Urban One Inc (UONE) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Urban One 2021 First Quarter Earnings Call. As a reminder, this conference is being recorded. We will begin this call with the following safe harbor statement.

During this call, Urban One will be sharing with you certain projections and other forward-looking statements regarding future events or its future performance. Urban One cautions that certain factors, including risks and uncertainties, referred to in the 10-K, 10-Q and other reports periodically filed with the Securities and Exchange Commission, could cause the company's actual results to differ materially from those indicated by the projection or forward-looking statements. This call will present information as of May 12, 2021. Please note that Urban One disclaims any duty to update any forward-looking statements made in this 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 wwww.urbanone.com. A replay of this conference will be available from 12:00 p.m. Eastern Standard Time today, May 12, 2021, until 11:59 p.m., May 13, 2021. The callers may access the replay by calling 1(866)207-1041 or (402) 9701 -- I'm sorry, 970847 with the access code 1059321. Access to the live audio and replay of this 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 7 days after the call. No other recordings or copies of this call are authorized or may be relied upon.

I would now like to turn the conference 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.

Thank you very much, operator. Also joining me are Karen Wishart, our Chief Administrative Officer; Jody Drewer, our CFO for TV One; and Kris Simpson, our General Counsel for the company.

You all have got the press release for the first quarter results. We were pretty happy with our performance in Q1 and very excited that this is the quarter that we will put behind us and start to lap our COVID comps, even with 2 months of negative -- bad COVID counts are strong months last year, we actually posted stronger EBITDA in Q1 compared to 2019. We are starting to see significant rebound activity for Q2 in our radio business. And our other units continue to perform well. So we're very optimistic about the full year.

So I will now turn it over to Peter to go into the specifics of the numbers.

Thank you, Alfred. Net revenue was down by 3.6% year-over-year for the quarter ended March 31, 2021, at approximately $91.4 million. Core radio revenue, excluding political, was down 13.7% year-over-year in the first quarter. January was down 28.4%, February was down 19.9%, and March was up 8.8%. So we saw sequential improvement throughout the quarter.

Including political, national ad sales for Q1 were down by 23.7% year-over-year, while local ad sales were down 21.5%. By category, entertainment was down approximately $2 million, driven by the lack of concert event and movie activity. Financial was down by $1.7 million. Services was down by $1.4 million, driven by lower tax, legal and recruitment client spending. Retail was down $1 million. Food and beverage was down approximately $900,000, driven by lower spend from fast food and other restaurants.

And the outlook for radio in the second quarter is obviously stronger, with Q2 pacing currently up by more than 70% as we lap our most difficult quarter from 2020. Adjusted EBITDA for Q1 was impacted by $1.4 million of expenses related to the Richmond casino project, despite which, as Alfred said, we posted a higher adjusted EBITDA than in the first quarter of 2019.

Net revenue for Reach Media was up by 16.8% in the first quarter, driven by increased advertiser demand for the African-American audience and government business related to COVID-19, and the launch of a Macy's podcast. Adjusted EBITDA of Reach was up by approximately $1.9 million year-over-year.

Net revenues for our digital segment increased by 64.7% in Q1. Strong demand from brands to spend with black-owned and certified diversity publishers contributed to the growth in direct advertising sales at iOne Digital. This drove adjusted EBITDA growth for the quarter of approximately $3.2 million year-over-year for our digital segment.

We recognized approximately $46.2 million of revenue from our cable television segment during the quarter, a decrease of 2.6%. Cable TV advertising revenue was down 1.6%. Cable TV affiliate revenue was down by 2.8%, with the rate increases of approximately $1 million, offset by churn of approximately $1.7 million.

Cable subscribers for TV One, as measured by Nielsen, finished Q1 2021 at 49.4 million, down from 51.4 million at the end of Q4. And CLEO had 29.8 million Nielsen subscribers. We recorded approximately $1.7 million of cost method income less administrative expenses for our investment in the MGM National Harbor property for the quarter compared to $1.4 million last year and $1.7 million in 2019.

Operating expenses, excluding depreciation, amortization, impairments and stock-based compensation decreased to approximately $65.2 million in first quarter, down 0.6% from prior year. We saved approximately $1 million in employee compensation expenses and $650,000 in reduced travel and office expenses due to our cost savings initiatives year-over-year.

