Urban One Inc (UONE) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. I've been asked to 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 November 12, 2020. 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 this conference call will be available from 1:00 p.m. Eastern Time today until midnight on November 15. Callers may access the replay by calling (866) 207-1041 or international callers may direct-dial at (402) 970-0847. The replay access code is 8586903. Access to live audio and a replay of the conference call 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'll now turn the call over to Alfred C. Liggins, Chief Executive Officer of Urban One; who is joined by Peter D. Thompson, Chief Financial Officer.

Thank you, operator. And also joining us today, as usual, is our Chief Financial Officer for TV One, Jody Drewer; our Chief Administrative Officer for Urban One, Karen Wishart; and our General Counsel, Kris Simpson.

We've released our third quarter results, and I couldn't be happier about our performance in the midst of this awful environment and a raging pandemic. Our team has done an extraordinary job of pulling together, managing an environment of layoffs and furloughs and cost cuts. But also at the same time, figuring out ways to grow our revenue and our EBITDA, the piece of the pie in the midst of a significant downturn.

In Q3, we were able to actually eke out some EBITDA growth when most companies have seen significant downdrafts. The hardest-hit piece of our business was the radio business. We're starting to see that bounce back in a significant way, but our TV and our digital business and our syndicated radio business, Reach Media, performed exceptionally well.

The political advertising environment has been nothing short of extraordinary. Our target audience is in high demand. If you haven't seen the news stories about black voter turnout, we're -- across our entire platform, we're scheduled to probably post north of $20 million of political revenue. The fact that we're able to have such a large share than we traditionally get of political revenue, is allowing us to also get more comfortable with putting out the EBITDA guidance number for 2020, which we've -- in the press release, have noted is somewhere between $125 million and $130 million of full year EBITDA. By comparison, that EBITDA number last year was about $133 million. So in the midst of a pandemic, not off that much at all, which also is going to allow us to, at the end of the year, have a lower leverage ratio than we entered the year with.

There has been a lot of pain and suffering that has allowed us to achieve this. And I'm really proud of the team and all the employees that have really banded together to get the company through a very tough time.

I'm going to let Peter go into the specifics on the numbers, and I'll come back and talk about the swap that we did -- recently announced with Entercom and a few other things. Peter?

Thanks, Alfred. So net revenue was down 17.2% year-over-year for the quarter ended September 30, 2020, at approximately $91.9 million, and this is up 20.9% from second quarter revenue.

The radio segment net revenue was down 31.9% year-over-year in the third quarter, but was up 54.3% from the second quarter. This includes approximately $2.4 million of net political advertising revenue. This is a significant sequential improvement to second quarter, which was down by 58.4% during the height of the COVID-19 shutdowns.

National advertising sales for the third quarter was down 21.5% year-over-year, while local ad sales were down 36%. On a same-station basis, which excludes Detroit, our radio segment net revenue was down 29.7%. And excluding political, it was down by 34.5% year-over-year compared to being down 57.1% in the second quarter.

Except for our Philadelphia cluster, which was particularly bolstered by political advertising in third quarter, all of our radio clusters experienced net revenue declines year-over-year, but all of which were improvements from the second quarter declines.

While all categories, except for government, were down year-over-year for Q3, we experienced the biggest declines in entertainment, retail and auto, followed by healthcare and food and beverage.

Fourth quarter radio pacings are currently down only mid-single digits on a same-station basis. Excluding political, they're down in the high 20% range. And that's a sequential improvement of the year-over-year declines of over 6 points from second quarter.

About $10 million of gross political advertising revenues being booked in the fourth quarter, bringing the annual total to over $15.3 million for the radio stations alone. This is about $6.25 million more or 70% more than the company's previous record high watermark for political, which was in 2012. And across the whole platform, we've exceeded $20 million of gross political revenue.

Net revenue for Reach Media was down by 29% in the third quarter. Expenses were down by 48.5%, with adjusted EBITDA up by approximately $1.3 million or 68% year-over-year. The majority of the revenue decline was from the absence of events that were canceled this year in light of the pandemic, mainly the Family Reunion event.

Lower operating costs are a result of the retirement of the Tom Joyner Morning Show at the end of last year, along with the absence of the events, notably the Family Reunion, and also staff pay cuts and other cost-savings measures.

