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spk00: Your conference will begin momentarily. Please continue to hold. © transcript Emily Beynon We'll be right back. Your conference will begin momentarily. Please continue to hold.
spk04: Ladies and gentlemen, thank you for standing by. And welcome to Urban One's year-end earnings call. At this time, all participants are in a listen-only mode. Later on, we will conduct a question and answer session, and instructions will be given at this time. 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 March 3, 2022. Please note that Urban One disclaims any duty to update any forward-looking statements made in the presentation. In this call, UrbanOne 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 the call or in the company's press release, which can be found on its website at www.urbanumeralone.com. A replay of the conference will be available from 12 p.m. Eastern, March 3, 2022 – until 1159 p.m. March 7, 2022. Callers may access the replay by calling 866-207-1041. To repeat the toll-free number, 866-207-1041. International callers may dial direct at 402- The replay access code will be 2519146. To repeat the access code, 2519146. Access to live audio and a replay of the conference will be available on Urban One's corporate website of 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 D. Liggins, Chief Executive Officer of Urban One, who is joined by Peter D. Thompson, Chief Financial Officer. Please go ahead, sir.
spk01: Thank you very much, Operator, and welcome to our fourth quarter results in the year-end conference call. Also joining Peter and I are Karen Wishart, who is our Chief Administrative Officer. Jody Drew is the Chief Financial Officer at TV1. And we have Christopher Simpson, our General Counsel, also on the call. And as the press release states, I'm very happy with our Q4 and most of all our full year performance. We had guided EBITDA to be 140 to 145. That guidance was up from 135 at the beginning of last year. And we were able to exceed that and come in at 150 and some change. So very proud of the team. across all of our platforms. They performed exceptionally well during COVID, and as we come out of COVID, they are continuing to accelerate that performance. The demand for our platform and our audience continues to be very strong, as I've stated. I expect this demand to continue for the foreseeable future. I do believe there has been a paradigm shift at how advertisers look at minority targeted and focused audiences, diversity and inclusion as it relates to ownership in media. The fact of the matter is it's always been a very logical business proposition that the audiences of Hispanic and African Americans are increasingly valuable as the country continues to grow in its minority presence. And now I think more and more advertisers are really putting their investments in those areas. And so we're very pleased that we've been a big beneficiary of that, having been in this space for over 40 years. So Peter is going to take you through the details of the numbers and the operations. There's a lot for him to say, a lot to unpack here. And then after that, we will go to Q&A. Peter? Thank you, Alfred.
spk02: As Alfred said, we were very pleased with our full year 2021 numbers. And the first quarter of 2022 has started very strongly as well, with advertising pacings up across the board. First quarter core radio advertising revenue, excluding political, is pacing up low double digits. The auto category is still trailing prior year, but services, healthcare, retail, and entertainment are all showing very healthy increases. Reach advertising revenues are also pacing up strong double digits, as are ad sales for TV1, and also the digital segment revenues are pacing up strong double digits first quarter. So as we move into this year, we've had a good start. There was some noise in the fourth quarter expenses, which I'll talk about in more detail later. But I think the key points are, firstly, that we were missing around $13.9 million of political advertising spend in the quarter. And we made that up with some lower margin business, such as events, which obviously came with higher expenses. We also had higher sales commissions driven by increased revenues. And we had higher annual bonus and incentive plans that skewed into fourth quarter expenses. We ran... almost 50% more hours of original TV programming in fourth quarter. And this led to an increased content amortization expense of TV1. And our digital segment invested more in content and traffic acquisition and also had higher accruals for full-year incentive-based compensation. So the quarterly expense run rate was inflated by these various issues and isn't really fully representative of what we expect to have going forward. Consolidated adjusted EBITDA was $32.5 million for the quarter, down from $41.7 million for 2020 and up from $27.5 million in 2019. Full-year adjusted EBITDA was $150.2 million compared to $138 million in 2020 and $133.5 million in 2019. This exceeded our full-year adjusted EBITDA guidance for 2021. And as I mentioned, we're seeing favorable signs for continued success in 2022. Net revenue was up by 15.3% year-over-year for the quarter ended December 31st, 2021 at approximately $131 million. Net revenue for the radio segment decreased 11.6% year-over-year in the fourth quarter due to non-returning political advertising revenue. Political revenue was down $10 million in just the radio segment and down $13.9 million overall. Excluding political, net revenue for the radio segment was up 15.5%. Local ad sales excluding political were up 11% and national ad sales were up 12% excluding political. Most of the major advertising categories were up from last year except for political. Food and beverage and automotive were also down, and automotive was down 21.8% due to the supply chain challenges in the auto industry. Government and public was still our biggest category, driven by government-funded pandemic outreach, amongst other