We also saved approximately $1.1 million in lower program content amortization expense of our cable television segment. These savings were offset by an increase of approximately $1.3 million in marketing spend to promote programming at TV One.

The increase in corporate selling, general and administrative expenses was primarily due to an increase in professional fees related to the Richmond gaming opportunity. Radio operating expenses were down 11.4%. The radio SG&A expense line was down 9.9%, driven by lower employee compensation, revenue variable expenses and discretionary marketing and promotions. Radio program and technical expenses were down 14%, mainly from lower employee and talent compensation and reduced music royalties.

Reach operating expenses were down 12.1%, mainly due to lower employee compensation and a favorable reversal of bad debt expenses. Operating expenses in the digital segment were up by 12%, driven predominantly by variable expenses related to the increased revenues. Cable TV expenses were up 5.2% year-over-year. Programming content expense decreased by approximately $1.1 million. The sales and marketing expenses were up by approximately $1.9 million, driven by the increased media campaigns to support program.

Operating expenses in the Corporate and Elimination segment were up by 23.9%, primarily due to the increase in professional fees for corporate development activities relating to potential gaming and other similar business activities.

For the first quarter, consolidated broadcast and digital operating income was approximately $36.4 million, a decrease of 3.3%. Consolidated adjusted EBITDA was $28.8 million, a decrease of 10.6% year-to-year.

Interest expense was approximately $18 million for the first quarter compared to approximately $19.1 million for the same period in 2020. The company made cash interest payments of approximately $13.9 million on its extending debt in the quarter. The benefit from income taxes was approximately $10,000 in the quarter and the company received a cash refund of taxes of $32,000. Net income was $7,000, which rounds to $0.00 per share compared to a net loss of approximately $23.2 million or $0.51 per share for the first quarter of 2020. Capital expenditures were approximately $804,000 compared to approximately $1.4 million last year.

As previously announced on January 25, 2021, we successfully refinanced all of the company's existing debt, cash on hand and $825 million of senior secured notes at a rate of 7.375% due February 1, 2028. As of March 31, 2021, total gross debt was $825 million. The ending unrestricted cash was $56.8 million and net debt was approximately $768.2 million compared to $134.6 million of LTM reported adjusted EBITDA, given a total net leverage ratio of 5.71x.

And with that, I will hand back to Alfred.

Thank you, Peter. I wanted to call to everyone's attention, I don't know if you've seen it much in the advertising press. But there is a very, very positive advertising climate for African-American owned media companies. Corporations like Procter & Gamble and General Motors have made significant pledges to increase their investment in African-American owned media specifically. And also within the last week, the Interpublic Group of ad agencies and now GroupM advertising to very large advertising holding companies have also committed to increase their spend with African-American owned media.

We will benefit greatly from that. These are tailwinds that started in the aftermath of the protest over the George Floyd murder and the Black Lives Matter movement of last year. I got a lot of questions about whether or not we thought that momentum was onetime, whether it was sustainable or whether it really was a sign of positive momentum that would create systemic change. And I got to certainly say that all signs are pointing to continued momentum, larger commitments and a real desire to create a more equitable playing field as it relates to media investment.

So that's very positive. The GroupM and the Interpublic announcements all came within the last week. I've been involved in high level conversations with these corporations and these advertising agency holding companies. So I'm well aware of the intent and the commitment that they're laying out. And it all starts at the top. So when the CEOs decide that this is a commitment that they want to make to multicultural media and diverse owned media, then that's a big statement.

Secondly, I want to talk about our Richmond Virginia Casino opportunity and initiative. As I mentioned before, we, Urban One in partnership with Peninsula Entertainment, made a proposal to the city of Richmond to build a $600 million casino resort in the city. It was an initiative based on our desire to further expand into the gaming arena since we had such a great experience with our investment at MGM National Harbor. Started off with 6 different companies that responded to the RFP on February 22. It is now down to just 2 of us, Urban One and the Cordish Companies. And we're spending a lot of time trying to win this and get it over the finish line.

