Spanish Brdcstng Sys A

Good morning and welcome to Spanish Broadcasting's second quarter 2022 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Brad Edwards with Investor Relations. Please go ahead.

Thank you, Chad, and good morning, everyone. Before we begin, please recognize that certain statements on this conference call are not historical fact. They may be deemed, therefore, to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. In particular, statements about future results expected to be obtained from the company's current strategic initiatives are forward-looking statements. Many important factors may cause the company's actual results to differ materially from those discussed in any such forward-looking statements. Spanish Broadcasting System undertakes no obligation to publicly update or revise its forward-looking statements. Please also note that we will be discussing non-GAAP financial measures. The company believes that operating income before depreciation and amortization, gain on the disposal of assets, recapitalization costs, and other operating income, excluding non-cash stock-based compensation, or adjusted OIBDA, is useful in evaluating its performance because it reflects a measure of performance for the company's stations before considering costs and expenses related to capital structure and dispositions. This information is not intended and be considered in isolation or as a substitute for operating income, net income or loss, cash flows from operating activities, or any other measure used in determining the company's operating performance or liquidity that is calculated in accordance with U.S. GAAP. A reconciliation of the company's U.S. GAAP information to adjusted OIBDA is provided in the tables attached to the company's 2022 second quarter earnings release, which is available on the investor relations section of the company's website, at www.SpanishBroadcasting.com. I will now turn the conference over to Mr. Albert Rodriguez.