initiatives. The entertainment category saw the biggest increase in the quarter from last year, up 166%, with increases from all of the entertainment product categories. Services, healthcare, financial, telecoms, travel, and transportation all saw double-digit increases compared to last year, and retail was also up. Net revenue for Reach Media was $19.3 million in the fourth quarter compared to $10.3 million in the prior year. Event revenue from the Tom Joyner Fantastic Voyage was approximately $7 million. The remaining revenue increase was due to strong demand for network audio. Adjusted EBITDA in the REACH segment was up by $100,000 for the quarter and by $4.3 million for the full year. Net revenues for our digital segment increased by $4.7 million in the fourth quarter. Continued demand for black-owned and targeted brands drove growth in direct advertising sales at I-1 Digital. Adjusted EBITDA decreased for the quarter by $1.9 million. but increased by $11.2 million for the full year compared to 2020, and by $16.6 million compared to 2019. We recognized approximately $54.6 million of revenue from our cable television segment during the quarter, an increase of 19.9%. Cable TV advertising was up 43.6, excluding political, with a favorable rate volume impact of $1.7 million, $2.1 million of free video on demand revenue, a million-three increase in Clio TV, and $2.1 million favorable audience deficiency unit burn-off. Cable TV affiliate revenue was up by 5.7%, driven by rate increases and by converting free subs to paying subs, which was partially offset by churn. Cable subscribers for TV1, as measured by Nielsen, finished fourth quarter 21 at 49.3 million, up from 42.3 million at the end of Q3, and Clio had 43.8 million Nielsen subs. We recorded approximately $2 million of cost method income, less admin expenses for our investment in the MGM National Harbor property for the quarter, compared to $1.6 million last year and $1.7 million in 2019. Based on internal estimates of publicly available information, Our put option is currently valued at around $100 million. And to remind investors, we have the option to put our 6.67% stake in MGM National Harbor at seven times trailing EBITDA. Operating expenses excluding depreciation, amortization, impairments, and stock-based compensation increased to approximately $106.1 million in fourth quarter compared to $74.1 million in Q4 of 2020. Of this increase, $3.5 million is for the non-cash charge on the CEO's employment agreement award, and $1.9 million is for the one-time casino chase costs. Both of these amounts are added back to just to keep it down. As a result of the continuing reopening of the economy and increases in revenue, the following operating expenses increased from the prior year. Employee compensation increased by approximately $5.9 million. Programming content amortization at our cable TV segment increased by $5.8 million. Revenue variable expenses increased by $4.2 million. Outside services, including contract talent and consulting fees, increased by $1.7 million. Marketing and promotional expenditure increased by $1.4 million. And event expenses increased by $7.1 million, of which $6.6 million was for the REACH cruise. Radio operating expenses were up $3.6 million. Music license fees, employee compensation, and promotional spending were the main expense increases in radio. REACH operating expenses were up by $8.5 million against a revenue increase of $9 million. And as mentioned, the cruise revenue was $7 million and the cruise expense was $6.6 million. Profit sharing expense and affiliate fees were also up at reach. Operating expenses in the digital segment were up $6.4 million, driven predominantly by incentive compensation and variable expenses related to traffic acquisition and sales. Cable TV expenses were up $7.6 million year-over-year. Programming content expense increased by $6. approximately $5.8 million, and employee compensation increased by approximately $1 million. Operating expenses in the corporate and elimination segment were up by $5.8 million, which included the Richmond Chase casino costs of $1.9 million and the employment agreement award of $3.5 million. For the fourth quarter, consolidated broadcast and digital operating income was approximately $44.1 million, a decrease of 14.9%. Interest expense was approximately $15.9 million for the fourth quarter compared to approximately $18.7 million for the same period in 2020. The company made cash interest payments of approximately $187,000 in the quarter since the semiannual debt service payments are due February 1st and August 1st. Provision for income taxes was approximately $1.2 million in the quarter, and the company paid cash taxes in the amount of $359,632. Net income was approximately $6.6 million, or 13 cents per share, compared to $26.4 million, or 58 cents per share, for the fourth quarter of 2020. Capital expenditures were approximately $2.1 million. The company executed a stock-fest tax repurchase of 2,530 shares of Class D common stock in the amount of $9,000. As of December 31st, 2021, total gross debt was $825 million, ending cash was $151.7 million, and net debt was approximately $673.3 million, compared to $150.2 million of LTM reported adjusted EBITDA for a total net leverage ratio of 4.48 times. We believe our stock is currently trading below market comparables given our valuable put option in the MGM property, our high cash balance, reduced net leverage ratio, strong adjusted EBITDA performance, particularly from digital, cable TV, and network radio segments, and also our ongoing free cash flow generation. We will continue to be opportunistic but prudent in terms of share repurchases. And we expect the board to authorize a stock buyback program as part of our capital allocation strategy. We currently expect full year 2022 adjusted EBITDA to be between $145 to $150 million, absent any significant economic slowdown, with potential upside if political and digital revenues exceed expectations. And with that, I will have myself.
