Urban One - Earnings Call - Q4 2024
March 27, 2025
Executive Summary
- Q4 2024 net revenue was $117.1M (-2.7% YoY) and Adjusted EBITDA was $26.9M (-0.9% YoY); net loss widened to -$35.7M (-$0.78 EPS) largely on $24.2M of TV One-related impairments.
- Radio outperformed on political advertising (Radio net revenue +14.5% YoY), while Cable TV remained pressured by audience delivery and churn; Digital Adjusted EBITDA rose 50.7% despite softer demand.
- 2025 guidance was set materially lower: Adjusted EBITDA $75M and ~$25M free cash generation; Q1 revenue pacing down ~13% with Q2 improving to down ~1.6–1.7%.
- Management emphasized continued deleveraging (notes repurchased ~$140M in 2024 plus $17M in Jan-25) and cost containment (Q4 staff reduction ~5% yielding ~$5M annual savings), with liquidity of $137.1M YE cash and ~$117M on 3/27/25.
- Stock-relevant catalysts: guidance reset, ongoing debt buybacks, cable delivery stabilization, and disclosure of a cybersecurity incident (no material operational impact to date).
What Went Well and What Went Wrong
What Went Well
- Radio segment strength from political advertising: “Net revenue for the Radio Broadcast segment was $47.7M, an increase of 14.5% YoY…Political advertising drove the growth”.
- Digital profitability: “Adjusted EBITDA was $5.3M, which was an increase of 50.7%” for Digital despite demand softness.
- Deleveraging momentum and liquidity: Repurchased ~$140M of 2028 notes in 2024 and $17M in Jan-25; YE cash $137.1M; “Cost containment and continued de-levering remains the focus for 2025”.
What Went Wrong
- Cable TV under-delivery and churn: Cable TV ad revenue down 21.4% YoY; affiliate fees down 9.9%; delivery declined 36% in total day P25–54.
- Impairments at TV One: $24.2M Q4 impairment ($4.0M trade name; $20.2M goodwill) driven by declines in projected market revenues and margins.
- Core radio weakness into Q1 2025: “Pacings currently minus 13.6…seeing improvement in Q2 with pacings down 1.7” indicating near-term demand downdraft.
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by and welcome to the Urban One 2024 fourth quarter earnings call. As a reminder, this conference is being recorded. We will begin this call with the following safe harbor statement. During this conference call, Urban One will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance.
Urban One cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs, and other reports it periodically files with the Securities and Exchange Commission, could cause the company's actual results to differ materially from those indicated by its projections or forward-looking statements. This call will present information as of March 27th, 2025. 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.urbanone.com. A replay of the conference call will be available from 2:00 P.M. Eastern Daylight Time, March 27th, 2025, until 11:59 P.M. Eastern Daylight Time, April 3rd, 2025. Callers may access the replay by calling 800-770-2030. International callers may dial direct 609-800-9909.
The replay access code is 3407726. Access to live audio and a replay of the conference will also be available on Urban One's corporate website at www.urbanone.com. The replay will be made available on the website for seven days after the call. No other recordings or copies of this call are authorized or may be relied upon. I will now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter Thompson, Chief Financial Officer. Mr. Liggins, please go ahead.
Alfred C Liggins (CEO)
Thank you very much, Operator, and welcome to our fourth quarter conference call. Also joining us, as usual, is Jody Drewer, who's the Chief Financial Officer at TV One, and also Karen Wishart, who's our Chief Administrative Officer. As the press release stated, we ended up coming in at the middle of our guidance for adjusted EBITDA at $103.5 million. That number in Q4 was boosted by a pretty strong performance with our political advertising efforts.
However, we did see continued headwinds in our cable TV business due to churn and under-delivery. That actually has started to stabilize in Q1, so that's good news. Unfortunately, the radio business continues to see downdrafts in Q1 with pacings currently minus 13.6%. However, they are improving going into Q2 with pacings down just 1.7%. We're optimistic that things will continue to improve in our radio business, but with the downdraft, we've been taking precautions with our cost containment and further debt reduction.
We had a staff reduction in Q4 of about 5%, which is about 64 people of our workforce, which has saved us about $5 million a year. Going into 2025, it's going to be all about cost containment and also continued debt reduction, standing in a pretty strong liquidity position as of the end of the year with about $137 million of cash on hand. We are prepared to offer a 2025 guide, even though it's early in the year, but we are going to guide to $75 million of adjusted EBITDA down from the $103.5 million in 2024. It's going to be a combination of the weaker radio, primarily driven by a lack of recurring political advertising.