I guess you could say since there's 2 of us. We have a 50-50 shot. But we are currently in discussions with the state. So is the other party. However, we've got very different proposals. Our proposal is on the south side of Richmond in an industrial area that doesn't really impact neighborhoods and actually has widespread support from the largely minority neighborhoods and populations that surround it because of the amenities that our project would bring. The competing project that's sponsored by the Cordish Companies is in North Richmond in a trendy restaurant bar area called Scott's Addition that has the exact opposite population.

So ultimately, it's going to come down to where the city sees itself wanting to spark further economic development. So stay tuned on that. We should hear something by the end of the month. But this is the first time you'll see it flowing through our P&L. We had $1.4 million of what we call chase costs and those are costs for the RFP, lobbyists, printing, the initial architecture designs renderings that you have to put together to show what your project is, advertising, et cetera. If -- should we be chosen, which we'll know by the end of May, beginning of June, then we'll have to go to City Council to get approved to be put on the ballot for a referendum that will happen in November, where the citizens of Richmond will then vote on whether or not to approve a casino, a resort casino at the chosen location or at our location.

There will be additional costs that will come from running the referendum and then more architecture costs. So we're estimating our chase cost could be, if we win, up to $4 million or so. If we don't win, there'll be half that. But pretty exciting to get this far. And you can go to onecasinoresort.com. That's onecasinoresort.com. And get updates information. There's lots of videos about what we're planning there. As I've said before, should we be lucky enough to be chosen, this particular opportunity could create another revenue and EBITDA stream that would rival the size of our radio group or our cable television operations. So would be a pretty significant diversification opportunity for the company.

Operator, can we go to the line for Q&A, please?

(Operator Instructions) And we do have a question from Rafe Leeman from Eaton Vance.

It's Rafe. So you mentioned on the pacings for, I guess, quarter, up 70% in Q2. That sounds great. You -- like others in the space, your actual numbers for Q1 ended up being better than the pacings and that's kind of what people had said, is that things were coming in later and then the actual numbers are actually doing better than the pacings. Is that continuing? Do you think that will occur again where there's a little bit of a delay and you'll still -- you'll do even better than the pacings? Or is that kind of normalized in terms of return?

It feels like it. But the timing of when dollars hit is so much harder to predict these days. Certainly, during the pandemic, things were canceling at breakneck speed. And then when they started to turn, you started to see the numbers look really, really ugly and close and improve throughout the month and throughout the quarter. Q1 was -- January was down 28% and then there was -- February is down 20%, and then March was plus 8%, right? So I suspect that we'll see things booking late and improving.

But as you get closer to normalization, then I think that improvement pace during the month and the quarter will start to slow as well. Because you are seeing a robust economy, right now like particularly on our national facing businesses, Reach Media, we have inventory problems and sold out. And so therefore, we're in a position where rates are rising. I guess, inflation is a good thing from that sense. And you're seeing that. You're seeing more demand than inventory in digital and you're also seeing pretty strong demand in TV. Local radio is not as robust as those other platforms, but it's absolutely improving. So the answer to your question is, I guess, if you're asking, do we think we're going to do better than plus 70 for Q2, I don't know, do we have a forecast, Peter?

We do. And it is slightly better than that, but it's not dramatically so. And as I look at the pacings, I think we called out in your quote, Alfred, that April finished up about -- just under 90%, 89% up, May is pacing up about 75%, June's pace and up about 49%. And we -- if we were calling it now, we'd say it's mid-70s.

Mid-70s, yes. So a tick over the 70 mark. I would say that when we budgeted for our radio business, we did not budget to be back at 2019 levels. We budgeted to be somewhere between 2019 and 2020, and we are on target for that revenue performance. And so we feel comfortable about that. It's too early for us to say whether or not we're going to overperform that. But right now, we feel pretty good about it. We've got -- our Q4 last year was tremendous because of political. So Peter and I were talking about it earlier. I think we're going to be feeling good tracking along until we get to Q4, right? And then -- because it was such a big quarter for us. But we still think that we can hit the metric that I just described to you.