spk01: Thank you. The other important topic that people want some color on is what's going on with our efforts in Richmond on the second casino referendum. Yeah, the the city. Council of Richmond, Virginia voted eight to one to ask to petition the court for a second referendum to be put on the ballot for this coming November. However, that was the first step. And then there is an effort in the General Assembly in Virginia by a state senator that represents another city, Petersburg, to actually block that referendum and move the casino license opportunity out of Richmond to Petersburg. There were two bills, one in the House, one in the Senate, that would do that. The one in the House died. The one in the Senate also got killed. down in Richmond following that and advocating for the opportunity for Richmond to have a second chance to vote on this. The city council also committed to offering up legislation that would reduce property taxes and specifically target casino revenues to to schools and other capital projects, so it is a different project. Even though those two bills died, there is language that's been put in the budget bill currently that would effectively block Richmond from having a second referendum this year and would not allow it to have another referendum until November of 23 and would study the viability of Petersburg as a potential location. At least for this year, it does not look like it will move out of Richmond. Currently, this language would prohibit Richmond from moving having another referendum this year, but, you know, if they chose to, could do it in 23. There's still a lot of moving parts in the General Assembly. That session, you know, goes to until mid-March. There's a lot of politics, you know, involved with this, you know, with the casino issue, quite frankly, that has nothing to do with the viability the casino being in Richmond and has everything to do about you know certain legislators wanting at other places and willing to trade off things you know in terms of votes for certain issues in order to get it so very fluid you know at this point in time but we're highly engaged our partner in the Richmond casino operating partner Peninsula P2E they're called, but Peninsula Entertainment has recently, a week ago, announced that they were being sold, and they're actually being sold to Churchill Downs Incorporated, which is a much larger gaming entity that obviously, I don't want to say obviously, that owns the Kentucky Derby, if you don't know who Churchill Downs is, but Most people think of them as the Kentucky Derby, but they're also a very large gaming operator and own a number of gaming facilities and casinos. Most of their gaming operations are Class III slot machines and also table games. They're in the Florida market. They're in the Maryland market. They're all over Kentucky. They're in Ohio. They just won the Class III license in Terre Haute, Indiana. So a very large, you know, gold-plated partner. And even though our partner in Peninsula is very committed and we like working with them, the folks at Churchill Downs who had an opportunity to talk to last week and actually meet yesterday are very excited about the Richmond opportunity and want to be – very helpful in trying to make sure that that opportunity is not lost. And we get a resurrected chance for a second vote. So I don't have any news. I'm not here to tell you that it's dead. I'm not here to tell you that it's going to happen. It's 50-50 at this point in time. But we're still alive and still hopeful and still putting effort into it. That also dovetails into another topic of conversation because I think in the last conference call we talked about, and that's debt repayment. We've got a bunch of cash, as Peter articulated, and quite frankly, until we know what's going to happen with the RVA casino opportunity, we're kind of sitting on that for now. But I suspect, you know, that, you know, as the year moves, you know, on, we're continuing to build more cash as operations continue to perform great, you know, as they have been. You know, but, you know, I would not be surprised, you know, if we ultimately decided to, you know, purchase some of our debt in the open market, you know, which, you know, we're allowed to do, therefore retiring that debt. I don't want anybody to think that we're just of the mindset to stockpile cash for the sake of stockpiling cash. But it really is largely related to whether or not we're going to have to make a significant $100 million investment in the casino opportunity. But things are going well. I'm optimistic about... where we sit, you know, as a company, um, you know, I'm sullen and, you know, and, and they're nervous about the geopolitical backdrop as I'm sure we all are, um, uh, in this country. And, you know, what does that mean, you know, for, um, you know, the economy here at home. Um, but, um, you know, we're doing, uh, uh, we're, we're, we're doing the best that we can in, um, uh, in, in, an ever-changing media environment and an uncertain geopolitical environment. So with that, operator, I would like to open the lines up for questions.