We're going to be down a bit in TV, but again, we feel like that that is stabilizing as well. So a $75 million guide for 2025, down from the $103.5 million in 2024. Continued cost containment and debt reduction. We're going to be able to talk about more when we get to the Q&A section if anybody has questions. Right now, I'm going to let Peter go through the numbers from 2024 and the quarter. So, Peter.
Peter Thompson (EVP and CFO)
Thank you, Alfred. Consolidated net revenues were down 2.7% year over year for the three months ended December 31st, 2024, approximately $171 million. Net revenue for the radio broadcast segment was $47.7 million, an increase of 14.5% year over year. Excluding political, net revenue was down 5.1% year over year. According to Miller Kaplan, local ad sales were up 0.1% against our market that were down 5.2%, and national ad sales were up 35.4% against a market that was up 28.4%.
Political advertising drove the growth in the national marketplace and for our stations, and was our largest advertising category for the quarter. Second largest category for us was services, which was up 12%, driven predominantly by legal services. Healthcare, retail, auto, financial, food, and bev all down year over year. Telecom, travel, and transportation categories were up.
Net revenue for the Reach Media segment was $9.6 million for the fourth quarter, down 10.7% from prior year. Adjusted EBITDA was $2.9 million for the quarter, a decrease of 15.4%. While Reach benefited from $1 million in political advertising, client attrition and lower average unit rates offset those dollars. Net revenues for the digital segment were down 3.1% in Q4 at $20.5 million.
Direct national sales were down, driven by decreased advertiser demand. However, political advertising was $2.4 million, and both Connected TV and podcast revenue were up from prior year. Adjusted EBITDA was $5.3 million, which was an increase of 50.7%. We recognized approximately $39.8 million of revenue from our cable television segment during the quarter, which was a decrease of 15.9%. Cable TV advertising revenue was down 21.4%. Delivery declined 36% in total day persons 25-54.
We had approximately 6% fewer units converted to ad inventory, about 4,000 more units allocated to ADU to help mitigate the delivery impact, and that was partially offset by favorable AVOD and FAST revenue of $1.3 million. Overall, that resulted in an ad revenue decline of $5.8 million. Cable TV affiliate revenue was down by 9.9%, driven by the increased subscriber churn, which was a $3.3 million loss, partially offset by a million three in subscriber rate increases and the launch of NOW TV.
Full year subscriber churn was minus 9.5%. Cable subscribers for TV One, as mentioned by Nielsen, finished Q4 at 37.2 million compared to 39.1 million at the end of Q3. TV One had 36.4 million Nielsen subs. Operating expenses, excluding depreciation and amortization, stock-based compensation and impairments of goodwill, intangible assets, and long-lived assets decreased to approximately $91.1 million for the quarter ended December 31st, 2024, which was a decrease of 13.8% from prior year.
The overall decrease in operating expenses was primarily due to lower corporate SG&A expenses, driven by a reduction in the CEO's TV One award and lower overall expenses in the digital segment due to lower sales and marketing-related costs. Radio operating expenses were down 5.4%, or $1.9 million, driven by a favorable adjustment to the bad debt reserve. Reach operating expenses were down by 7.8%, driven by lower talent and staff incentive-based compensation. Operating expenses in the digital segment were down 16.1%, driven by lower sales and marketing costs and lower performance-based compensation.
Operating expenses in the cable TV segment were up 4.1% year over year, driven by increased rating service costs and connected TV support costs. Operating expenses in the corporate and elimination segment were down by approximately $10.2 million, primarily as a result of reduction to the CEO's TV One award. Consolidated adjusted EBITDA was $26.9 million for the fourth quarter, down 0.9%.
Consolidated broadcast digital operating income was approximately $38.6 million, an increase of 1.7%. Interest income was approximately $1.1 million in the fourth quarter compared to $2.5 million last year. Decrease was due to lower cash balances in interest-bearing investment accounts. Interest expense decreased to approximately $11.5 million for the fourth quarter, down from $14.2 million last year due to the lower overall debt balances as a result of the company's debt reduction strategy.
The company made cash interest payments of approximately $347,000 in the quarter, and during the quarter, the company repurchased $15.4 million of its 2028 notes at an average price of 69.8% par, bringing the balance down to $584,575,000 at year-end. In January 2025, the company repurchased an additional $17 million in notes at a price of 62.5%, bringing the current balance on the debt to $567,575,000. $24.2 million in non-cash impairment charges were recorded in the fourth quarter. $4 million of that was associated with the TV One brand name, and $20.2 million was for goodwill associated with the TV One reporting unit.
The primary factors leading to the impairments were a decline in projected gross market revenue and operating profit margin for TV One. Provision for income taxes was approximately $27.6 million for the fourth quarter, and the company paid cash income taxes in the amount of $130,000. Capital expenditures for the quarter were approximately $1.3 million. Net loss was approximately $35.7 million, or $0.78 per share, compared to a net loss of $11 million, or $0.23 per share for the fourth quarter of 2023.