Net revenues for our digital segment increased by 3.4% in the third quarter, driven by strength in direct advertising sales at iOne Digital. This and staff salary reductions and other cost savings contributed to adjusted EBITDA growth of approximately $864,000 or 121% increase year-over-year.

We recognized approximately $44.7 million of revenue from our cable television segment during the quarter, a decrease of 2.7%. Cable TV advertising revenue was down by only 1.8% or 5.1% if you exclude political revenues.

Lower average unit rates were offset by higher delivery. Cable TV affiliate revenue was down by 3.6% with rate increases of approximately $1.2 million, offset by churn of approximately $2.1 million. Cable subscribers, as measured by Nielsen, finished the third quarter at 51.8 million, which is up from 51.4 million at the end of Q2.

We recorded approximately $1.6 million of cost method income, less administrative expenses, for our investment in the MGM National Harbor property for the quarter, which compares to $1.7 million last year, down only 5.8%. The casino reopened at the end of June with occupancy restrictions and enhanced health and safety protocols, which is actually now resulting in gaming revenue returning to very close to pre-COVID levels. So that's good news.

Operating expenses, excluding depreciation, amortization, impairments and stock-based compensation, decreased by $19.9 million or 26.3% to approximately $55.6 million in Q3.

Due to COVID-19, all in-person events scheduled to take place during the third quarter were either canceled or postponed to a later date. Reach Media events expense was down $3.1 million, and the radio station events expense was down approximately $1.5 million year-over-year.

We saved approximately $6.8 million in employee compensation and benefits expense through a combination of layoffs, furloughs and temporary pay cuts. We've also recognized savings of approximately $2.6 million in lower cable programming and content amortization, $1.6 million in contract labor and talent cost savings, $1.4 million in reduced travel and office expenses, and $1.0 million in reduced or delayed marketing spend. In addition, there were lower variable expenses such as commissions and rep fees of approximately $1.8 million.

Radio operating expenses were down 31.3%. Radio SG&A, the expense line there was down 37% from lower revenue variable expenses such as sales commission and national rep fees, cancellation of station events, employee compensation, and discretionary marketing and promotion reductions. Radio programming and technical expenses were down 20.6%, mainly from lower employee and talent compensation.

Reach Media operating expenses were down 48.5%. Our programming and technical expenses were down 32.2%, driven by lower talent and employee compensation expenses as a result of the post Tom Joyner Morning Show programming restructure and temporary pay cuts.

Reach SG&A expenses were down 71.2%, mainly due to the cancellation of Family Reunion and other events. Corporate SG&A expenses at Reach were up $85,000 due to the timing of a bonus accrual reversal last year, offset by staff savings this year.

Operating expenses in the digital segment were down by 8.8%, driven by reduced ad operations, product development and editorial content costs, which includes some salary reductions. Cable TV expenses were down 23% year-over-year. Sales and marketing expenses were down by $1.4 million. Programming content expense decreased by approximately $2.6 million, and compensation and benefits was down $1 million.

Operating expenses at Corporate and Elimination segment was down by 1.4%, with lower employee compensation expense and lower T&E, offset by higher outside professional fees and contract labor. And that's partially due to the timing of insurance reimbursements that we received last year as a result of the consulting fees incurred following the cybersecurity incident last year.

For the third quarter, consolidated broadcast and digital operating income was approximately $44.2 million, up 1.3%. Consolidated adjusted EBITDA was $39.6 million, which is an increase of 2.3% year-to-year. Our Reach Media, cable TV and digital segments all posted double-digit percentage growth or better in adjusted EBITDA for the quarter, which we think is exceptionally strong performance relative to our peers.

The noncash impairment expense of $29 million in the quarter was driven by COVID-19-impacted radio market revenue declines across the whole industry. And this write-down obviously did not affect our cash flow, broadcast and digital operating income or adjusted EBITDA. Interest expense was approximately $18.2 million for the third quarter compared to approximately $20.2 million for the same period in 2019, which was a decrease of 9.9%. The company made cash interest payments of approximately $9.2 million on its outstanding debt in the quarter.

The senior secured MGM National Harbor term loan balance increased by PIK interest of approximately $571,000. The senior unsecured term loan was paid down by a total of $12.1 million, and the term loan B was paid down by approximately $824,000. Benefit from income taxes was approximately $136,000 in the quarter, and there were $509,000 of cash taxes paid.