spk04: Ladies and gentlemen, if you wish to ask a question, please press 1 then 0 on your phone. Press 1 then 0, the signal you wish to ask a question. And we're going to take a question from the line of Patrick Wang with Voya Investments. Please go ahead.
spk03: Yeah, good morning. Thanks for the question. I noticed that the debt balance is down to $811. Does that mean that you have repurchased some of the notes in open market at this point? And also, what's the cash on hand at this moment?
spk02: No, so that's just when we report it, we report it net of issuance cost, so NEOID. So that's just the net number. The gross debt is 825, as I mentioned earlier. And I think we're in the mid-130s in terms of today's cash balance. I will just pull that up in a second. So, yeah, no, the gross debt hasn't changed. There have been no purchases. And the cash balance as of this morning was about $137 million. Okay. Okay.
spk03: And so what is the timeline now that when do you – what's going to happen next? And just kind of give us a playbook on the development of the casino project.
spk01: I think that over the next – 30 days we'll know where we sit on our chances of running a referendum in uh 22 um versus having to run one in 23 and you know a number of things if it goes to 23 we gotta you know there's a there's a number of other things that happen you know you know you know to happen to you know sort of you know, secure, you know, whether it's us, you know, I mean, our, our, our deal with the city doesn't go that far, right? So the city's got to ultimately decide that they're okay wanting to go to, to 23, right? So those discussions are, you know, ongoing right now, everybody's working hard, the city and us to try to, to get it in 22. If where we end up, um, uh, is that we can't run to 23, then everybody's got to sit down and say, okay, are we willing to stay committed to this project for another year and three quarters, right? Actually, it's not a year and three quarters, about a year and a half. And I've been in and out of Richmond pretty much every week. I was just there yesterday. So we're working lockstep with the city. They want to see this happen. Obviously, they don't want to have this opportunity move to another jurisdiction. And so we're all working on the same page. So I just said, in the next 30 days, we'll know whether or not we're going to be able to run one this year. And then I think over that period of time, we'll probably have some clarity on whether or not the coalition all wants to hang together and pursue it in 23. Right.
spk03: So what's the likelihood that Petersburg will get it?
spk01: I have no idea. I mean, it's not going to happen this year. Look, everybody wants me to handicap this. This is politics. I can't handicap politics. And even if I gave you a handicap, I also can't handicap the vote. So last go-around, we had polls that said that You know, we were, you know, prior to the RFP, 62% of Richmonders, you know, were in favor of gaming. After the RFP process, because there are a number of proposals that were proposed in, you know, kind of middle to upper middle class neighborhoods and people went bananas, the whole NIMBY thing, you know, at the end of the RFP process, it was, you know, 47% for gaming, 45% against gaming. Then after we got chosen, it was 52% to 53% for gaming, five undecided and a balance against it. And then once the referendum was run and you had a surge of conservative voters across Virginia come out, we lost 50.85 to 49.15. So I don't want to lead anybody on that. We're working this. The political environment right now is uncertain, but even if we get it, even if we get a chance to run a referendum, again, it's a 50-50 shot. If you own our securities or own our stock, you should really be focused on the fundamentals of the base business, our security. Cable networks, the return of our radio business, the digital business, which is now really starting to take flight, the value of our MGM stake, which we own, the put is at maturation. They're doing exceptionally well. And think about the casino as upside if it were to happen. Right, right.
spk03: Could you also talk about your, you know, your strategy on radio before you talk about potential station swaps to get more economy scale? Is there any recent update for the plan?