Yes. And then the other thing to point out is digital, obviously, is our strongest growth area at the moment from a radio standpoint. And so when we talk about our pacings, we're including the digital business in that, the radio digital business in that. When we report out and break down advertising, we pull all the digital into the digital segment. So just to be careful that we're talking about the same thing, the plus 70 number includes our radio digital performance.

Okay. That's helpful. And any update on events, sort of how -- what the timing is looking like on that?

I mean our biggest event that -- we got 2 big events, 1, birthday bash in Atlanta is scheduled to resume in June. We're doing it -- forgot the name. It's the old Atlanta Braves Stadium that now, I think, is a Georgia state facility. It holds 50,000 or 60,000 people and we're setting it up to be socially distanced for 15,000 people. But the business model for this year actually could see it be quite profitable should we hit that benchmark. So that is happening at reduced capacity. And then we have our Fantastic Voyage cruise from Reach Media scheduled for Q4. And right now, that's on -- all plans are set for it to go. And that would be a significant driver as well with profit expectations to be not at historical profit levels, but not far off of it.

And I think as long as cases keep coming down and vaccinations keep happening and the economy keeps starting to open, then you'll see us continue to return to events. But 2 of our biggest events are happening at this point in time this year.

Terrific. Terrific. And if I can maybe just do one more and then I'll jump out. Just any update in terms of the financing on Richmond. I think you've been pretty clear on the last call that I guess you can write-up to a $75 million common equity checkout of this everyone's silo, but it might not be that much in program. So any updates there?

Yes. Look, it's moving around. And the reason it's moving around is because we're negotiating with the city, which kind of moves around the numbers in the project. But a couple of things. We've got robust demand from almost 60 local investors that have signed up to invest alongside us in this project. And so the idea that we sell off at least 10% of this to people who actually live in Richmond is a real concrete plan, right? These people are signed up with giving us numbers, et cetera. And so that is helpful to go to reduce whatever our numbers are. Our original equity commitment was $75 million. So that equity commitment would have been $75 million minus the 7.5% for their 10%. I pledged to put some personal money into it as well.

And so the local investment number could go up. We could look at alternative ways to finance it. The pandemic was helpful from the standpoint as we got, I think, smarter about the tools that we could use to raise capital. We were very lucky and excited to have gotten that refi off. We have 2 ATM programs for both classes of shares in place. We've used at least one of them, the class As, we haven't used the Class Ds.

So I would say to you that we will be very conscious of how we finance this and avail ourselves of all capital opportunities to also be able to focus and think about our continued goal of deleveraging. That's super important. Even though our current leverage level is at a place given the pandemic that we haven't seen before, we realize that it's not where it needs to be. No. And so we're not going to do anything that stretches us too thin. So we would look at also other outside -- other ways to raise capital outside of selling equity and taking the local investors too.

Deleveraging is still a very important effort for us and we're not losing sight of that. If we were lucky enough to be chosen, I think that I don't know what's going to happen to our securities, but they should respond in a positive manner because it will be a significantly accretive event, although it will be out in terms of when it comes to fruition. Just winning that license will build significant value in and of itself.

(Operator Instructions) Our next question is from the line of Todd Morgan and he's from Jefferies.

I just had 2 kind of follow-ups on the operating side. I guess, first of all, very broadly, I mean, given the kind of the positive start to the year and your comments here, I know you said the fourth quarter is a little bit of a tougher comp. But is it fair to say that kind of your broader thoughts about sort of EBITDA for the full year that you kind of talked about in the past, I would think you're feeling a little bit better about the achievability of that at this point, just given the strong --?

100%. If you remember our road show, and we did our refi. We didn't actually give official guidance, but we knew Q4 was going to be -- and we knew this was going to be a nonpolitical year and Q4 was big for us, et cetera. And so what we expressed in terms of EBITDA kind of neighborhood, zip code, soft, whispered guidance is still in effect.

Now I'll caveat that by saying if we don't win the Richmond license, we're going to have a onetime hit of probably a couple of million bucks that will come off of that number, that you're probably referring to. But if we do, it will roll into the investment and we'll probably be over our bogey.

No, that's helpful. That's helpful. And also this year, with production restarting on the TV side, I know you called out expectations that the programming cost levels could rise along with that. Is that unfolding as you kind of previously anticipated? Or is -- how is that really kind of moving in this environment? Is there any change from what you thought previously?

