Urban One Inc (UONEK) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Urban One's Year-End Earnings Call. (Operator Instructions)

During this conference call, Urban One will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance. Urban One cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs and other reports it periodically files with the Securities and Exchange Commission could cause the company's actual results to differ materially from those indicated by its projections or forward-looking statements. This call will present information as of March 3, 2022.

Please note that Urban One disclaims any duty to update any forward-looking statements made in the presentation.

In this call, 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 the call or in the company's press release, which can be found on its website at www.urban1.com.

A replay of the conference will be available from 12:00 p.m. Eastern March 3, 2022, until 11:59 p.m., March 7, 2022. Callers may access the replay by calling (866)207-1041. To repeat the toll free number (866)207-1041. International callers may dial direct at (402) 970-0847. The replay access code will be 2519146. Access to live audio and a replay of the conference will be available on Urban One's corporate website of www.urban1.com. The replay will be made available on the website for 7 days after the call. No 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. Please go ahead, sir.

Thank you very much, operator, and welcome to our fourth quarter results and year-end conference call. Also joining Peter and I are Karen Wishart, who is our Chief Administrative Officer; Jody Drewer, who's the Chief Financial Officer at TV One. And we have Christopher Simpson, our General Counsel, also on the call.

And as a press release states, very happy with our Q4 and most of all, our full year performance. We have guided EBITDA to be $140 million to $145 million. That guidance was up from $135 million at the beginning of last year. and we were able to exceed that and come in at 150 and some change. So very proud of the team across all of our platforms. They performed exceptionally well during COVID and as we come out of COVID, they are continuing to accelerate that performance. The demand for our platform and our audience continues to be very strong, as I've stated. I expect this demand to continue for the foreseeable future. I do believe there has been a paradigm shift at how advertisers look at minority targeted and focused audiences diversity and inclusion as it relates to ownership and media. The fact of the matter is it's always been a very logical business proposition that the audiences of Hispanic and African-Americans are increasingly valuable as the country continues to grow in its minority presence.

And now I think more and more advertisers are really putting their investments in those areas. And so we're very pleased that we've been a big beneficiary of that, having been in this space for over 40 years.

So Peter is going to take you through the details of the numbers in the operations. There's a lot for him to say a lot to unpack here. And then after that, we will go to Q&A. Peter?

Thank you, Alfred. As Alfred said, we were very pleased with our full year 2021 numbers. And the first quarter of 2022 has started very strongly as well with advertising pacing up across the board. First quarter core radio advertising revenue, excluding political, is pacing up low double digits. The auto category is still trailing prior year. But services, health care, retail and entertainment are all showing very healthy increases. Reach advertising revenues are also pacing up strong double digits as our ad sales for TV One and also the digital segment revenues are pacing up strong double digits first quarter.

So as we move into this year, we've had a good start. There was some noise in the fourth quarter expenses, which I'll talk about in more detail later. But I think the key points are, firstly, that we were missing around $13.9 million of political advertising spend in the quarter, and we made that up with some lower-margin business, such as events, which obviously came with higher expenses.

We also had higher sales commissions driven by increased revenues, and we had higher annual bonus and incentive plans skewed into fourth quarter expenses.

We ran almost 50% more hours of original TV programming in the fourth quarter, and this led to an increased content amortization expense of TV One and our digital segment invested more in content and traffic acquisition and also had higher accruals for full year incentive-based compensation.

So the quarterly expense run rate was inflated by these various issues and isn't really fully representative of what we expect to have going forward.

Consolidated adjusted EBITDA was $32.5 million for the quarter, down from $41.7 million for 2020 and up from $27.5 million in 2019. Full year adjusted EBITDA was $150.2 million compared to $138 million in 2020 and $133.5 million in 2019. This exceeded our full year adjusted EBITDA guidance for 2021. And as I mentioned, we're seeing favorable signs for continued success in 2022.

Net revenue was up by 15.3% year-over-year for the quarter ended December 31, 2021, and approximately $131 million. Net revenue for the Radio segment decreased 11.6% year-over-year in the fourth quarter due to non-returning political advertising revenue. Political revenue was down $10 million in just the Radio segment and down $13.9 million overall. Excluding political, net revenue for the Radio segment was up 15.5%. Local ad sales, excluding political, were up 11% and national ad sales were up 12%, excluding political.

Most of the major advertising categories were up from last year, except for political. Food and beverage and automotive were also down. And automotive was down 21.8% due to the supply chain challenges in the auto industry.