spk01: Yeah, you know, we continue to look at stuff, you know. We're, you know, focused, you know, primarily on opportunities that, you know, allow us to get, in market scale, you know, and, you know, we're currently analyzing a number of opportunities. We do not have a definitive agreed upon deal to do anything, you know, at this point in time, you know, but I continue to believe that scale in the radio business, You know, makes sense. You know, I'm of the opinion that the radio, actually, it's not an opinion. The radio business, at least in the markets, you know, that we've operated in, you know, have been declining over the last, whatever, 10 years, you know, kind of low single digits. You know, I think our markets, the average decline has been like minus 2%. some markets are doing better, you know, um, than others. And again, I'm just looking at the markets that, you know, um, uh, that were, that were in. So, you know, um, it's a slightly declining business and, um, you can make money in it, you know, um, and I'm not saying that that doesn't ultimately, you know, if you get further consolidation and ultimately, you know, um, there, you know, um, Radio is undervalued in terms of its cost per thousand, and I do think as the industry consolidates and you've got more big players really out there harping on that and being able to deliver value for advertisers, then ultimately I think you could get some lift in CPMs. But anyway, notwithstanding that, when you underwrite any sort of acquisition – you know, of radio, I think you need to do it from the mindset that, you know, this is going to be a, you know, a business that could be declining, you know, in low single digits. And how do you manage that? You know, that should inform what you pay. That should inform how you're going to manage that business, you know. And so that's what we're going through. And so you got to, you know, you got to look at acquisitions, I think, through those lenses, through that lens. And but I think ultimately, you know, it makes sense. I also think that it will take us out of not, you know, I'm not saying anything that we buy won't be in our format wheelhouse. But I think if we do participate in, you know, further full scale radio consolidation, it will necessitate us going outside our traditional box of urban radio. But that's not bad. We did that in our swap. you know, with Intercom in Charlotte, North Carolina, and that's turned out to be great for us. We now have a, you know, real cluster there that's got, you know, some scale, and instead of being a market where, you know, we had $800,000 or $900,000, you know, of EBITDA and used to just break even, now we have multi-millions of dollars of EBITDA, and we've got a real broad offering for advertisers, including Urban. You know, I'd like... to have a collection of clusters that look like that, you know, in markets. So that's where we're sitting right now.
spk03: One last question on the margins. This quarter you have about $10 million shy of last year's EBITDA level. Is that just, oh, because the political advertising, the lack thereof, or there's some other one-time investment, you know, on digital side that's dragging down the margins? And then can we look for 2022 margin probably a bit higher than the first quarter because of these investments?
spk02: Yeah, so look, I tried to... Yeah, revenue's great. The political, obviously, was high margin. That wasn't there this quarter. And if you think about the cruise, for example, that was $7 million of revenue, $400,000 of profit. We were very happy with it. We wanted to run a big-scale event you know, post-pandemic and see how it went, but obviously very dilutive on margins. And then as I also mentioned, you know, Q4 was expense heavy and is not really representative of a regular quarter. We had the TV1 amortization higher. We had incentive payments that were for the full year, but we didn't know what those were going to be until fourth quarter. So there were, you know, heavy incentive payments booked into fourth quarter. So To your point, the margins were depressed in fourth quarter, unnaturally so. And we would expect to see, you know, margins generally return to, you know, a historic kind of run rate.
spk03: Great. Thank you.
spk04: Once again, ladies and gentlemen, if you wish to ask a question, please press 1 and 0. We have a question from the line of Rafe Lehman with Eaton Vance. Please go ahead.
spk05: Hi, good morning. Thanks for taking my question. I'm just wondering if you could talk about your full year guidance in EBITDA for 22, just some of the puts and takes, you know, what could go better or worse and, uh, with it being political, you know, why, why you see it being down year over year?