Good morning, ladies and gentlemen. Welcome to the SPS 2022 Second Quarter Earnings Conference Call. On today's call, we'll provide an overview of recent operating developments and review our financial results. Joining me today are Jose Molina, our Chief Financial Officer, and Richard Lara, our General Counsel. Our second quarter results reflect continued solid performance by our audio assets, offset by a period of strategic investments in our business as we look to drive accelerated growth and performance in the coming years. We made investments to support our newly acquired Tampa and Orlando station cluster, as well as further differentiate our digital offerings. Earlier this week, we announced the launch of our DigiIDEA digital marketing solutions platform, which will make SPS a one-stop shop for our brand partners for Hispanic marketing needs. DigiIDEA's full-service digital solutions include search marketing, display, OTT, CTV, email, and social, in addition to their vast Spanish-language portfolio of radio, TV, streaming, audio, and programmatic platforms. Digidea will allow advertisers of all shapes and sizes from any industry to build robust marketing programs to meet their targeted consumer and demographic groups across every stage of the purchase journey. At SBS, we have always been committed to operating the best diverse minority-owned Spanish-language audio and digital entertainment platform in the nation. The targeted investments we are making will build our market leadership and history of industry outperformance. Today, our assets and reach is unmatched, and we are delivering an increasing multi-platform audience to our advertising partners, The Latino population has never been larger, had more influence, or been more sought after than right now. We've never been more confident in the future of SPS and ever expanding touch points. We have with the Latino population across the nation's largest and most densely populated markets. Today, SPS offers a premium investment, which is at the intersection of diverse targeted and diverse owned. We also offer a scale and reach that is incomparable to any other out there to help brands meet their diversity and inclusion goals. This is a core initiative to our business enterprise. Our audio revenues increased 6% in the second quarter, and we are currently tracking plus mid-single digits in the third quarter. The 6% growth in the second quarter demonstrated the power of SBS. In the 2021 second quarter, SBS grew revenue versus 2020 at an incredible 160% over the prior period. No other radio broadcaster even got close to that number. Our audio revenues are accelerating, which demonstrates what we have long believed and history has shown. Audio is recession-proof and remains a reach vehicle for advertisers. given its efficient CPMs. In the first six months of 2022, the market's SPS service grew by 13% and SPS grew revenue at 29% versus 2021 per Miller Kaplan. SPS grew revenue faster than any other radio broadcaster in the nation. In addition, a TV viewership Continues to migrate to OTT or streaming options, advertisers are looking to address a growing inefficiency and find new and compelling options to replace their TV advertising. Digidea digital marketing solutions platform will enhance our overall TV and video operations. As these dollars continue to shift, Spanish language radio offers a highly compelling alternative given the ever-expanding power of the rapidly growing Hispanic market here in the U.S. Today, Hispanics represent 19% of the total U.S. population, and by 2040, it's expected to represent over 25% of the overall population. Today, Hispanics represent $1.7 trillion in buying power, and that will only grow as the Latino population does. Now, let's review our operations, and we'll start with Ida Radio Network for the second quarter of 2022. Ida Radio Network outpaced the marketplace by 25%. Ida Network was able to widen the gap and had strong categories in this period. Such categories included home products, plus 83%, insurance and mortgages, plus 123%, pharmaceuticals, plus 400%. and 59 percent retail is plus seven and qsr is plus 59 percent it continues its commitment for super serving hispanics and asserts its position as the largest diverse minority owned and certified spanish language audio network in the nation its core comp Competitive advantages include 95% reach of the U.S. Hispanic market in key demographic groups, 15 million weekly listeners across 100 markets nationwide, presence in the top 50 U.S. Hispanic markets. One of the key highlights for AIDA's initiative includes El Terrible Morning Show, La Mezcla, with Alex Sensation, the influencer network delivering campaign messaging services through a national platform while penetrating local markets, and Adidas 360, where brands are aligned with Latin artists. For the second quarter of the year, Ida Radio Network was up 26%, and Miller Kaplan reported the network category by 1.5%. Turning to the audio division, where we were the number one in our top markets across the nation, with unrelenting rock-solid rating performance and listener growth. We are very proud to announce for the first time in history a laser-focused Hispanic program. We have a number one rated station beating all the stations in two of the significant major markets. Number one in New York with WSKQ Mega. Number one in Miami, WXPJ El Zo among all adults, 18 to 49, Monday through Sunday, 6 a.m. to midnight. To have a number one beating all stations irrespective of language is a feat that proves that we are the pioneers in setting new trends in the Hispanic market. Our digital stream ratings continue to grow every month. La Mega 97.9 once again be the reigning most streamed online audio content in the nation. A recently launched initiative of daily on-demand audio and top-rated shows has grown listening and engagement by over 1,000%. on our La Musica app. Our programming team created new original and audio on-demand content. Podcasts from our top shows are now available exclusively on La Musica app. As mentioned earlier, WXDJ, El Sol, is now the rating leader in Miami among all persons. El Sol is the only Hispanic female leading morning host with El Basilón, La Gatica, and she is number one in the morning. In Miami, WCMQ, CETA 92.3, is at the top in the mornings with radio and TV journalist Oscar Aza, and it still remains number one overall in the adults 18 to 34 demographic group. WRMA Ritmo is celebrating its sixth anniversary in gearing up for the Cuauhtonazo concert. This yearly station event is with the participation of the