During the three months ended December 31st, 2024, the company repurchased 1,386,544 shares of Class A Common Stock in the amount of approximately $2.1 million at an average price of $1.50 per share, of which 908,894 shares of Class A stock were held in treasury stock as of December 31st, 2024. During the three months ended December 31st, 2024, the company repurchased 703,292 shares of Class D Common Stock in the amount of approximately $700,000 at an average price of $1.02 per share. During the three months ended December 31st, 2023, the company did not repurchase any shares of Class A or Class D Common Stock.
As of December 31st, total gross debt was approximately $584.6 million, and ending unrestricted cash balance was $137.1 million, resulting in net debt of approximately $447.5 million compared to $103.5 million of LTM reported adjusted EBITDA for a total net leverage ratio of 4.33 times.
On March 16th, 2025, the company began investigating an incident involving an unauthorized third party who had gained access to and infiltrated certain information from our information technology systems. Upon discovery, we activated our incident response team, which is comprised of internal personnel and external cybersecurity experts. As of today, the incident has not impacted the company's operations or ability to conduct business in the ordinary course. At this time, the incident has not had a material impact on the company's financial condition and the results of operations all our investigation is ongoing.
Alfred C Liggins (CEO)
Thank you, Peter. Operator, could you ask the audience if any questions are coming forward?
Operator (participant)
At this time, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one a second time. Our first question will come from the line of Aaron Watts with Deutsche Bank. Please go ahead.
Aaron Watts (Managing Director)
Hey, Alfred, Peter. Thanks for having me on.
Alfred C Liggins (CEO)
Hey, Aaron.
Aaron Watts (Managing Director)
A few questions, if I may. I guess first, just to clarify, your 1Q radio pacing down 13.6%, what was the equivalent performance that lines up with that for the fourth quarter? Was it the radio advertising down 8%? Is that the right way to think about it?
Peter Thompson (EVP and CFO)
Yeah. I gave core X political. You'd need to strip out the political from Q4. I'm just looking back through my notes.
Aaron Watts (Managing Director)
Yeah. Sorry, I missed that.
Alfred C Liggins (CEO)
Yeah.
Aaron Watts (Managing Director)
Maybe while you're looking, I'll explain next time.
Peter Thompson (EVP and CFO)
Excluding political, yeah, excluding political, net revenue was down 5.1%.
Aaron Watts (Managing Director)
Okay.
Peter Thompson (EVP and CFO)
Thank you.
Aaron Watts (Managing Director)
All right. Could you give us a little more insight into what drove the weakness from that down five in 4Q into the first quarter? Was it broad softness, particular categories? A similar question on where you're seeing the improvement as you look ahead to 2Q and what's pushing that theme?
Alfred C Liggins (CEO)
Yeah. Look, it's absolutely broad softness. I've spent a significant amount of time with our national rep and our teams. In Q1, you're basically seeing negative double-digit pacing across local, national, and network radio. There was political in Q1, but not a ton of it. I think that you're absolutely seeing advertisers probably reacting to an uncertain economy.
I think I just read something from the CEO of Walmart talking about, excuse me, consumer behavior being choppy and skittish. The improvement for us is coming. When I say improvement, it's still negative, right? It's negative 1.7. We're seeing a bounce back and improvement in our Ohio markets, which are starting to lap significant comps as it relates to, excuse me, as it related to sports betting revenue. Peter, you were going to add a local.
Peter Thompson (EVP and CFO)
Yeah. Local's bounced back more strongly in Q2, right? National's a little better in Q2 than it was in Q2, but local is strongly better in Q2 than it was in Q1. Local at the moment is pacing up in Q2, whereas it was down 10%, call it, in Q1.
Alfred C Liggins (CEO)
We're also seeing improvements in national as well, be it against still negative.
Aaron Watts (Managing Director)
Okay. That's encouraging. Carrying that out a little further within your 2025 guide, what are you assuming for the core radio broadcast segment from a top-line perspective? Do you think it can trend back towards neutral, Alfred, or are you still assuming it's going to be down a little bit for the year?
Alfred C Liggins (CEO)
Yeah. I mean, we're, but that guide is also right on top of our internal budget. I think Peter got the.
Peter Thompson (EVP and CFO)
Yeah. I mean, if you strip out the political, Aaron, then we've assumed that the core grows a little bit in that number. If you took out every dollar political and did not replace it with something else, it would look worse than what we've got. We've assumed some growth in local and national X political, and obviously digital.
Alfred C Liggins (CEO)
Right. Right. Okay.