spk01: Yeah, good question. Um, uh, So our digital business, you know, has exploded. I mean, I think the budget was last year was $30 million, give or take, and we did close to 60. Right? Yeah, like high 50s. So, you know, this is a business that we started in 2008. And we struggled with it for a very long time. Now, digital publishing is hard, you know, because it's switched from, you know, being sort of domain, website domain oriented, then to, you know, search oriented, then to social oriented, you know. And now, you know, every time, you know, any one of the big platforms changes an algorithm, it changes your, you know, your audience size, content's expensive. you got to give Google, you know, and Facebook, you know, a large part of your revenues. So for years and years and years, this business either broke even lost a million dollars or made a million dollars. Um, prior to going into the pandemic, we started to cut a lot of expenses. Um, we made, I think $900,000 in, uh, in 2019, correct me if I'm wrong, Peter, you know, um, you know, we had a low expense base going into the pandemic, you know, we trimmed it some more, although be it, you know, not as, as much as other places, but then you got this uplift in, um, uh, in African-American audiences target, you know, social equity and demand started to really increase, you know, you know, dramatically. And, uh, and then we made $6 million, I think, in, in 2020 in, in the, in the pandemic. Going into 21, we were like, okay, and by the way, traffic has been the same or declining. We didn't know where the demand was really going to go. 21, the demand was even stronger, right? And so we ended up making like $17 million last year. So quite frankly, the answer is we're budgeting for digital to go down just because we don't know where – you know, that demand is going to sort of peak. We don't know how much of it is a moment of time, a moment in time. You know, I do believe that the paradigm has shifted as far as advertisers wanting to put dollars towards this audience and towards, you know, minority-owned entities. But I just don't know when it levels off, if it declines, you know, et cetera. So we budgeted digital down. And yes, we do have political, and I just don't know, but quite frankly, we took digital down from a $17.5 million performance to a $10 million budget. That's a big number, right? Ironically, though, it's actually doing really well in Q1. So there is potential upside. We're just allowing... you know, we're allowing for there to be some, you know, withdraw of the, you know, extraordinary demand that we've seen, you know. So, you know, that's how we're thinking about it, you know. And political could be off the chart as well. And I think Peter articulated that there could be upside, you know, there. You want to?
spk02: Yeah. I mean, look, segment by segment, you know, Radio properties, we're anticipating higher revenues and higher adjusted EBITDA year over year in 2022. And the same for TV1, you know, incredible performance, great ad sales growth, and we expect EBITDA growth this year. So really what Alfred's saying is, you know, when we kind of balance out all the segments, we're least certain about digital. It's a newer business to us. It's been growing like a weed. You know, how long can we continue that? And there are more factors to play, like how many impressions can we deliver, what's traffic doing, who's changing their algorithm. So we kind of dialed that back, as Alfred said, but to your point, the other segments, you know, with forecasting and that guidance to be up.
spk01: And so, look, here's the thing. You'll know what we print in Q1, right? You can track, you know, how we're doing, you know, quarter to quarter. So at some point in time, people will be able to figure out, oh, they're going to do better than this 145 to 150. We contemplated not giving guidance at all, you know, but, you know, people, you know, kind of like to know something, you know, and so, you know, we felt comfortable, you know, putting out 145 to 150. We also don't know what's going to happen in the world, right, in terms of, You know, is there going to be a recession? Is there going to be, you know, fallout from, you know, what's happening in Europe? But anyway, that's how we came to guidance, and I get one could argue that, you know, we should do better, right, than our guidance.
spk05: Maybe just to – yeah, that's helpful. And maybe just on political, to drill down a little bit – Lots of folks talking about midterm election cycle versus presidential, and typically that's lower, but a lot of folks are thinking, at least in certain markets, could be equal or maybe even more. Where do you guys come out on that, do you think?
spk02: Look, we kind of look back in four-year cycles. 2020 was obviously exceptional. And if it's anything like that, then we're going to beat our number. I think when we go back and look at 2018, we did about $7.4 million net. And we're kind of thinking it'll be somewhere in that zip code, give or take a million. But it could go, you know, that's kind of what we baked into our guidance and our budgets. But, you know, if it ends up being more akin to 2020, then we will beat that. The previous high watermark we've had, just for reference, was in 2012. We did 9.1 million. So, you know, in 2020, we did about 18.9 million net. And in 2012, prior to that, we did 9.1. So there's some kind of bookends as to where it could go.
spk05: Okay, great. Maybe if I could, one more. You talked about some of the one-off expenses, but I didn't necessarily hear in there, I think, kind of inflation. I don't know if there's anything supply chain related, but maybe just more inflation or maybe on the wages side. Yeah, anything to mention there?
spk02: Yeah, we did do salary increases midway through last year from memory. And that's the first time in a long time that we've done across the board increases. So yes, that will drive expenses up. And there is, you know, obviously there is inflationary pressures on various things.