Jody, you want to give him an idea of what the increased programming spend you're going to do this year?

I don't have what our total was last year. But yes, we are expecting about a 10% increase in our program amortization based on production being back in and just making commitments or promises to our affiliates to deliver a certain number of original hours.

But that's -- it sounds like there's really kind of on track with what you thought before, in other words.

Yes.

The next question is from Patrick Wang from Voya Investments.

Congratulations on the bidding. Can you just talk about from 6 down to 2, so why did you eliminate the other 4? What's the consideration from the city council regarding this project?

Yes. I think -- I mean, look, it was a number of factors that eliminated the other 4. Not all of them got eliminated for the same reason. I think level of experience and belief in their business plan was one, site control was a second one, size and scope of project would be a third one. The Pamunkey Indian Tribe proposed a $350 million project that is essentially across the street from our location. So I think they got eliminated because they also weren't teamed with a known existing gaming operator and they had the lowest project sort of proposal in terms of value.

I know Bally's got eliminated because of issues with approvals from state and governmental organizations that the city didn't control for their site and also neighborhood pushback. Gold Nugget got eliminated because they basically had a backup contract on the valley site. They didn't actually have an option on it. So various different ones.

And now it's down to us and Cordish, and it's really going to be about location, where folks want to put it. The ability for that location to also win in a referendum because the citizens get to vote on that, and I think, to some degree, what the city selection committee feels about who will create, develop the highest quality product. And so I think those are going to be kind of the remaining consideration in addition to what are the economics that are going to go to the city, so.

Right. In terms of the underlying real estate, that's a former Philip Morris site. Do you actually have a contract to buy the land? Or are you going to lease the land? Or how is that?

Yes, we have an option to buy it. We have an option to buy it.

Okay. And the timing you said is May to June, so that's just around the corner. Is that --?

Honestly, I suspect we'll know if we've won or lost in the next 2 weeks.

Okay. Great. If you one, do you have to divest your MGN Harbor minority interest for conflict interest?

No. We do not.

Yes. Okay. Great. Another question is regarding radio advertising. It's -- traditionally, it's more local. And you talked about the increased interest from advertisers for minority owned media. Would that -- what's the component right now between the mix between national and local? And how much would that increase your national advertising too?

Yes, look, our local radio business is about 27% national? Or is it higher than that now, Peter? Is it at 3 now?

It's around 30.

It's around 30?

And it depends on the political or nonpolitical. Obviously, we tend to sell in a political year, more national.

Yes. And look, I can't tell you how much it's going to help, right? That depends on how many clients each of these people, these ad agencies, have at any given time. They've given us percentage targets for where they want to go, but that percentage target leaves out what the sum total spend is, right? I can just tell you that it has been helpful. It's continuing to be helpful and people are making commitments, and that's only good news for us.

Right. Have you considered just joining the KAKC media platform because some of the competitors talked about recently?

We're already part of it. Yes. Yes. KAKC is basically the de facto only-national rep in the radio business.

Right. That's understood. Right.

I'm sorry?

That's under -- is that owned by script?

No. KAKC is owned by iHeart.

Okay. Okay. I'm thinking about the KAKC TV, on the TV side.

Yes, you're thinking about the Cats television networks. No, different company.

Yes. Got you. Last question is the -- regarding the ATM program. You said the A has been used up. So I think during the quarter, you have $9.5 million for the shares that you --?

I didn't say it was used up, I said we've used it. The A's are the only shares that we've issued. I'm sure we still have outstanding capacity on it. But we also stood up a Class D for the UONEK shares that we have not availed ourselves of as of yet.

And what's the size of that D ATM?

Is it 50 or 25?

It's -- the shelf is 50, but we'll put it up first, put it up at 20, incremental 20.

Yes. So we have a $50 million shelf registration, but our pros up that we'll register is going to be for $25 million.

Okay. That's shares, not dollar, right?

No, that's dollar amount.

That's dollar amount. Okay. And how much you have left on under A?

I think we got top of my head about 19, but I'd have to double check in. So we have significant capacity still under the second $25 million.