Aaron Watts (Managing Director)
All right. Let me squeeze one more in, and I appreciate the time. There's been a lot of talk around deregulation across the broadcasting space. I'm curious what opportunities you see that potentially opening up for you on the radio side, whether that's as a seller or a buyer. Do you think we could see some material consolidation in the space on the heels of kind of this new positioning from the FCC?
Alfred C Liggins (CEO)
Yeah. Look, I've been pretty vocal about my belief that you're going to see further consolidation in the radio sector. You need to see it. We have, over the years, been both buyers and sellers. Recently, we've been more of a buyer consolidating in Indianapolis and Houston.
We have trimmed our portfolio a number of times and gotten out of places that were where we weren't successful, weren't working for us, and put that capital to work in either debt reduction or more accretive acquisitions. I think you'll see us continue with that. I think that we're probably in better shape than a number of other folks in the sector in terms of our leverage profile, which I think gives us an advantage to be proactive in terms of opportunity. You still have to be careful, right? Even with consolidation, you're still dealing with a negative trend line on the top line revenue number. It is very tricky.
Because of that factor, even if you get dereg, having new capital come into the industry will probably be a challenge, right? I think that people will look to see if there's swap opportunities that can be executed in order to put people in better positions in various different markets. I've always seen that as challenging for people to align on what's a good swap. You just don't see a lot of it. The state of the industry and the dereg might make people more motivated to do that. I would say that it is absolutely a net positive because in declining industries, you need to create economies of scale.
I also think being bigger in these local markets makes you more of a digital force for local advertisers because you're covering off more formats. You've got more audiences that you're touching. We're seeing significant amounts of digital revenue come into the Miller Kaplan in local markets. In fact, in about half of our markets, we're seeing more digital revenue than national spot revenue, which really came to light during our fourth quarter budget process for the first time.
Having more girth in the local market is going to allow us to compete better digitally, I believe, as well. Net positive, but still a challenge because I don't think you're going to see a flood of capital come in to execute this consolidation. People are going to have to figure out how to work it between themselves. I also think that the current debt holders in the industry are eager for some sort of solution for folks' balance sheets and will be constructive in trying to see consolidations happen. It helps the industry and helps the players in it.
Aaron Watts (Managing Director)
Very helpful perspectives. Thanks as always, Alfred.
Alfred C Liggins (CEO)
Thank you.
Operator (participant)
Our next question comes from the line of Ben Briggs with StoneX Financial Inc. Please go ahead.
Ben Briggs (Director)
Good morning, guys. Thank you for the time, and thank you for taking the question. I've got a couple here. Most of them are around kind of what capital allocation plans are for fiscal 2025. Thank you for the guidance. You mentioned that cost reductions and debt buybacks are going to be a focus for 2025, and I think the market will definitely be glad to hear that. Curious if there's any plans for stock repurchases, or is most of it going to be debt?
Alfred C Liggins (CEO)
We have been repurchasing stock. We've got a plan in place. It's a small plan that basically just buys kind of like the daily limits. I think we've probably repurchased in the last year $5 million-$6 million of stock in comparison to $150 million. What's our total debt repurchases?
Peter Thompson (EVP and CFO)
We did $140 million last year and then another $17 million this year, right?
Alfred C Liggins (CEO)
Yeah. So almost $160 million of debt repurchase. Yeah. I think you'll continue to see that kind of outsize ratio of how we deploy that capital. So 95% of our money will go to continued debt reduction. That's I think we're also looking at M&A opportunities as the previous person was questioning about dereg and having cash available to us if we can find acquisitions that accomplish the same thing, that are deleveraging, which is our goal.
We keep that in mind, but we're not going to just have it sitting around in hopes that an acquisition comes along. With that said, we've always been mindful and thoughtful about how we repurchase debt, right? We'll look in, we'll buy it in $10 or $15 or $20 million dollar chunks. We're not a repurchaser at any cost either, right?
We've definitely tried to be opportunistic on the pricing of it because that benefits the company long term. If we just go into the market and indiscriminately buy debt, then it runs away from us. You never know exactly when we're going to be a buyer and when we're not going to be a buyer because we've definitely set out for periods, even when we had open windows, because we didn't like the price.
Ben Briggs (Director)
Okay. Got it. That's very helpful. Have there been any, I know you disclosed the buybacks through January. Have there been any debt buybacks since then? There were a few good-sized trades that went through.
Alfred C Liggins (CEO)
No. We intentionally set out while the window was closed. We did not put a plan in place. We were out of the market for the last—we have been out of the market since that January repurchase.