Net loss was approximately $12.8 million or $0.29 per share compared to net income of approximately $5.4 million or $0.12 per share for the third quarter of 2019. And obviously, that EPS figure is impacted by the noncash impairment charge. Capital expenditures were approximately $526,000 compared to $1.8 million last year.

The company executed a stock vest tax repurchase of 3,195 shares Class D common stock in the amount of $6,000. In August, the company issued 2,859,276 shares of Class A stock at an average price of $5.39 per share for approximately $14.8 million of net proceeds to the company after fees and expenses. And this cash remains on the balance sheet. For covenant purposes, pro forma LTM EBITDA was approximately $130.7 million.

Our net senior leverage was 4.55x against a covenant of 5.85x. Net debt was approximately $785.6 million compared to $123.9 million of LTM reported adjusted EBITDA for a total net leverage ratio of 6.34x.

On November 9, the company completed a transaction to exchange 99% of its 7.38% senior secured notes for new 8.75% senior secured notes with a maturity of 12/15/22. This transaction extends the maturity of both the senior secured notes and the senior unsecured term loan, expanding the company's opportunity to access capital markets throughout 2021.

As part of the exchange agreement, we will also reduce our outstanding debt by $25 million. $15 million will go to pay down the new notes, and $10 million will go to pay down the senior unsecured term loan using cash from the balance sheet.

We've increased our full year consolidated adjusted EBITDA guidance to $125 million to $130 million as a result of the record-setting political advertising and the steady underlying improvement in radio market conditions, also stability in our network radio and the performance of our cable TV and digital advertising businesses, which combined with the rigorous ongoing cost controls makes us feel better about where we're going to end the year.

While further potential economic shutdowns could adversely impact this guidance, this healthy EBITDA and the company's efforts to delever and position the company comfortably to clear covenants and maintain liquidity throughout pandemic. So as a result of the extension of the debt maturities and the increased guidance on EBITDA, we feel a whole lot better about going-concern reviews and that type of issue, which we took some calls on -- we took some questions on the last call. I think the company feels significantly more confident having made the moves we have, and haven't had the political advertising and the improvement in our core business that we have.

And with that, I'll hand back to Alfred.

Thank you, Peter. We recently announced a radio asset swap with Entercom. And I've said that I believe that the industry -- the radio industry is due for another round of consolidation in any kind of mature business, consolidation where you can create economies of scale, expense savings, advertiser sort of clout with a broader offering. That's good because we're a niche broadcaster focusing on African Americans. It became clear to us that in order to continue to build scale in markets that we operate in, we're going to have to expand beyond just our urban niche.

Charlotte is a market we've been in for quite some time. We had 3 FMs there focused on the African-American audience. Entercom had a -- the third-largest customer in terms of revenue there, but still considerably smaller than Beasley or iHeart in that market. They were doing probably about 20 -- 20 revenue share. And we worked out a deal to get their general market stations under our fold. They have the legendary news talk station, WBT, in that market; sports station, WFMZ; and also a legendary well-performing adult contemporary station, WLNK. They -- in 2019, those stations probably did about $20 million of revenue. With COVID impact, they're probably going to do about $15 million. And combined with ours, we're now looking at a cluster that will have approaching $20 million of revenue in that market once it's normalized, and we have the ability to offer a much broader spectrum of formats to the advertisers and become a significant player.

We didn't give up that much in our opinion because the stations that we swapped with them, we had singular positions. So in St. Louis, which was the most significant cash flow that we traded, we only have 2 FMs in that market and no way to get larger. And so Entercom will pick up one of those FMs, WHHL. And we're actually going to sell the second one to a religious broadcaster, Gateway Creative, for $8 million, which is a very attractive price for us. And Entercom will take the intellectual property of that second FM and put it on one of their other radio stations. And so in a market where we couldn't get any larger, we're going to exit.

And in the other 2 markets, Philadelphia, we had 3 FMs. And the one that we swapped to Entercom WPHI, was not a significant cash flow generator for us at all. So we kept our best stations in the market, our best signal and our station with the highest ratings, still remaining in Philadelphia. And we think that we'll be able to have similar results than we've experienced in the past with the 2 stations instead of 3.

And then we swapped a sports AM that we recently bought a few years ago. That was breaking even for us or slightly losing a little money this year. And Entercom is consolidating the sports format in the Washington market.