hottest Cuban artists, such as Genta de Sona and Chacal. We have never had non-Cuban artists pop up, such as Don Omar. This event will have many surprises. And now I want to say that there are only one or two times in a lifetime when we can launch two stations from scratch. And the success is exemplary and is recognized by Nielsen as a historic launch because of the immediate waiting success. WPYO-FM, el nuevo, nuevo, nuevo, 95.3%. the fastest growing radio station in the entire Orlando DMA in less than eight weeks on air and in most current Nielsen weekly rating is now beating all other Hispanic stations in various day parts we had an exclusive on air in studio with an artist that took over from the most prominent star Bad Bunny we are now in Turning to Los Angeles, our launch on the Omar and Angelia Morning Show KXO Omega 96.3 has become a rating success with over 100% of Hispanic adults. Since day one, our morning streaming audience has remained at the top of the charts. Omar and Angelia are an actual married couple airing all of their love and couple situations. It has a very unique connection with the new listeners on Mega 96.3 KXOL Los Angeles. The Hottest Club and Los Angeles DJ is now the number one Spanish-rated show in the afternoon on Mega KXOL among 18 to 34 adults, and that show is from 3 p.m. to 7 p.m. KLAX La Raza 97.9 is the number one Hispanic regional station and is home to the number one Hispanic morning show. His commitment to the community, providing food, wellness information, and original fun, entertainment, makes us the number one show among all Hispanics in L.A. Puerto Rico's ratings have exploded. We have a station number one in each demographic group. W.O.D.A., La Nueva, 94, number one, 18 to 34. WMEG Mega, 106.9 FM, number one, 18 to 49. WZNT, number one in men, 25 to 54. Now to MegaTV, where our national footprint reaches millions of homes via our cable and satellite broadcast partners. Our primetime content remains an area of focus, and we are making progress driving audience growth among critical demographic groups. Turning now to our live events division, during the second quarter, SBS Entertainment Division continued to make progress in the Orlando market, executing a two-day festival on the Orlando fairgrounds, Wai-Wai and Via Nacional de la Salsa. These were attended by over 13,000 people each day and received significant client and sponsorship interest. The events in the Orlando-Tampa market will continue to see significant growth with the radio station acquisitions in those markets. SPS also produced the Megamecla concert in New York. This event was sold out within 60 days of launching and generated almost $2 million in gross revenue, which is a record breaker for the New York show. The division continues to expand and grow with over 14 shows scheduled from now through the end of January 2023. We are extremely optimistic about the live event space and its strategic positioning within the market. Now turning to our mobile and digital platforms and strategic initiatives, over the last several years, we have had great success transforming SBS into a leading multimedia Hispanic media company. Today, we connect brands with more Hispanics than ever before, and our aggregate audience continues to expand. For our brand partners, there has never been a more important time to have Latino-focused marketing strategy and outreach programs. The diverse Latino population is growing rapidly in size, cultural influence, and purchasing power. SBS has the multimedia assets, the reach, and over four decades of experience and commitment to the Latino community across the US. As such, we can deliver compelling and integrated advertising opportunities that cross all major media platforms and offer access to coveted demographic groups. As I stated, Our aggregate audience continues to grow. As of June 30th, our total audience was up 16% compared to Q2, the prior year. Programmatic revenue grew by 122%. The total division grew by 42% year over year. Our La Musica platform reaches over 1.9 million people who combine for over 20 million streaming hours per month. Usage and adoption of La Musia continues to accelerate as it offers a truly unique mobile and digital experience, including original daily video content, short-form programming, millions of songs, and a personalized experience. Overall, we have placed strategic emphasis on identifying new digital revenue streams as well as increasing our CPMs on existing digital offerings. During the second quarter, our total streaming audience surpassed 1.7 million unique listeners per month. This audience delivered 60 million listening hours and over 50 million total sessions in the quarter. Given Hispanics heavily over-index on mobile phone use, ownership, and usage, mobile remains the primary driver of our mobile digital traffic and accounted for 94% of our total digital traffic in the quarter. In the second quarter, La Musica had a record of 515 million audio and impressions, in addition to 150 million display impressions and 95 million video pre-roll impressions. A key driver for our growth in streaming hours and sessions has been the expansion of our La Musica user base, as well as increasing consumption of our podcasts and playlist products, with average time spent listening with over 45 minutes in the most popular categories, We have added over 20 new shows in the second quarter of 2022 to our podcast offering, and we expect tremendous growth on this category for the rest of the year. In summary, the second quarter marked a continuation of strong trends we've seen on the audio and digital sides of our business. Our financial results reflect the period of strategic investment in our business as we look to best position of our new Florida station duopoly for accelerated growth while also further strengthening digital platforms. Our aggregate audience continues to expand, and we are connecting brand partners with the rapidly expanding Latino population in more ways than ever before. The underlying momentum in our business is strong. And after this period of investment, we see a growing number of opportunities that will accelerate our growth and best position SBS for sustained industry outperformance in the years ahead. In particular, Florida. We control Hispanic radio in Florida. No other radio operator in Spanish has the audience that we have. This marks the fifth consecutive quarter of SPS generating revenue at higher levels than we were at pre-pandemic. Thanks for your time and attention. Now let me turn the call over to Jose Molina for the financial overview.