Ben Briggs (Director)
Okay. Okay. Good to know. Thank you. The second thing is kind of more operational with the business. I know previous calls you guys have discussed this, but can you give a little clarity, or can you just kind of re-explain to me, I guess, what exactly, as far as revenue is concerned, what goes into your digital segment? I know there's kind of a little bit of a few different things that go in there, and I've gotten a couple of questions from investors this quarter on what exactly goes in there. If you could just remind me, I'd appreciate it.
Peter Thompson (EVP and CFO)
Yeah. Look, it's a timely question because one of the things that has been going in there is the connected TV revenue. Yeah, look, that's a growth area. We've decided going forward from January 1 that we're going to report that through the TV segment. That would be a change.
Part of the thinking there is, as linear TV is more challenged, to strip out that growth area and report it as digital is going to give a falsely negative position of the TV business. We're going to kind of repatriate that revenue and those impressions back to TV One. We think that's right because they really are attached to the TV business rather than digital content verticals. Up until now, we reported CTV through digital. Now we're going to report it through TV.
All other digital impressions go through digital. It can be adverts on content verticals, can be pre-roll, can be banner. Podcast revenue, streaming is the other big one. That is worth talking about. We had a really good deal through Katz, and that got renegotiated down. Call it $7.5 million of revenue that we were getting from Katz on the podcasting side was reported as digital. It is going to be significantly less, so infinitely lower, probably $4 million lower.
Alfred C Liggins (CEO)
It was podcasting and streaming.
Peter Thompson (EVP and CFO)
Sorry. Yeah. Streaming and podcasting.
Alfred C Liggins (CEO)
So essentially.
Peter Thompson (EVP and CFO)
Sorry. The main part of that is streaming. If I said podcasting, I flipped them in my head. It's both together. Streaming is the bigger part.
Alfred C Liggins (CEO)
Essentially, we had an output deal where they basically bought all of our available inventory that we had, and that got renegotiated. Everybody's got cost reductions, and so did they, and that affects us in a big way. We're out now rebuilding our streaming partners. Instead of just giving all of our impressions to one entity, we're actually plugging into multiple entities, and it's going to take us a while to build that back up. The net is we're going to see that revenue probably reduced by half of what it was. That's going to affect the digital revenue number.
Peter Thompson (EVP and CFO)
Yeah. Putting out CTV plus that. You're going to see our digital segment look weaker as a result of those two things.
Alfred C Liggins (CEO)
In the most recent Miller Kaplan, we're getting annihilated in digital, and a big part of that is in our streaming number.
Ben Briggs (Director)
Okay. That's all very helpful. As you report going forward, since you're recategorizing some of that revenue, are you going to report, are you going to adjust prior period numbers as you report them so we can compare?
Alfred C Liggins (CEO)
I don't think we're planning to adjust prior period. I can give, look, if it's materially different, I can probably give color on the earnings call so people can understand the differences.
Ben Briggs (Director)
Okay. That is very helpful color. Thank you, guys, and I'll talk to you soon,
Alfred C Liggins (CEO)
Thank you.
Operator (participant)
Our next question comes from the line of Marlane Pereiro with Bank of America Securities. Please go ahead.
Marlane Pereiro (Research Analyst)
Great. Thank you for taking my question. Based on your full year EBITDA guide of $75 million, how should we think about free cash flow for the year? If you can provide any context on some of the puts and takes that would affect that, that would be great.
Peter Thompson (EVP and CFO)
Yeah. So obviously, the good bad news is EBITDA is going down. Good news is we got less debt interest payments, so that's about $41 million. CapEx, we're penciling out at $10 million. There's a big project going on to consolidate the Indianapolis office post-acquisition. That's kind of $5 million of the $10 million. So that's a little higher. $10 million is a little higher than we would normally do, but it's probably a solid number. TV One programming, not a huge difference there. And so long story short, at the moment, we're looking at around $25 million of free cash flow generation off of '$75 million.
Marlane Pereiro (Research Analyst)
Great. Thank you, Peter. Coming back to the cost-saved containment, you mentioned about $5 million that you'd be saving from some staff reductions. How should we think about cost savings for 2025 that'll hit the numbers as well as the cost to achieve?
Alfred C Liggins (CEO)
Yeah. We are actually in the we wanted to get through getting our accounts filed, year-end, etc., and we're back focused on what other cost-save opportunities that we have. We do not have a number yet. We do feel like we have more opportunity to reduce costs. We did our first round in Q4 and made it effective by the end of January. We have not gotten there yet. You can expect more. Do not know how much more yet, but we are looking at every available opportunity.
Marlane Pereiro (Research Analyst)
Got it. Just to confirm then, for the $75 million of EBITDA for the year.
Alfred C Liggins (CEO)
That number does not, the $75 million does not include any new or projected cost saves that might come. Yeah. We made it simple this year. That number is our, that's our actual budget where we think we're going to be at, and it doesn't take into account any further cost reductions in it. I mean, I know that I think iHeart it given a guide for 2025, which included their expected cost save. We had already taken out our cost save when we went through the budget process. Anything new would actually help that number going forward.