And we believe that at a minimum, these swaps are going to add over $1 million of EBITDA to 2020 in addition to putting $8 million more cash on our balance sheet. So we felt really good about it. It's much easier, much more efficient and productive to operate larger clusters of radio stations. And we're going to look to continue to try to build out our clusters and markets that we operate in as we look for ways to rationalize the radio portfolio and create more EBITDA, all in the effort to continue to delever the company. And I think that we've been making some significant strides towards that.

As indicated by what we said earlier that our leverage ratio, we feel, will end up being lower at the end of this year than where it was when we came in. And having gone through and continuing to be in the middle of a pandemic, I want to say a little bit about the stock price. Stock prices are always hard to gauge, and people have to determine what they think a company is worth.

And in the pandemic, it's really hard to judge media companies because you've got these depressed levels of revenue and EBITDA due to just the current situation of shutdowns, et cetera, et cetera. However, if you look at our company, and we kind of looked at an estimated year-end debt level of about $790 million net, give or take, it could change up or down a little bit. And if you take the midpoint of the EBITDA guidance that we gave, about $125 million to $130 million and take the midpoint of $127.5 million; and if you use the normal trading multiple that radio companies had been trading at in the past of about 7x, if you multiply that EBITDA by 7x and subtract our debt, and we've got 45.2 million shares outstanding. If the Class A shares, which trade at a premium, just stay static, don't move either way, those Class D, the UONEK shares, they should be just on normal trading multiples and the EBITDA and the debt that we forecast to have, our shares should be well over $2.

I don't know if the market is going to look at it that way. The stock has been trading on a lot of news, and Black Lives Matter interest and a lot of retail trading, but the analysis that I just outlined is basically a fundamental look at our EBITDA times a traditional regular trading multiple, 7x, which is not unreasonable, less our debt and the number of shares that we have outstanding.

The radio business continues to get better. The fact that we're only down mid-single digits in Q4 is pretty extraordinary. I expect that next year in the radio business, probably won't get back to 2019 levels, but it will certainly be a heck of a lot better than 2020. And we expect our other units to continue to do a great job in growing their cash flow. And so we'll continue to delever, move forward.

The other thing that happens next year, at the end of '21, is our put of our MGM interest comes to full value of 7x whatever the EBITDA is going to be at the end of '21. This year, it's 6x whatever the year-end EBITDA is going to be.

I can tell you that MGM having been closed for 3 months, is back open and doing extraordinarily well in terms of gaming revenue even at 50% capacity. I haven't seen what their EBITDA numbers are going to look like as of yet. But all of these casinos, particularly these regional casinos are controlling their expenses in a significant way, such that a lot of them are actually having higher EBITDA levels than they did a year ago. So I suspect that the property will continue to do exceptionally well also from an EBITDA standpoint.

So we continue to do the job that shareholders and debtholders, the stakeholders have charged us to do.

And we are going to open up the line for questions from the audience. Operator?

(Operator Instructions) Your first question comes from the line of Jay Lee from [Hasten] Capital.

Questions, just a few quick ones. So one on the radio station sale in St. Louis. Can you give us an idea of what the multiple on that particular station was on a kind of a DCF level?

Yes. Peter can do that.

Yes. Give me a second. Hang on a second. 16.8x.

Okay. Great. And then for the MGM National Harbor put interest, how much do you guys own again? What is the equity there?

6.67%.

Okay. Great. And then a final question on the -- kind of on the capital deal, I mean you guys did the bond exchange earlier, very recently. Kind of bought you another 8 months or so. But how are you guys looking at -- how are you guys thinking about the cap stack here given kind of the near-term maturities, the term loan B in '23, your notes in '22, the MGM [techno] in '22 as well?

Yes. I think we communicate on a consistent basis with most of our large debtholders, as evidenced by the exchange that we just did; we had like 99% participation, it was extraordinary. And I think the general consensus, the idea is that we'll rerack -- we'll look to rerack the entire cap stack in '21. Most likely once we get past the COVID quarters, so that you don't have to get -- you don't have to ask people to sort of imagine that COVID didn't happen if we can just get past those numbers and lap them. Then it just makes the sales job easier. But I think that's kind of the general consensus, is rerack the whole thing.

And you try to create a security also that has got some significant size, so we can get more players into it. Our securities now are all kind of small-ish, $350 million tranche, a $300 million tranche. And then I guess, the sub-notes are like a couple of hundred million dollars. All of those are subscale and don't allow the full universe of investors to participate in.