Thank you, Albert. Before we turn to our results, as Albert has mentioned, our results were impacted by investments in our newly acquired Orlando and Tampa startup stations. investments in our digital infrastructure and personnel, and investments in our programming talent and content. We expect these investments to continue in the near term, after which we should see our margins and profitability normalized. We believe that we are making the necessary and right investments to drive accelerated long-term growth while also sustaining and building on the power of our brands and market leadership positions. Additionally, During the prior year quarter, our radio, television, and corporate expenses were favorably impacted by $2 million of PPP funds which were directly used to offset and reduce employee-related compensation and benefit expenses. I also want to take a moment to touch on the current economic environment. Like most companies, we are not immune to the impact of challenging economic times and a potential recession. With that said, We have been through tough times before. Most recently, the height of the COVID-19 pandemic. Each time SPS's team works together to rise above the challenges and find ways to reduce expenses while continuing to hold market leadership positions and deliver for our brand partners. Now turning to our second quarter results. Our consolidated revenues totaled 37.5 million compared to 36.2 million for the same prior year period, resulting in an increase of 1.3 million, or 4%. Additionally, our consolidated revenues exceeded the same pre-pandemic period in 19 by 600,000, or 2%. Our radial revenues totaled 35 million, increasing 2 million, or 6%. The growth was primarily due to increases in digital, network, special events, and barter revenues. Our radio revenues also exceeded the same pre-pandemic period in 2019 by 2.1 million, or 6%, which marks the fifth consecutive quarter that radio revenues are above 2019 levels. Our television revenue totaled 2.5 million, a decrease of approximately 700,000, or 21%, primarily due to lower national, local, barter, and subscriber-related revenues. Our consolidated adjusted OIBDA, a non-GAAP measure, totaled $5.5 million compared to $12.2 million for the same prior year period, representing a decrease of $6.7 million, or 55 percent. Our radial adjusted OIBDA decreased $4.2 million, primarily due to increases in operating expenses of $6.1 million, partially offset by the growth in revenues. Our radio station operating expenses increased mainly due to the lack of PPP proceeds in the current period, increases in compensation and benefits, advertising and promotion, commissions, barter, and T&E. Our television adjusted OIBDA decreased approximately $800,000 due to lower revenues and an increase in operating expenses of $200,000. Corporate expenses increased $1.7 million primarily due to increases in compensation and benefits outside services and T&E. Operating income totaled $4.7 million compared to $12.6 million for the same prior year period. The decrease in operating income was primarily due to the increase in operating and corporate expenses and the decrease in other operating income partially offset by a growth in revenues. Our capital expenditures during the second quarter were approximately $1.2 million. As of yesterday, we had cash on hand of approximately $17 million. In addition, if needed, we have the undrawn $15 million revolver fully available. As per our credit agreement, our current net debt to adjusted EBITDA leverage is 6.9 times, as I've mentioned earlier, The recent investments we've made across our business will deliver future top-line growth, but will have a near-term impact on our operating results. We remain committed to reduce our leverage and expect it will begin to improve in the coming quarters as our margins and profitability normalize. This will conclude our formal remarks. And with that, I would like to turn the call over to the operator for any questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And our first question today will come from Tim Daggett from RBC. Please go ahead.

