, and selling that asset could diminish our cash flow, possibly to zero. Even if we apply a low multiple of 5 for radio, losing $1 million in cash flow while receiving $8 million would only net us $3 million, which isn’t worth it. If we needed the cash for something important, it would be a different situation, but currently, we don’t require the funds. We have received a couple of such inquiries, but none of them have reached the $20 million mark.

Next, we can move to Marilyn Pereira with Bank of America.

Hi Alfred, Peter. Hope all is well. You’ve answered most of my questions, but just a quick follow up. There’s the 3.55 leverage that you mentioned. That’s for 3Q, is that correct?

Correct.

Okay. And then by end of the year you’ll be around 3.8. Does that actually incorporate maybe some incremental debt reduction or just some moving around in cash? I mean…

Yes. So, the fact that it’s moving upwards between where we’re at now and between Q2 and the end of the year, was that the question, or no?

You’re like 3.55 for 3Q. And I was just asking if the around 3.8 by year-end considers any incremental debt reduction, or is it just cash moving around a bit?

No, it's just cash moving around. The latter half of the year will be weaker due to the absence of political revenue. In the fourth quarter, when we look at the last twelve months, we will be short $8 million from political sources. Consequently, our last twelve months EBITDA will be lower by the time we reach the fourth quarter.

Got it. And then, I think it was the last call you had mentioned free cash flow, maybe in the mid-60 million area, and that depended kind of where CapEx comes out to. Obviously with a number of moving parts, whether it be Richmond or anything else, are you still thinking about it in that context for the year? And then, any comments on CapEx potentially for next year that you’d be willing to share?

Yes. I believe it’s lower now. There were $5 million in referendum costs, and to address various material weaknesses, we’ve had to hire several consultants, which amounts to about $4 million and is increasing as we rectify these issues. Together, these factors have consumed around $9 million to $10 million in cash. Therefore, I think the total is slightly lower. However, both of these expenses are one-time only, which is worth noting. As for capital expenditures, we are currently reviewing our budgets, as Alfred mentioned. We have a couple of significant initiatives, including consolidating operations in Indianapolis, which will require millions of dollars to merge facilities and acquire new equipment. At this point, we might be looking at around $10 million in capital expenditures for next year, which is a bit higher than our usual run rate of $7 million. However, this is still preliminary, and we manage capital expenditures very carefully. There may be additional projects we decide against next year if we need to allocate funds towards the Indianapolis facility.

And next we’ll go to Hal Steiner with BNP Paribas. Please go ahead.

Thank you for taking my question. I would like you to discuss the TV network aspect of the business and go over the affiliate fees, specifically the timing of any carriage renewals, if there are any significant ones, and your strategy for approaching those situations.

Carriage renewals, we just renewed with Verizon. They were up in October, and we just renewed them for another couple of years. Our next carriage renewal is not till the end of ‘25, right, Jody?

In the third quarter of ‘25.

In the third quarter of ‘25, we have one small streamer for which we did a one-year extension. However, our larger deals do not come up until the end of ‘25, with the next one following at the end of ‘26 or the beginning of ‘27.

Got it. That’s great. Okay. That’s very helpful. I guess just, can you maybe give a little color about how you think about sort of just what like your sort of positioning is and sort of the bundle, right? I mean, there is just a lot of talk about that and concern about that and how the bundle sort of evolves. And just if you could give any color about what you think your position is and ability to stay in there would help.

We feel optimistic about our position. We have always operated as an independent network and have not been part of a larger group. Although the environment has changed, there has also been a shift towards more diverse content, which we offer. Being an African-American owned entity is significant for us. We maintain strong relationships with all operators, except for DISH. Currently, we are not available on YouTube TV or Hulu, and we need to address that. I acknowledge that the environment has undergone dramatic changes, but we have no reason to believe that operators do not still view TV One and CLEO as valuable, as evidenced by the recent renewal we completed two weeks ago.

Got it. A lot of what you said aligns with my expectations, so I appreciate that insight and confirmation. Regarding the digital side of the business, I understand there are some cyclical pressures causing a slowdown. Could you provide more details on your ability to grow that business and whether there are any properties that could be potential targets for acquisition? Any additional information you can share would be helpful.

I’m pleased that we’re profitable. You’re right about the pressures on ad revenue, and digital is quite complex. Currently, we are experiencing these ad revenue pressures, but I believe we have performed reasonably well in this slower environment. The challenge with digital, particularly regarding acquisitions, is that audience sizes fluctuate significantly depending on how major platforms like Google or Meta choose to prioritize content and alter their algorithms. When you acquire a property that supposedly has, for example, 10 million unique visitors and 500 million page views, you might find that an algorithm change could cut those figures in half within six months. We have encountered this on a smaller scale ourselves, so we must exercise extreme caution. We assess digital acquisitions every year; in fact, we were exploring a public company this year that ultimately pursued a different deal. We aim to find a scalable approach, but it’s a challenging process. Additionally, many of these digital acquisitions are not profitable, which poses a problem. They often seek valuations despite their lack of profit. For instance, BuzzFeed acquired the company Complex, a leading urban content publisher that generated $100 million in revenue but lost $11 million, and they paid $300 million for it. We cannot engage in acquisitions of that nature.

I understand. Before we move on to the last question, I wanted to ask about the terms of the indenture. It seems you needed to make an offer to repurchase the bonds with the amount of excess proceeds. However, it appears you believe that through debt buybacks and potentially other investments, you will fulfill this obligation and won't have any excess proceeds left by the time you need to make that repurchase offer. Is that correct?

We don’t know, but there is a number of things that we’ve invested in that count towards those investments that aren’t just buying radio assets. Like, our Houston transaction counts. There’s some programming investments that we make that count. So, we’re not sitting there right now with $137 million of investible basket that we got to deal with. It’s something significantly less than that already. But as Peter said to me yesterday, we’re not going to go out and make a stupid acquisition just so we don’t have to offer to buy back bonds at par. That’s not going to happen. But to your point, we’re probably at something close to $80 million of the $137 million already, like sheltered, if you will, for stuff that we invest in on a regular basis. And I don’t know what’s going to happen between now and April.

And our last question here will come from Brad Kern with Fort Breaker.

Regarding cash utilization, now that you've partnered with Churchill Downs, would you consider being a minority partner in another venture, whether it's in gaming or another sector, where you wouldn't have control over the investment? Are you open to opportunities where you could act as a capital solutions provider or engage in something more strategic? How do you view these types of opportunities?

Yes, we would consider opportunities like that. However, our previous deal with MGM has set a high bar for us because it provided a cash return immediately from gaming revenue. That was a unique situation where we invested money and saw returns right away. We also evaluated a deal with a smaller public gaming company that wanted us to invest approximately $20 million to $25 million. However, they wanted to place us behind numerous obligations, which made it a traditional equity investment. They were also inflating their valuation beyond its actual worth, so we decided against it. We're indeed accustomed to favorable terms. We would be interested in being a minority investor, but it would have to be in a scenario where, if we made a significant equity investment and were subordinated to debt, it would need to be structured so that, during the pay-down period with no dividends or restricted payments to equity for a long time, we would expect a return much higher than 20%. We've encountered two such investment opportunities, and we opted out of both.

Okay. Appreciate it. The discipline makes sense.

And that does conclude the conference for today. Thanks for your participation and for using AT&T Teleconference. You may now disconnect.