So you're looking at more -- I'm assuming more of a back half of '21, just to give you guys a few quarters of runways?

Yes. Look, that's my thought, that you look into the back half of '21. But let me just say this also, the capital markets are funny, like they could explode or they could be really hot and people may be willing to look past the COVID numbers. And investors and bankers may say that they're willing to do something now at a reasonable level. And we've got to be in a position to take advantage of that. So traditional thought process is telling me, it's the back half. But just -- you just never know. I was always taught that you take capital when it is available. And if the markets are open at a reasonable level, we'll be opportunistic.

I know you guys talked about -- I know you -- Alfred, you mentioned that you were looking to do kind of a recapitalization or kind of a refi pre-COVID. Is that kind of along the similar lines where the bigger tranches...

No. Actually, that was going to be a different approach. We've been thinking about that, but the capital markets pre-COVID were exceptionally hot. And we -- after our, I think that was our year-end release, we'd been counseled by a number of banks that we could have refinanced that tranche that we just exchanged, that $350 million tranche, we could have refinanced that at the time at -- they gave us a level of 8%, and the tranche was 7.38%. And they thought that you might be able even to come inside of that. So we were actually going to go, and at a minimum, just refinance that tranche. If the markets were there, so we could have done all of the front end, we would have done that.

But just taking -- just refinancing that tranche would have pushed out that maturity and also bumped out the term loan since it has a springing maturity feature. And so we were going to do that. We would have printed that singular tranche trade, but then COVID happened. So now if you ask me how we're thinking about it, we would rerack everything and look to do 1 bigger tranche or at least a larger singular tranche in the front end and then figure out with Carlyle, who owns the back end of our paper, what we do with that maturity. They've been a great partner.

And so that's the thinking today. I'm not saying it wouldn't change. But when we were looking at pre-COVID, we were actually thinking about doing something else, and it was just purely a function that the market was there.

And there's a final question. So the reason why the notes were exchanged for, call it, 8 months or so of maturities, just to give you guys a little bit more flexibility going into '21?

Yes. Give us more time to get a refinancing done and not have to be in the throes of COVID performance.

Your next question comes from the line of Matt Swope from Baird.

Could you talk about how you think about that EBITDA number, Alfred? You walked through your sort of analysis of where the stock is and that midpoint EBITDA of $127.5 million. But obviously, that's an impacted number. What would you counsel investors to look at as a normalized EBITDA number sort of absent COVID?

Yes. That's hard, right? Because I don't think '21 is going to be back to pre-COVID levels for the radio business, right? And so we've got a -- yes, I'm talking to other CEOs about what do you do about budgeting for next year. We've got an assumption for what we think the market is going to do, but it's just that. It's an assumption. I mean, I think we're really going to have to look at it quarter-by-quarter. And so I don't know what the normalized EBITDA will be for next year because I don't think next year is going to be normalized, right?

I can also tell you that prior to COVID, people -- investors were more comfortable with, I think, the radio industry than they were with the cable television programming industry because of cord cutting, et cetera. Thank God, we're in the cable television business because that business has performed at an extraordinary level for us this year. People sitting in the house had to watch television. Ratings are up a significant level. Yes, there's still churn. But in this last quarter, churn has slowed. Television is still a primary advertising vehicle for folks. And so that business is pretty resilient.

So I don't want to go out on a limb and try to give folks what I think normalized EBITDA is. We, as a management team, we always try to make sure that we put ourselves in a position to survive first and then we look for opportunities to thrive. And I think the performance that you're seeing this year from this team is how we think about every year. So next year won't be any different. But I mean, it's the middle of November, and we're just now giving guidance.

And so -- yes, it would -- yes, I'd just be sticking a finger in the air for next year if I tried to give you something. What I can tell you is that we are going to have a strategy to continue to delever and to maintain our EBITDA. And I suspect that I can go out on a limb and say that our EBITDA won't be any worse than this year. And we're going to look for ways to grow it.

Yes. No, that's certainly fair and helpful. And we appreciate you giving guidance. There's very few of our companies that have given any guidance at all. So definitely grateful for that. And I'm interested by your comments about sort of the change in perception for radio versus cable. And is there any opportunity given that in terms of maybe -- you talked about consolidation in radio, but what about consolidation in cable TV? Is there any opportunity for you to monetize sort of the recent strength in TV One?