spk01: I think for us, we're pretty fixed cost based. Yeah, and most of our escalators in our agreements are very low single digits you know stuff that we've been able to negotiate over time you know i mean we kind of we kind of got away from the cpi you know sort of you know escalator a lot of years and kind of focused on trying to get things to be one percent two percent i mean i don't i don't know all of our contracts i remember all of our contracts off the top of my head but if there's a two and a half percent number in one of our contracts, that's like the outlier. Yeah. We, we long ago rejected that, you know, three, four and 5% increases were, you know, yeah, they weren't the norm, right. You know, cause you know, there was no inflation for a long time. And so we spent a lot of time negotiating, you know, you know, you know, those down and,
spk05: Got it. Sorry, I said that was my last question, but I did think of one more when you mentioned in your last answer what could happen in the world in recession, et cetera. Any comments on kind of how your business, you know, would be affected in a recession maybe versus some other similar types of business? Do you guys tend to be a little more resilient?
spk01: I mean, if you, well, you know, I mean, look, we sell advertising, right? You know what I mean? So, yeah. And it depends on what kind of recession. You know, the recessions off the top of my head are like, you know, that I remember are like 2009, 2010, you know, and then the pandemic sort of catastrophic, you know, economic meltdown recessions, right? Not just like, you know, GDP has gone backwards by 1%, you know? And, and so we, you know, we're a management team that does what it takes in order to get to the other side. We had, a lot of debt. I mean, I think at one point in time, we were close to nine times, and we've cut that ratio in half, you know, without, you know, having any sort of, you know, major issues with, you know, debt holders and things of that nature. So I think the management team is willing and used to doing what it takes to keep the company on a good financial footing. But, you know... Our mix of assets, you know, I think, you know, protects us, you know, our diversification against, you know, a number of things. Certainly during the pandemic, you know, our radio business in April after the pandemic really started in full force was down 70 plus percent. I mean, it was unbelievable. And you saw the radio companies, you saw their EBITDA get cut by, you know, more than half. Yeah. And, um, and we actually ended up, you know, doing okay on the other side of that, even though we all took pain, we all took salary cuts and stuff like that. And, you know, and we got through it. And a large part of that is because our cable television business, you know, um, you have flourished and our digital business, you know, um, uh, did well, you know, we've got over 500 million ish of revenue, a hundred million of that is, you know, from subscription fees, from affiliate fees from cable television operators that aren't, you know, prone to, you know, swings, you know, in the economy. Prone to churn, you know, but not, you know, the swings in the economy. So I think compared to other radio companies, we obviously are more, you know, protected because we're more, you know, diversified. And so... It depends on what kind of recession it is. But the answer is, yeah, I think that we do better because we're diversified across more different types of businesses. We've got more of a unique position. I think the desire for people to spend against our audience and with minority-owned companies right now will help further insulate us. And we've also gotten our debt down, you know, and we like, you know, being, you know, not in a stressful, you know, leverage position and, you know, plan to stay in that zone. You know, the other thing is that when I said management will do what it takes, even though the family owns a very large percentage of the company, you know, we're not hesitant to sell equity when we need to, right? You know, so during the pandemic, we – We accessed the ATM market, and we sold $50 million worth of equity at different points in time when it made sense, and that helped us immensely. So proper capital allocation, extraordinary expense control, diversification, a great demographic. Yeah, this is a battle-tested management, you know, team that I'm, you know, really proud of all the way, you know, down through all the different divisions. So they're probably sick of me, you know, shouting the mantra of we've got to reduce debt, we've got to do this, you know, but it's served us well, and the troops have really, you know, leaned in and instead of being resentful of our need to do tough things in order to get it down, they did it. And we've gotten through to the other side. Thanks for taking all my questions. Operator, we've got time for one more.
spk04: Our next question will come from the line of Sundar Varadarajan. with Lord Abbott. Please go ahead.
spk06: Yeah, hi. Thanks for squeezing me in. I just wanted to kind of step back and maybe have you discuss a little bit more about what your ultimate leverage targets are, and then put that in the context of you mentioned authorization to buy back stock, as well as as you evaluate this referendum, what happens if In 30 days, it doesn't look like it's going to happen in 22, but there's a chance it may happen in 23, or you're still going to hold on to the cash until you figure out what happens in 23. So if you could give us some kind of timeline surrounding that, it would be very helpful.