And our next question is from Ben Brogadir from Odeon.

On Richmond, just trying to understand the purchase price and potential accretion for you guys. So you're saying it would kind of all things -- if all things go well, could be an equal contributor to your radio and TV EBITDA. So call it, I don't know, between $100 million and $130 million at a $600 million purchase price. It seems quite cheap compared to other gaming transactions. Am I thinking about that the right way? And also, does the $600 million include the land? Or would that be additional?

Actually, the $600 million includes the land, includes everything, actually includes some soft costs like interest and everything else too. So I mean, yes, that's kind of the math right now that how we're looking at it, right? And -- but all of this stuff is contingent upon gaming studies that we all -- the state hires a company to project what gaming revenue would be by market, given the structure that they've set up in terms of the number of licenses, et cetera. Then we hire people to come in and drill down on the market and give us an estimate what they think the market size will be based on household income, population, et cetera. And then you overlay a tax rate that whatever the state is going to charge you. And then what you think the local city charge is going to be. Then you layer in whatever else additional you're going to do in sort of a host community agreement where you're also going to make some financial commitments. And then you lay over an expense structure, which your operating partner has a very strong and deep knowledge base because they run casinos and it spits out an EBITDA number.

And yes, that EBITDA number is $100 million or better, right? And -- but I'm going to caveat all this is that gaming studies have been wrong, right? Like you can miss them, some do better, some do worse. National Harbor was actually right on target. That's actually not a little better. When we first saw that business plan, I think it said that gaming revenue was going to be in the 6's and cash flow, EBITDA was going to be $175 million. And gaming revenue has been in the low 7's and they've done a couple of hundred million dollars of EBITDA.

When MGM did Springfield, that study was wrong and they missed the mark, right? So for us, that's the math we look at, but we'll capitalize it and think about the risk from the perspective of what's our downside, right? How far off could this be? And it still be an accretive opportunity for the company. And that will inform how much we're willing to spend in bid, et cetera, to also protect our downside. But yes, that's kind of the math right now.

Got it. Appreciate all that context. And then kind of a follow-up on to the ATM program that you guys are running. Obviously, it's dilutive to the equity. And I guess I'm just curious, when you guys think about bolstering liquidity or raising capital for these type of projects, it's -- I guess, what's the thought process behind diluting your equity when it's trading at $2.50 a share, kind of comparing that to the current rate environment and kind of fixed income instruments. I mean are you guys taking a look at some things that you don't think equity is cheap? I mean I'm just trying to understand that.

That's a good question. Look, I still think we have too much leverage. I knew for sure we had too much leverage when we were levered at 6.7x. Now that we're a turn lower coming out of a pandemic, I still think it's too much leverage and should go down. We bought back a lot of shares over the years. I think we bought back half the company, probably more than half the company now probably at an average rate of $1, right? It was $0.80.

We had always said that in order to delever or to fund projects that we think could build value, we were potentially a seller of stock at $3 level on the D's. We were a seller of stock of the A's at these higher levels. We haven't been a seller where it's at now, but we were a seller in the 6's and the 7's. And how I think about that is that's a positive trade for us given what we bought shares back for in the past. And if you still think you have too much leverage, which I do, yes, I don't think this company should be living in the high 5's in terms of leverage.

So -- and so that's how we think about it. Yes. And the family, my mother and myself, probably own close to 50% of the shares. So it's really -- we're taking the biggest hit on the dilution. But I think getting into a leverage range where you're comfortable and it's sustainable is more important for the long-term health of the company. And so that's how I think about it.

And just jumping in for saying the previous gentleman's question, I just checked on the $21.9 million available on the Class A ATM out of the $25 million. So still substantial room there.

Appreciate all that context and color, makes sense. Just last one for me. Obviously, you guys are extremely busy on the gaming initiative. When you think about kind of your broadcasting assets and stations, kind of radio, TV, you guys have done some selective asset optimization on the M&A front. Do you think that your portfolio is kind of where you want it to be as it stands today? And kind of how do you kind of view the current M&A landscape?