I mean I think we have monetized it. It's cash flow that's coming as we're using to pay down debt. I mean I don't -- you know, I don't know what you mean by monetize, whether you're asking would we consider selling the asset. Yes, that's certainly a question that I would never actually openly debate on a conference call. But I can tell you today, I am grateful that we own that asset. And I think having a diversified strategy in a media business that is being disruptive from a digital standpoint is a winning strategy. Because I just don't know which way it's going to go, right?

There was one time where everybody was really down on the radio business. And then I watched big investors start to really be bullish on radio. I lived through that turnaround.

And now if you look at the pure-play radio companies, they're all going to have like [dag-on] near double-digit leverage levels, yes. And their stocks are still trading as if everything is going to bounce back to normal. I mean so -- but look, I got to worry about us and how people view us. And so I like the diversification strategy. So yes, I'm not looking to try to divorce myself from any of the businesses that we currently own.

No, that's a helpful answer, Alfred. I appreciate that. And maybe, Peter, could I go back to the EBITDA question? And you listed off a number of the costs that were down in Q3 year-over-year. So sort of back to that EBITDA question, how much of that stuff do you think is going to come back? How much should we -- between things like sales commissions and some of the incentive expenses and others, how should we think about where expenses go as hopefully we're in a happier place in 2021?

It's a difficult question. Obviously, I deliberately gave a fair amount of detail about where the savings came so that you can kind of look at the different buckets.

I say it's difficult because TV One programming, obviously, it's going to be suboptimal for us to continue to save at this kind of level there. We're going to need new programming. So at an appropriate time, that spigot will have to be turned back on, for want of a better phrase.

But to Alfred's point, we're going to manage through this next couple of quarters and see where we're at. So it's hard for me to give you a numerical answer to your question, even though I'd like to, because I don't know where we're going to be with TV One programming. We want to do more, obviously. And the same on TV One marketing, which we'll follow the programming.

I think what we can say is we have made a number of the furloughs permanent. And obviously we've laid off, unfortunately, some people. So there's a permanence there. But even that is a little tricky to speak to numerically because once events, if things start opening up again, then you're going to see our revenues go up as we start to have our big events again, and then we're going to need to bring people back in to manage those events and deal with promotions on the ground. So it's a complicated act.

And so yes, we saved $20 million in third quarter. As I look at our forecast in fourth quarter -- this might be helpful to you -- I think the costs overall will be down about $8 million, but EBITDA will be up. So I'm trying to sort of give you the best answer I can. Obviously, some of that is variable. I've given those numbers. But it's hard to give you how much is permanent and how much isn't. Because there's just a lot of moving parts to that question.

Yes. No, that's all helpful. And just to be sure we're on an apples-to-apples basis, so that $125 million to $130 million EBITDA guidance, what are we supposed to be comparing that to for 2019 that you said?

$133.5 million.

Got it. And so as we look ahead to 2021 -- maybe I'm trying again on what I was asking Alfred -- can we think about 2021 being a better number than that 2019 number?

That is certainly how we're going to approach the budgeting process, yes. That's what I would tell you.

And look, that's going to be a tough act. And when I say that's a tough act is because we took all these costs out in terms of salary reductions, headcount, bonuses, et cetera. So next year is going to be -- next year should not be a crisis year, right? So we'll load back in. We've already restored salaries and things of that nature. You'll give people an opportunity to earn their bonuses back. And so you got a bunch of costs that were unnatural, that got taken out this year that you'll load back, and then we're going to have to then try to grow our EBITDA on top of that.

But you're also not going to be dealing with the same kind of depressed revenue levels in the radio business that you had in 2020. I just don't know how much it's going to bounce back. We've got things like the swap that we just did in Charlotte that are going to give us EBITDA upside opportunity. We've got a number of other things that are happening. We're getting more and more distribution for our second cable television network, CLEO. We just finished renewing our Verizon deal that's done, CLEO is going to get launched as part of that. We're about to launch on DIRECTV for CLEO. And we announced that we were getting that distribution, but it's about to launch in the near term.

Yes. DIRECTV launched.

Oh, DIRECTV did launch? Yes. So DIRECTV -- what, it launched on the 8th or 11th or something like that?

Yes, on the 9th.

Yes. It launched on the 9th. So that's up. CLEO's next year going to be probably in the $30 million sub of arena. So now it's time to look at getting it rated, which allow us to monetize.