Hey, guys. Good morning. Good morning, guys. Thanks for taking my question. On the 3Q outlook, I think you said it's tracking up mid-single digit. Is that for the whole company or just the radio business? And then any detail on how national network and local are doing, respectively? Thanks.

Okay, Tim, that's a great question. I'm glad you asked it. We're pacing in mid-single digits for radio. Television is off. National is probably going to be flat or maybe up maybe close to a percent, but it's probably going to be close to flat. The Standard Media Index for the month of July, they reported that nationally ad revenues were down 13%. SBS radio was up 9%. That's a 21% swing. So although there's hints of some of our brand partners holding back on certain investments, we are focusing on share. We're focusing on share, and you've seen the performance of Spanish Broadcasting that we always do better than all of our peers, and that's just one example. of our performance even moving forward, even in this economy.

Okay, great. And then the new stations that you acquired in Florida, are those free cash flow positive now? And if not, when will those be free cash flow positive, those two stations?

Those stations are stations, obviously, we've made investments. And I'm glad you asked about the new stations because we have information on that. Before we go into a market, we do extensive research, extensive research of why we should be in there. And per census, the census shows Hispanics at 19%. In markets like Orlando, It's way above the national average of the Hispanic population. Orlando is close to 40%. Tampa is well above in the 20% in terms of Hispanic population. So those are markets that strategically, because of the content that we provide to Hispanics across the nation, they make sense for us. They make sense for us for several reasons. Orlando and Tampa is the fastest growing DNA in the nation. It solidified our position in Florida and Miami. During the due diligence process, we found that a lot of our brand partners had extensions of their business in Orlando and Tampa, and we're doing a lot of three market deals. Another key factor is obviously the content that we serve from, in particular, where a lot of the reggaeton and urban content comes out of from Puerto Rico. Puerto Rico is an extension of all of this wonderful content. In particular, I can give you the example of Bad Bunny. It's the most streamed Hispanic artist in the world. And those marketplaces like Tampa and Orlando are a reflection of that. Now, with respect to, in terms of profitability, Both stations are going to be profitable as you look at it in the next, I would say, closer to the next six months or maybe 12 months. But that's what the plan is. Jose, did you want to add anything else to it?

I think it's key to note that these are startup stations. We bought sticks. I think that's very important to note. New sales team, new programming team, new logo. We have to educate the market that we are a Spanish station. These stations were Anglo. So it's a complete flip. So it's going to take the required investments in these markets to A, be known, and B, establish a very good position in the market, which I think Orlando just, the telltale sign for eight weeks, we've established a pretty good ground.

We're in top leadership in ratings. And Tim, I think I'm glad you asked the question about Tampa and Orlando because that is extremely important for the footprint of Hispanics nationwide. This company's been in business for four decades, and when our chairman and chairman emeritus founded the company, a lot of people said, are you sure you're going to go into New York? It was 40 years ago. That station in New York is the most listened to station in America. most listened to stream station, most listened to station in the tri-state New York area, and it is the most listened to Hispanic station globally. So we're going in the right direction as the Hispanic population continues to grow. Those are vibrant Hispanic markets, Orlando and Tampa being one of the fastest-growing Hispanic VMAs in the nation, and those two markets could not be continue to grow revenue there. We're going to look at, obviously, our expenses, but we're going to make sure that we make – that the stations are profitable.

And are there any other stations or markets in Florida that you'd look to get into besides those two?

I think for right now, I think we're good with those two. Those are – I call them the golden triangle. And it's given us such a competitive edge. In particular, I'll tell you, even in Miami – As we transact business on a daily basis, our clients have a lot of extensions in Tampa and Orlando, and we do a lot of these fields. So it's helping the content that we deliver. It's helping the revenue we generate. It helps Miami. It helps Puerto Rico. It helps our network. It helps our national footprint. And in terms of our experiential footprint, We're going to be doing events in both of those markets, and our digital footprint is continuing to go through the roof. There's a lot of data management platforms that confirm that those are two key markets for the audience that we serve, which is the fastest growing and diverse segment of this population today in the nation.

Okay, great. Maybe last one for me. What are you seeing in terms of political revenues? Is anything coming in yet, and what's the expectation for the rest of the year on political? Thanks, guys.

Look, we're excited about political. We're seeing some of it come in. Political historically in midterm election cycles always come in very, very strong after the Labor Day. But I'll tell you, because of our digital platform, we've run on political ads not only in the top 10 markets, but in markets that we don't have owned and operated stations.

And thank you. The next question will come from Matt Swope from Baird. Please go ahead.

Matt, good morning. Great to hear from you today. Good morning, guys. Yes, happy to be on. I would love to just follow up on the expense issue or reconciliation to the extent that Jose is comfortable, could you just break out, Jose, a little bit more the decrease of 6.7 million year over year? Obviously, we have the 2 million PPP component to that. You guys have talked about the startup expenses. But to the level you're comfortable, could you please just maybe itemize that decrease a little more for us?