I think that the answer is no. I think our assets should ultimately be combined with a larger radio platform to get more scale, particularly in the markets that we already operate in. The swap we did with Entercom to get out of St. Louis and get larger in Charlotte, it's been great. The business is just a lot more stable when you've got larger shares and you're in multiple formats. And it's also becoming more of a scale business competing against iHeart and Entercom and Cumulus.

I think that now that there is not radio D-reg on the horizon that our company probably is the best well positioned to be one of the central platforms in the consolidation. And that's absolutely what I think should happen in radio. I've said it before. And why aren't we focused on it now because nobody wants to do anything now because nobody has any idea what their real EBITDA is, right? You're coming off of COVID. I mean Cumulus used to do $210 million or $216 million of EBITDA and they went down to like $80 million-something last year. And now they're going to bounce back to somewhere between $112 million and $120 million. I don't think that they think that's their EBITDA equilibrium, right?

So nobody wants to do a deal. Nobody wants to buy, nobody wants to sell right now because you just don't know what assets are worth. But as soon as we get through that, I think we should be focused on doing something.

Makes sense. Appreciate that. I'm going to sneak in one more. You mentioned kind of target leverage. Do you have a number in mind there?

Something in the 4's. Yes.

And the next question is from Umesh Bhandary from Legal & General.

Just a quick follow-up on the last one. Did you sort of imply that you would be the consolidator or you'd be more a seller in this consolidation of the video assets?

That's a good question. I have always said that we are willing in assets to be on either side of a transaction that created value and made sense. I like the radio business. Quite frankly, other than -- prior to COVID, it had actually stabilized. And so in fact the Entercom deal was interesting because I was like we either need to leave Charlotte or you need to leave Charlotte. Which is -- and I said I'll do either. In fact, they were actually going to buy our stations in Charlotte 2.5 years ago and then they backed away from it. So we ended up buying them.

So I'm always willing to be on either side of the transaction if I had to handicap it. There are not a lot of radio operators left, people who know the business, know how to run radio stations, like running radio stations, don't mind the business. So I would have to say that given the current landscape, we would probably be the surviving entity just because I don't see -- iHeart is not going to be able to do anything substantive, neither would Entercom, but again I'm willing to look at it either way. But if I had to handicap it, we're the surviving entity. And I'm happy to be that and I'm happy to be the management solution for that because we like the business. We know the business. The radio business has actually helped us get into these other businesses. We wouldn't have been able to get into the cable business if it hadn't been for the radio business. The radio business is absolutely helping us in get into the gaming space.

So -- but if there are opportunities, if there were markets that made sense for us to leave or swap around because we created value, we have no intention of exiting the business altogether, the business that we're creating. We think we have a lot of opportunity and upside. So I don't want to give anybody an intention, the attention that we're a seller from the -- we're leaving the business standpoint. We would be a seller or a swapper of assets in order to create value of which we can then use to delever or deploy into other areas that we can grow faster. Does that make sense?

That makes sense. And I think obviously you've alluded to that because it seems like wholesale large transactions is a little bit difficult just given the ownership role, it seems like more sort of market by market, swapping or buying selling a couple of stations, that seems like that's more of the trend?

Yes. I mean there really are no buyers -- I mean, if somebody put a radio company up for sale today, I mean, I think that happened. I mean, I think there was a process for Townsquare at one time and it didn't ultimately materialize, ultimately materializing the major shareholder, getting -- just getting bought out. I don't think there's anybody who wants to go out and just buy big radio companies. But for a company like ours, there are significant synergies who are matching up in markets, where we're not full yet. So Indianapolis, Dallas, Cincinnati, Washington, D.C., there's significant cost savings. If you look at us in another -- a company like a Cumulus, between corporate and the 7 markets that we overlap in, I think there's a lot of cost and revenue synergies there. I think that somebody needs to take advantage of that.

All right. That's helpful. And just a quick follow-up on your previous question that was asked. I think like during the roadshow, you sort of, I think, gave a soft indication in terms of like EBITDA, I think, for the full year around $130 million. I'm assuming that number seems to still stand from what you are saying.

Yes.

With that EBITDA number, it seems like you should be generating a pretty healthy amount of free cash flow. I mean, are you -- what do you plan to do with the cash? Are you going to sort of sit on -- you're going to see it on the balance sheet so that we can invest in this potential casino or buy back debt? How would you sort of think about that?