So there's these things that are opportunities that we're going to have to go out and monetize. So -- and so our goal will be, in the face of all those things we just said there, is to then go out and beat this year's EBITDA number.

And that's without $20 million of political, right?

And That's without $20 million of political.

You're going to factor that in as well.

Yes. It's got to be our goal.

Does you guys' base case include any events revenue in 2021?

We haven't even -- yes, we haven't -- the answer is no right now. We haven't even gotten to the budgeting process yet for radio. We made a conscious decision not to really start to look at it in earnest until we get into December. And realize how well December is doing versus last year and using that as a jump-off point to start to forecast Q1.

Your next question comes from the line of [Ryan Lawrence], an investor.

I was just wondering is there any diversification happening, like getting away from cruise ships, especially since COVID doesn't look like to be abating anytime soon and getting worse? And the casino business and other things like that, and maybe advertising with some of these sporting events, with the BLMI -- BLM movement?

I'm sorry, I didn't hear the first part of the question.

Diversifying away from things like cruise ships, casinos. So look, I think we are responding to all of those things. And obviously, the cruise business at the moment isn't running. But at some sort of point, hopefully, it will run again because those events are profitable to us. We also hold (technical difficulty) in pretty much all of our markets, and that generates significant revenue and significant profit for us in a normal year. And we hope that -- and we believe that that will come back. What we've done in the meantime in terms of diversification, as Alfred said, we just announced this deal with a radio swap, where we're going to get bigger in Charlotte and exit some other markets. So that will help us.

I think your final point was about BLM. And clearly, there is a movement from which we are benefiting. I think that's one of the reasons that the social justice issues that helped us with the amount of political dollars we've gotten this year and the focus on our audience. I don't know if Alfred has any specific thoughts on that. But that's really -- we are -- I wouldn't call it diversification. It's -- we're reacting in real-time to the business conditions on the ground.

Yes. So I would say that my own personal view is there's going to be a vaccine that will get control of this. And over time, life will go back to normal. I mean it did with the Spanish flu, right? Is that going to be Q1 of '21? I don't think so. I think it will take most of next year for things to start to get back. But I do think that life will return to normal and people will gather and there will be concerts and they will be events, and there will be cruises. Now, by the way, our cruise business, it's a big revenue number, but it was $1.7 million of our $133.5 million of cash flow. It's not a gigantic piece of our profitability.

The casino, you've got to differentiate regional casinos from Las Vegas. Las Vegas is hurting badly because so much of their revenue and profitability is also about tourism and conventions and room nights, and less about gaming. The regional casino business is about people within a 60-mile radius showing up, playing Blackjack and slots, and MGM National Harbor is killing it.

And so I don't want to diversify away from that, in fact I'd rather diversify more into that business than away from it. So yes, I think the other thing that people have to look at our business, and it's hard because all of this BLM stuff and because we're a black-focused company, everybody is like, oh, this company is going to go to the moon, right? Well, we're in the middle of a pandemic. Most of our advertisers were shut down. And so what our position as a black media company has allowed us to do and our diversification, is to perform at an extraordinary level compared to everybody else and what happened with them in the pandemic.

And so being down from $133.5 million to $125 million to $130 million, when lots of other folks got just wiped out altogether, that's what our strategy has allowed us to do and what our focus is. So I see stuff on chat boards where people think that our revenues are going to be up 50% because of Black Lives Matter. I mean we're still a media company and businesses that spend advertising dollars are still at limited capacity or closed.

Yes. There are also people on the chat boards saying false things about naked shorts and pump-and-dumps with the extreme stock price movement with June 16. So I'm wondering if anyone, just a follow-up, is considering like getting more heavily involved with seizing opportunity as far as diversification or adapting to these new times? Obviously, the world will somehow return. I don't think it's ever going to return fully. COVID looks like it's going to morph into all kinds of things.

But I appreciate what you're saying, but there's people on these boiler rooms, putting out false information that you guys are heading towards bankruptcy, which I'm not hearing today at all. So I commend you on what you guys -- how you have adapted with COVID. So thank you for answering the question. I appreciate it. And good luck. I do agree, the casino diversification is a good move.

My pleasure. Thank you.

And at this time, there are no further questions.

Great. Thank you, everybody. I always say this at the end, I feel like I sound like a broken record, but Peter and I are always available offline to answer any additional questions if you think of something that you didn't get to ask today. We appreciate your support and talk to you next quarter.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.