spk01: Yeah, look, I haven't sat here and thought through all of that, but just off the top of my head, if it ends up being that it's going to happen in 23, and if we hold the coalition together and we're going to move forward and support it in 23, the company generates a lot of cash. So there is an opportunity for us to pay down debt, buy some stock back if we choose to, even do some opportunistic M&A and still be in a position to make the $100 million investment that we need to for the casino. No, we won't just hold on to the cash. We're paying seven and three-eighths on our debt and we'd like to continue to increase our free cash flow generation. So, you know, these assets generate a lot of free cash flow. So, you know, I would feel comfortable, you know, whittling down the balance sheet because I know we'll still be in position to be able to execute on the casino opportunity.
spk06: Got it. And then in terms of your leverage targets for the core business, You know, where do you want to get to before you say, you know, you've done enough and then move more towards equity returns?
spk01: I don't want to see a six handle on our leverage ratio again, right? You know, and, you know, we're at four and a half now, you know, and... If we do nothing, it's going to be below four by the end of the year. We'll probably be in the high threes by year end if nothing happens. That's a great place to be, right? And so I'm not saying that we wouldn't consider doing something that took the leverage up to five to do something in the very short term that we thought was going to get us back down quickly strategically. You know, but I got to tell you where I want to be for the long term is I want to be below four, right? You know, and I want to stay there. Yeah. And so that's how I think about it. You know, I don't think, you know, and again, I think, we sell equity, right? You know, so, I mean, we've done it. You know, we will do it. We like to do it opportunistically. I mean, you know, we bought back probably over half the shares of this company, you know, over a 10-year period, and we've bought them back at prices that, like, you know, when nobody else, when the world, you know, they think the world's ending, people think the world's ending, and we have a, you know, and we have a real opportunity good viewpoint on our business and you know what we're actually able to do with it you know we've been opportunistic and we bought back at you know shares at very low prices i think during the pandemic you know we bought forgot how many shares it was awesome almost four million shares at 76 cents you know and so turn around and then selling those shares at five bucks is you know is is is a great trade but at the end of the day i'd like to see this company go below four um You know, and I don't ever, you know, want to see a six handle again. And I would try to, you know, avoid anything with a five handle if, you know, if it wasn't just for a short period of time in order for us to work through sort of, you know, an integration of an acquisition that eventually got us back down, you know, into the fours and on the path to go below fours.
spk06: Just one clarificatory point on that, you know, when you said strategic transaction that could get you about, you know, at or close to five times for a short-term basis, do you also, do you kind of include the gaming investment as part of that? Or when you say strategic, you're talking more within the core?
spk01: That's an extraordinarily good question, and I hadn't really thought about that, you know. I don't want to answer that because, right, if $100 million goes out the door and then, you know, look, I'm riffing here, you know what I mean? But if $100 million goes out the door, you know, then that's going to make our leverage ratio X, right? We're going to take that into account in whatever M&A opportunity that we're looking at, right, at that time, right? So if we send $100 million out the door for the Richmond Casino and then there's an M&A opportunity and then all of a sudden – you know, in order for us to do that, you know, our leverage is looking like, you know, 5.8 or 5.9 or got the bid six times. We're probably not going to do that transaction, you know, with all that. Right. And we'll probably, you know, do it, you know, um, in a way there are leverages lower now, by the way, if we're sending a hundred million dollars out the door to do the Richmond casino, our stock's not going to be $5, right. Our stock's going to be something, you know, way higher. because the market has shown, when they thought we were going to get it last time, that they're willing to give us some value for that ahead of it actually being open. And so we'll have other tools at our disposal to manage our leverage. Does that make sense?
spk06: Yeah, I know that makes a lot of sense. Thank you for that clarification.
spk03: OK.
spk01: Operator, thank you very, very much for your help with today's call. Everybody, thank you for attending. Thank you for your support. And as I always say, Peter and I try to be exceptionally accessible offline, so feel free to send an email or blow in a call if you missed a question or think of something later that you need answered. And thank you very much, and see you next quarter.
spk04: Ladies and gentlemen, that does conclude our conference for today. Thank you again for using the AT&T teleconference service. You may now disconnect. Thank you, everyone.
spk00: We're sorry. Your conference is ending now. Please hang up.
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