Sure. So like you mentioned, PPP is 2 million. Orlando and Tampa, let's say, from an EBITDA perspective, is $1 million. The TV loss is about $800,000. Corporate expenses were up 1.7, but of that, there was about $900,000 in discretionary and retention bonuses. And the rest, pretty much, is increase in compensation, mainly driven in the areas of programming and selling. So pretty much investing in personnel.

I see. Thank you. That's really helpful. Is some of this being driven by labor cost inflation, or are these fully investments in people and growing the business?

I would say both. I would say the first quarter was a – you know, we – We did see a tough labor market, tight labor market. We had some turnover. But, yeah, look, again, there's, you know, when employees get squeezed and things start costing more, the company needs to do what we need to do to have our employees not worried about living and focus on work. So we did what we had to do to retain our valuable employees.

Right. Nope, that certainly makes sense. So we've talked about a $50 million kind of EBITDA target as we think about getting back to previous levels. Has that changed for you at all with Tampa and Orlando? And obviously the world's changed on us in the last six months or so. How do you think about getting back to that $50 million level and when that might be able to happen?

Look, when we did our projections, obviously last year in the late year, there were signs of the country and globally getting out of the pandemic. And we were starting our concert and event business again. And clients, we kept on hearing about the microchip, that the microchip, the issue was going to get better. Automotive is a key category for us. We're in a lot of the Sunbelt states. So we're very optimistic. But at the same time, We're going to continue to be optimistic. I believe, we believe radio, audio is recession-proof. In particular, Spanish broadcasting, in the second quarter of 2021, we were the only one that, compared to 2020, was able to get to 160%. No one in radio was able to climb out of the pandemic on a few factors. Number one, We were the first radio group in the nation to get out of the pandemic. Number two, when we got out of the pandemic, our revenues went through the roof. We were at 160%. No other broadcaster was even close to 100%. So that's another key factor. And in the marketplace that we transact today, there is more appeal for diverse and inclusion in terms of diverse owned media, diverse targeted media. We check off both of those boxes. So we are uniquely positioned, Spanish Broadcasting, to grow faster than every broadcaster in the nation. Our content is relevant. Nielsen has us. in particular Mega in New York, as the number one station in America and where a lot of people focus on, well, the economy might not be doing as well as expected, maybe we cut back. We get more aggressive than the marketplace does and we grow our share because we're in it for the long term. We've been doing this for 40 years and we have a proven advantage strategy, proven track record of being the gold standard of radio in the nation. So we are not, look, we want the economy to be better, but we're not afraid of it because we know we're going to go faster than all of our peers. We're going to go faster of the industry. Tampa and Orlando, we're staring this out in the face in terms of the I-4 corridor, fastest Hispanic area in the nation in terms of growth with population. Those were markets we could just simply not pass up. Now, are we investing? We're making sound investments. We're not making investments so we can show a profit maybe in a month or two, okay? But we're making investments that we're going to be making significant profits in the very near future because I believe, we believe we staff appropriately in those markets. Per Nielsen. Nielsen has never seen the phenomenon of a station that went from one format in one language into another one grow in an exponential way. So we feel very, very, we feel bullish. We feel that we're on the right track. Our content is relevant. I can put up our content team to anybody in Hollywood, and I believe it's better. We can put up our technology team up to people in Silicon Valley, and I believe our technology team is better. For this specific reason, we have the number one most listened to and streamed station in America. Oh, by the way, that station's in Spanish. So we're going to continue to grow our audience. We're going to continue to grow our revenue share, and we're going to try and obviously get to the prior BICTA level, and we're going to get there. Whether it's this year or next year, we're going to get there. So I hope, Matt, that answered your question. I'm glad you asked it.

That's helpful, Albert, for sure. You know, anybody would question your guys' track record in radio, but to that point, some people might question your track record in TV. If I could make me take my last question and say... I'm glad you're going to ask about TV. Okay, you've got bonds trading at $80,000. and you've got a TV business that you continue to invest in, what if you were to redeploy that capital that's deployed to TV or even sell the TV business and buy back bonds that are trading with a 20-point discount?