Marlane Pereiro (Research Analyst)
Great. Last one from me. Are there any assets or parts of the business that might be considered non-core and potentially could result in an asset sale?
Alfred C Liggins (CEO)
Yeah. I mean, the answer is maybe we have some small things. You know what I mean? But you need buyers, and those do not exist right now. Yeah, in the media M&A landscape, in both television cable networks, you have not seen much activity. You have seen a number of failed processes on the cable television network front. Again, we have always been economic animals, meaning that if somebody were to make us an offer on pieces of our business that would ultimately be accretive to us from a deleveraging standpoint and would help us significantly move the needle, we would absolutely consider it.
On the other side, on the acquisition side, we are not really considering anything that also does not delever us, right? Because we have enough scale to be relevant now. Now it is really about getting the balance sheet to what I call a safe position. I think that that safe position's got to be leveraged that's in the mid-threes, low-threes maybe even. You need buyers, so.
Marlane Pereiro (Research Analyst)
Great. That's all.
Alfred C Liggins (CEO)
Which is what I said earlier when we talked about DREG and new capital coming into the business.
Marlane Pereiro (Research Analyst)
Great. Thank you, Alfred. That's all I have.
Alfred C Liggins (CEO)
Yep. Thank you.
Operator (participant)
Our next question comes from the line of Hal Steiner with BNP Paribas. Please go ahead.
Hal Steiner (VP of Trading Desk Analyst)
Hey, guys. Thank you for taking my question. A lot of my questions were already asked, but I just have a few quick things. I guess, do you want to hold at least $100 million of cash, or is there sort of a minimum cash balance you want to kind of keep on the balance sheet, or would you sort of be likely to drop below that as you kind of continue to focus on gross debt reduction?
Alfred C Liggins (CEO)
Yeah. No, we do not have a minimum amount of cash that we are targeting to keep on the balance sheet. We have got an undrawn $50 million revolver. Yeah, we could definitely see our cash balances be able to drop and still be fine from an operating standpoint. Again, our cash deployment has been opportunistic, right? Meaning if we can buy our debt at an attractive price, then we will do it. If the price is not attractive, then we sit out.
That strategy has led us to have more cash on average than probably people might otherwise think that we should. It is not because we are hoarding the cash. It is because we just do not want to go out and bid up things just because we have got cash, right? Every time we have bought debt, when we are in the market, it goes up. When we're not in the market, it goes down. The best thing for the company is to try to manage that in the most efficient way possible to get the most deleveraging possible.
Hal Steiner (VP of Trading Desk Analyst)
Got it.
Alfred C Liggins (CEO)
It's not a cash hoarding strategy.
Hal Steiner (VP of Trading Desk Analyst)
Yep. Understood. Understood. I know you've talked a lot about sort of the deregulation environment, but I guess one angle or something that I've been looking at, and I'm curious your thoughts, is I think WBD and Comcast have both been kind of working on maybe cable network companies or cable network SpinCos sort of coming to market. I guess I'm just curious how you think about that, those entities coming into market and maybe providing some valuation read-through. I'm just curious how you think about any combination or partnership angles there with your TV business efforts.
Alfred C Liggins (CEO)
I mean, everybody got all excited when Comcast announced they were doing SpinCo because they think that they're going to be the end buyer of all of the stranded cable assets. I don't know that to be true, right? I think the biggest problem you're going to have with cable assets is if AMC is trading at, last I looked, it was trading at four and a half or it was trading at five times cash flow. Yeah. Nobody wants to sell a cable.
Nobody wants to sell cable cash flow at five times. They'd rather keep it, right? Nobody really wants to buy it at seven or eight times. I don't necessarily believe that those entities are going to be the end buyers for people's assets. I do think, Jody, you're telling me we've seen churn moderate, right? Yeah. I think we're forecasting, what, mid-single-digit churn down from like 11% last year. I had a conversation in New York with a broadcaster. I had lunch with him.
Peter Thompson (EVP and CFO)
That is not true. The growth in the virtual entities are helping offset the gap.
Alfred C Liggins (CEO)
I had a conversation with a broadcaster, and he said that, "Hey, I've been talking to people, and a lot of people think that sort of churn or cable penetration is going to net out, bottom out at like 40%." I guess that would be like 40 million households. That was his view.
I guess the point I'm trying to make is churn has started to ease up. There's some people believe that it is going to bottom out at some point in time. If that happens, that will, I think, create more opportunity for people wanting to acquire these assets because you know what, you know the knife is falling, right? You know what you're going to own and can try to and can better project what the earnings from that are going to be.