Yes. So I think roughly $70 million is not a bad number to think about for free cash flow for this year. And it's probably not that much of a confidence that that's around the quantum, give or take a bit, on the Richmond investment, so we could invest the year's cash flow in that project. If we don't, I think we'll keep it on the balance sheet and look for other opportunities. And we also have the ability to prepay up to 10% a year on the note. So up to $82.5 million, we could prepay at $103 million on the note.

So we will look at that. We will see where we come out on Richmond and then make the appropriate capital allocation decision after that. But to your point, I think our cash and liquidity position at the end of the year will be extremely robust.

So how does that jive with your sort of earlier comment that leverages to (inaudible) reduce the leverage, but then you sort of take all the free cash flow and invest in an entity that's sort of outside the restricted group, right? So -- and how does that sort of philosophy work?

Well, that was always the plan. When we marketed our refi, we talked about gaming opportunities and we got a specific carve-out for additional gaming investments and we talked about Richmond. And you heard the gentleman earlier, when he asked about the Richmond math. And should we be fortunate enough to be chosen, the math works, right? It's -- it would be a great transaction and it would be accretive to the company and worth doing.

And so you would opt to take a year's free cash flow and invest it in Richmond. And net-net, you're going to improve the company's -- you're going to improve the company's equity value and lower the risk on its debt. Hopefully, our securities move as well. And if they do, then you could also issue -- you could issue more equity and pay down debt. If we only put $70 million in Richmond, we'll probably even have left over cash to pay down some debt as well.

So that's how we kind of look at it, right? And if we don't win Richmond, we'll pay down debt and delever even more so than we might otherwise. So I think the theories work hand-in-hand. It wouldn't work hand-in-hand if we didn't think Richmond was a significant opportunity, but we do.

Got it. And then I think like in this put option that becomes exercisable I think like in '22 or '23, I think, I mean I think you sort of indicated that you plan to exercise that.

You're talking about MGM put option?

Yes.

Yes. It's exercisable every year. It's just this year, it's exercisable at its highest -- at its maximum value, which is 7x whatever their EBITDA is, but it's exercisable every year. And yes, we always have the opportunity to put our stake at MGM and we think that's probably worth north of $90 million and that's another way to delever.

Yes. So the multiple is fully baked till the end of this year at 7x EBITDA with no balance sheet adjustments. And then it's an annual evergreen. So we get the chance to do that every Q1 from here on out.

So is there a plan to monetize that this year? Or what are you thinking?

We haven't talked about it, but I wouldn't monetize this year because they're probably still dealing with -- they're not even up at 100% capacity. So they're still dealing with COVID effects on their business. I don't think their EBITDA would get back to $200 million this year. I could be wrong, but I wouldn't monetize it this year. Plus it's stable. And so I think you monetize it when you need the cash for something, whether that's delevering or some other value-creating transaction, but --

Operator, we've got time for one last question.

And actually, there are no further questions in queue at this time. I'm sorry, Mr. Leeman just queued up. One moment, please.

Just -- can you talk a little bit about the sports betting potential revenue opportunity and whether or not you see that as impacted at all by your success or lack of with Richmond?

Say that again, the what now?

Your sports betting advertising opportunity. I mean I'm wondering generally about your ad categories doing strong.

You know what, I mean, we have not seen the level of sports betting advertising activity as other companies have because we don't have -- we've got one sports station. And we had one in Washington, but we traded that as part of the Entercom swap. We picked up a sports station in Charlotte -- actually, that's not true, we had one in Richmond. But we also just did something down there where we don't run that any longer. One of the competitors does.

So we haven't been benefiting from that. I do think that if we're able to win Richmond, we'll have a very different view on sports betting and how the company plays in it because we will pick up a sports betting license along with the bricks-and-mortar license. So the company probably will start to think about our brand and how it participates in sports betting, not just from an advertising standpoint, but from an operator standpoint, and who can we partner with and et cetera, et cetera.

Operator, thank you very much, and everybody. Thank you. We'll talk to you next quarter. As always, feel free to reach out to us directly.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T teleconference service. You may now disconnect.