Look, everything is upon consideration. The television market has migrated to the OTP marketplace. National viewership on television with all the big broadcasters, ABC, NBC, CBS, Fox, and Hispanic ones, there's been a decline with respect to HUD levels and PUD levels, houses using television, people using television. It's gone down. In particular, I'll give you a little bit more microscopic vision in Miami. For example, Miami, the Miami-Fort Lauderdale DMA has gone into about 70% of linear, 30% broadband, and it continues to grow in the broadband. That's why we had to put our app together. That's why we had to go with Digidea to that audience that's migrating to serve that. But we're also looking to be prudent with cost and also be ready with political, because political is coming on TV. You asked me, and I want to be very specific in terms of what your ask is. Yes, we were incredible. We're the gold standard of radio. We've had our challenges with video, but we're doing everything possible to address the shift in viewers and how they consume video across the nation. So your question's a valid one, and everything is upon consideration. We would look at anything that would make the right sense for our shareholders.

I really appreciate the honest responses. Thanks. And I appreciate you being on today.

Thank you, guys.

Appreciate it. Thanks, Matt.

And the next question is from Patrick Wang from Boy Investment. Please go ahead.

Good morning, gentlemen.

Great to hear from you today.

Oh, thank you. Thank you. So I just want to drill down a little bit on the economics on this, uh, to Florida radio station. Uh, you spent one 12 million, 12 and a half million, uh, thick costs. And how much do you expect to spend to reformatting it? And, uh, you know, the station expense, the launch costs, all inclusive. What's the total cost of this investment and what, what kind of, uh, uh, returning investment capital you reached, you're looking to get out of it because, uh, In a radio, stock is trading at four to five times EV multiple. So unless you get five to six million EBITDA out of these two stations, I don't even know that economics works in the current environment.

Well, Patrick, I'll take that question. So from a competitive standpoint, I can't really give you all that detail. We would hate to give our competitors what we're willing to spend. I think what we've done is, if you've followed radio for a very long time, to acquire two stations in Orlando and Tampa, which are significantly emerging markets for Hispanics.

Patrick, Tampa and Orlando rank top 20 in the nation in terms of population in both radio markets. And both of those markets for radio... for the first six months have done about $60 million in radio revenue. Those marketplaces per miller-captain will do close to $125 million. Jose, why don't you give more color on his question?

Sure. Look, I think if you're looking at a standalone acquisition, but you've got to look at it as Albert mentioned, how it fits in within the portfolio of Florida, how it fits in the portfolio of IDAE, how their synergies from an event standpoint. So there's a lot of offshoots in these two markets with the research that we've had for many, many years with our apps. Puerto Ricans are migrating from, we have Puerto Rican stations. Puerto Rico, a good portion of Puerto Ricans migrated to Orlando from Puerto Rico and New York. Tampa, there's a lot of migration going on from Miami to Tampa. So with all that being said, and how we operate, we believe that we're going to do very well. I understand that you want to look at it numerically, which I respect that, but we're trying to grow the consolidated business. So there's a lot of offshoots, and this is very synergetic.

Right. Well, do you see potential that these two markets will be as big as Miami? Because Miami is 22% of Europe. your total base right now. So how big do you think those two will get relative to that?

Orlando and Tampa, I'm sorry, Patrick, that's a great question. Orlando and Tampa are about, in terms of radio revenues, I just mentioned it's about the same. They've done close to 60. I believe it's going to be close to 125 each. they're almost at, they're about at pre-pandemic levels. The Miami market is a little different. Miami market is around, the marketplace is about 220 million. So Miami, where it ranks within the top 10 in terms of audience and billing, Tampa and Orlando are close to like 19 and 20. So, but Tampa and Orlando are going to be close to Miami, I believe.

Right. So as far as the spendings are concerned, what's the timing? When do you think that will be complete? Because this quarter looks like they're, you know, the inflation and the investment in the stations reformatting is more like in two to three million, I would guess. And what's the total? and when that will be done in the reformatting.