I do not think just because you have got these SpinCo's out here that all of a sudden you are going to see a bunch of consolidation. I could be wrong. I have not talked to anybody at Comcast about it. I have not asked them. I just do not think people can make that assumption.
Hal Steiner (VP of Trading Desk Analyst)
Got it. Makes sense. Thank you, guys, for taking my questions.
Alfred C Liggins (CEO)
Thank you.
Operator (participant)
Our next question comes from the line of Matt Swope with Baird. Please go ahead.
Matt Swope (Managing Director)
Thanks. Good morning, Alfred and Peter.
Peter Thompson (EVP and CFO)
Morning.
Matt Swope (Managing Director)
Peter, could you give an update on where your cash balance stands at this point?
Peter Thompson (EVP and CFO)
Yeah. As of this morning, it was $117 million.
Matt Swope (Managing Director)
Alfred, just sort of listening to you talk about possible capital allocation and things, I guess to be a little bit blunt, I mean, your bonds are all the way down to 50 now, which doesn't make a lot of sense to me, honestly. Why not, I guess, one, could you find any M&A that gave you a better return than buying your bonds back here? And two, why not do something bigger? You guys have run with a very, very low cash balance in the past. Why not take almost all of that cash, maybe do a broad tender or something, and buy back as many bonds as you possibly could, maybe at a slight premium to where the market has it today?
Alfred C Liggins (CEO)
Versus taking that cash and buying it at where the market is at over time. I mean, I think the problem with that is you go out and you offer a tender. It's rarely a slight premium, right? Just in negotiate, just doing the bond buybacks, our experience is there's a significant bid-ask when we're an active buyer between where people want to sell and between where the market is marking it, right? We have done better when we've selectively bought, right, as opposed to just going out, taking all our cash, and paying some big premium for the bonds. Yeah.
We have considered the tender. We're also going to run out of buyers, excuse me, at sellers at some point because our bonds are very concentrated into two big hands that probably own over 50% of the issue. There's going to be a point where you're not going to see sellers at these levels.
Matt Swope (Managing Director)
Given that dynamic, is there any thought to doing some kind of liability management exercise or working with your big holders to capture some of this discount, maybe do some equitization? You talk about wanting leverage to be down in the low threes. You've given an EBITDA guide that's down over 25% year over year. Obviously, that pushes your leverage a lot higher. Is there any way to do some kind of broader—I’ll use the word restructuring, which I know is a dirty word—but to maybe provide some equity to some of those holders just to reduce that debt balance a little bit proactively?
Alfred C Liggins (CEO)
Yeah. We have no liability management exercise in process. We haven't engaged anybody. People have pitched us on it. We think it's early for us. Our maturity isn't until February 28th. We think it's early to begin discussions on some sort of rollover amend extend like iHeart's done, like Beasley's done, etc. The answer to the question is, as we get closer to that maturity, maybe in another year, having those discussions with our holders are absolutely prudent, and we would consider all options to accomplish a better leverage profile. As I said before, there's two players that you got to deal with. We only have two people that we need to talk to and figure out what's the best route for the company because they have over 50% of the issue.
Matt Swope (Managing Director)
Got it. No, I appreciate that commentary.
Alfred C Liggins (CEO)
We have consistent dialogue with those players. We're not operating in sort of a vacuum of information flow between us and our debt holders.
Matt Swope (Managing Director)
I got it. Thank you. On the $75 million EBITDA guide, Peter, that's a little bit lower than I was modeling. Would you call that a more conservative estimate? Or how would you characterize that?
Peter Thompson (EVP and CFO)
Yeah. Look, one thing you got to think about is the valuation on TV One went down significantly year over year. As a result of that, the liability on the CEO's award went down by $10.5 million. That is in we got a pickup in the adjusted EBITDA as a result of the valuation of TV One going down. On a cash basis, you would adjust the $103.5. You would take that $10.5 million off. Really, your baseline is kind of $93 million, not $103.5 million. You follow me? That is because of that non-cash pickup that is not expected to recur this year.
Matt Swope (Managing Director)
I see. You mentioned that a couple—yeah, no, that does make sense. Can you just walk us through how that CEO award works?
Peter Thompson (EVP and CFO)
Yeah. I mean, I'll oversimplify it, but it's roughly 4% of any cash proceeds, dividends, sale proceeds from the value of TV One. I think the valuation of TV One at the moment is $285 million. There are some balance sheet adjustments. The liability currently stands around $10 million on the balance sheet. It has been as high as $25 million in the past. That's just a reflection on the reduction in the carrying value, in the fair value, and the carrying value of the TV One asset as the projections have decreased.