Patrick, there's always when there's a new, when you acquire a new station, there's always an introductory period, which is several months, a few months, in terms of an action plan, in terms of your marketing for a few months. And then after, as you grow your audience share and your audience and those respective DMAs are aware that there is new stations, content, Hispanic influencers, then you go into more of a maintenance program. But look, we're very pleased in just a matter of weeks, the Orlando station's close to a four share. So... That's incredible in terms of getting to a number like that in such a short period of time.

Right. So what are you saying is it will take a few quarters to kind of... It's going to take a few quarters. Right. Okay. What's going on with special events? This quarter is really disappointing compared to last quarter, and almost zero. So what's happening there?

Look, we did our event in New York, and because of a lot of artists' commitments, we changed the dates, and they are going to be within the next eight months. But we'll be doing events in third quarter. We're doing a ton of events in fourth quarter. And we're doing our Cali Bash in January in Los Angeles and Vegas. So we have a very busy schedule. We have about 13, 14 nights that we are planning for right now. So we have a very busy schedule in the next several months.

Patrick, but just to be clear, first quarter is always the biggest quarter from an event standpoint. Second quarter, we had a good amount of co-pro events. So the way that we recognize the revenue is a little bit differently. We just recognize the profit. And we did quite well on the events that we did. As Albert mentioned, we did one in New York, and we did one in Orlando as well. So we did well. You're not seeing the revenue, the tickets booked, right, because it's a co-pro. But we did have some good events, and we did make money.

Okay. What's your projection for the year in terms of events? Did you get back to 5 million level?

We have 14 nights.

That is the goal.

That is the goal right now, 14 nights across the country in several markets.

So that should be over 2019 levels, right?

It should be right in line.

It should be right in line. It's a very busy, very busy season for us for the alliance.

Okay. Do you anticipate in self-funding for the station costs reformatting? Because your cash levels dip to $8 million and you still have the revolver, but do you see any funding needs for that in the next few quarters?

Look, it's available if need. It's important to mention that we do have a refund from the IRS that's due. It's about $4.4 million, which we're hoping to get in the very near term, which should help out from a liquidity standpoint. But, yeah, look, the revolver is there for that reason if we need to tap in. Clearly we would hate to tap into it, but if we have to, just to fuel the launch of these stations and to continue to, you know, move the company forward from a long-term standpoint, we will.

Right. Okay. I saw on the press release there's a $4 million cash taxes. I thought you had a significant amount of NOL on the books. I need to talk about the refund. So is that the same thing, the $4 million that you paid and you're going to get it back?

Well, it's an ERTC credit, which we amended our payroll taxes, the government plan. We amended our returns. The government actually reimbursed us about $300,000. So there's six checks that are due. We got one that's $300,000. So now what's left is $4.4. As to what we've paid so far from a cash flow standpoint to $4 million, that's just cash taxes paid, which that should be, give or take, For the year, I would say roughly between $5 and $6 million.

But you have $260 million NOL on the books. You should be paying any cash taxes, right?

Can you repeat that question?

Well, last time I checked, you have net operating losses carried forward of $260 million. So why would you be paying cash taxes if you have that to offset income?

Well, there'll be income in the third and fourth quarter. As for the NOLs, they have been limited with the Section 382 limitation. So the NOLs don't exactly work that way. I mean, we'll go through the tax accounts. We'll have some NOLs that can shield some income in Puerto Rico, but in the U.S. we have approximately like $5 million. So there's $5 million, but then you net that out. So it'll save us some some money, but we'll have a tax bill at the end of the year.

Right, right. Okay. Okay. And what's just as a kind of historical information, what's the historical midterm revenue you guys get from midterm election advertising?

Typically around $4 million, $4 million, $5 million.

$4 million to $5 million. Okay. All right. Great. Thank you, guys.

Thank you, Patrick.

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

I wanted to say thank you for everyone who participated today on our second quarter 2022 earnings call, and I look forward to speaking to everyone, to all of our colleagues, for the third quarter of 2022. And have a great day. Thank you.

Bye-bye. Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.