Matt Swope (Managing Director)
I see. Has cash been paid out on that at all, or that's just the liability that moves up and down?
Peter Thompson (EVP and CFO)
It has. On an annual basis, TV One declares dividends, and the CEO gets his 4% share of those dividends. That has ranged—I think it is around $2.5 million a year at the moment. It has been as high as just north of $4 million. As the cash flow from that business has reduced, so has the cash payout on the annual dividends flowing from TV One.
Matt Swope (Managing Director)
I see. Thank you. Maybe just one last one for me, probably for Alfred. Alfred, is it safe to say that the casino process is off the table for now?
Alfred C Liggins (CEO)
In Richmond, yeah. It's safe to say given that they've actually broken ground on the casino in Petersburg. Yeah.
Matt Swope (Managing Director)
I guess I'm asking even a little—yeah, at one point, you maybe mentioned thinking about it in Maryland as well. Just given the state of the balance sheet and things, is it over?
Alfred C Liggins (CEO)
Yeah. No. We like that business. We are looking for opportunities to invest in it again. Our Maryland effort was not around a bricks and mortar casino, it was around their iGaming legislation. For the last two sessions, they've been contemplating trying to introduce iGaming. We would like to position ourselves to be in that business and get a license. We have been lobbying to be part of the legislation. It died again this year. iGaming is a great business as well. It is only in six states versus 37 or 38 states that actually have bricks and mortar casinos operating. That has been our most recent gaming effort. We are currently not participating in any sort of RFPs for any land-based casino developments at all.
Matt Swope (Managing Director)
I will reiterate my unsolicited advice that I can't imagine you can get a better return on anything than buying your bonds back in the open market right now. Thank you guys very much.
Alfred C Liggins (CEO)
Yeah. I mean, look, we've been taking that advice. I mean, we spent $150 million in the last year. I appreciate that advice. Like I said, we want to make sure that we're prudent about how we buy it. That's the reason we do it selectively.
Matt Swope (Managing Director)
Thanks, guys.
Alfred C Liggins (CEO)
Yep.
Operator (participant)
Our next question comes from the line of Ann Silver with Stifel Please go ahead.
Ken Silver (Managing Director)
Hi. It's Ken Silver from Stifel. Ann is my sister. How are you guys doing? Nice to see you again.
Alfred C Liggins (CEO)
Are you using her phone, Ken?
Ken Silver (Managing Director)
Yeah. Exactly. Anyway, nice to talk to you again. Most of my questions were answered.
Alfred C Liggins (CEO)
Thank you.
Matt Swope (Managing Director)
Most of my questions were answered. I guess let me just ask you. You gave the EBITDA guide, which was definitely helpful. Would you be—can you give us a revenue guide for the year also? You sort of did sort of talking about radio and TV a little bit, but.
Peter Thompson (EVP and CFO)
We haven't talked about giving that, Ken. I need to—I mean, Alfred and I haven't discussed it. I mean, obviously, I can see what we think it's going to be. I don't think we can do that.
Ken Silver (Managing Director)
That's fine. Let me just ask you, how should we think about Reach Media for the year? I mean, it was down, I think, like high singles just in 2024. Is that sort of a trend that's going to continue, or might it stabilize more?
Peter Thompson (EVP and CFO)
Yeah. We have it as stabilizing and actually growing a little bit on the bottom line. Top line down a bit, bottom line up a little bit. We do not see that as being the problem child this year.
Ken Silver (Managing Director)
Okay. And then on the digital?
Peter Thompson (EVP and CFO)
It's stable to down a bit, but up on the bottom line.
Ken Silver (Managing Director)
Okay. And then on digital, you called out sort of the headwind with CAC. Are there any other—obviously, you're going to move some revenues to the TV segment. Besides those two things, is anything else significantly up or down on digital?
Alfred C Liggins (CEO)
Yeah. I think there are a couple of other macro things. Our traffic is down significantly over historic levels, and that's a function of partly AI, partly the new landscape out there. We're not getting traffic driven to us in the same way as we have before from Google and Facebook. You have some headwinds in traffic, which in turn means we have to go out and buy traffic, which reduces the margins, right? You have higher tech. Then demand in general, we've ridden the DEI wave, and that's receded. I think there's a softening in demand there in the digital business as well. Digital's definitely got some headwinds for us.
Matt Swope (Managing Director)
Okay. Great. All right. Thanks very much. I appreciate it.
Peter Thompson (EVP and CFO)
Thanks, Ken.
Alfred C Liggins (CEO)
Thanks, Ken. Operator, 10:58 A.M., we got time for one more question.
Operator (participant)
We have no further questions at this time.
Alfred C Liggins (CEO)
Okay. Great. Thank you, everybody. As usual, we are available offline if anybody.