Government and public was still our biggest category, driven by government-funded pandemic outreach, amongst other initiatives. The entertainment category saw the biggest increase in the quarter from last year, up 166%, with increases from all of the entertainment product categories.

Services, health care, financial, telecom, travel and transportation all saw double-digit increases compared to last year and retail was also up.

Net revenue for Reach Media was $19.3 million in the fourth quarter compared to $10.3 million in the prior year. Event revenue from the Tom Joyner Fantastic Voyage was approximately $7 million. The remaining revenue increase was due to strong demand for network audio. Adjusted EBITDA in the Reach segment was up by $100,000 for the quarter and by $4.3 million for the full year.

Net revenues for our digital segment increased by $4.7 million in the fourth quarter. Continued demand for black-owned and targeted brands drove growth in direct advertising sales at iOne Digital.

Adjusted EBITDA decreased for the quarter by $1.9 million, but increased by $11.2 million for the full year compared to 2020 and by $16.6 million compared to 2019.

We recognized approximately $54.6 million of revenue from our cable television segment during the quarter, an increase of 19.9%. Cable TV advertising was up 43.6%, excluding political, with a favorable rate volume impact of $1.7 million, $2.1 million of free video on-demand revenue, $1.3 million increase in CLEO TV and a $2.1 million favorable audience deficiency unit burn-off.

Cable TV affiliate revenue was up by 5.7% driven by rate increases and my converting free subs to paying subs, which was partially offset by churn.

Cable subscribers for TV One, as measured by Nielsen, finished fourth quarter '21 at $49.3 million, up from $42.3 million at the end of Q3. And CLEO had 43.8 million in Nielsen subs.

We recorded approximately $2 million of cost method income less admin expenses for our investment in the MGM National Harbor property for the quarter compared to $1.6 million last year and $1.7 million in 2019. Based on internal estimates of publicly available information, our put option is currently valued at around $100 million. And to remind investors, we have the option to put a 6.67% stake in MGM National Harbor and 7x trailing EBITDA.

Operating expenses, excluding depreciation, amortization, impairments and stock-based compensation, increased to approximately $106.1 million in the fourth quarter compared to $74.1 million in Q4 of 2020. Of this increase, $3.5 million is for the noncash charge on the CEO's employment agreement award and $1.9 million is for the onetime casino chase costs. Both of these amounts are added back to adjusted EBITDA.

As a result of the continuing reopening of the economy and increases in revenue, the following operating expenses increased from the prior year. Employee compensation increased by approximately $5.9 million. Programming content amortization at our Cable TV segment increased by $5.8 million. Our revenue variable expenses increased by $4.2 million. Outside services, including contract talent and consulting fees increased by $1.7 million, marketing and promotional expenditure increased by $1.4 million, and event expenses increased by $7.1 million of which $6.6 million was for the Reach crews.

Radio operating expenses were up $3.6 million, music license fees, employee compensation and promotional spending were the main expense increases in radio. Reach operating expenses were up by $8.5 million against a revenue increase of $9 million.

And as mentioned, crews revenue was $7 million, and the crews expense was $6.6 million. Profit sharing expense and affiliate fees were also up at Reach.

Operating expenses in the digital segment were up $6.4 million, driven predominantly by incentive compensation and variable expenses related to traffic acquisition and sales.

Cable TV expenses were up $7.6 million year-over-year. Programming content expense increased by approximately $5.8 million and employee compensation increased by approximately $1 million.

Operating expenses in the Corporate and Eliminations segment were up by $5.8 million, which included the Richmond chase casino costs of $1.9 million and the employment agreement award of $3.5 million.

For the fourth quarter, consolidated broadcast and digital operating income was approximately $44.1 million, decreased 14.9%. Interest expense was approximately $15.9 million for the fourth quarter compared to approximately $18.7 million for the same period in 2020. The company made cash interest payments of approximately $187,000 in the quarter since the semiannual debt service payments are due February 1 and August 1.

Provision for income taxes was approximately $1.2 million in the quarter, and the company paid cash taxes in the amount of $359,632.

Net income was approximately $6.6 million or $0.13 per share compared to $26.4 million or $0.58 per share for the fourth quarter of 2020.

Capital expenditures were approximately $2.1 million and company executed a Stock Vest Tax Repurchase of 2,530 shares of Class D common stock in the amount of $9,000.

As of December 31, 2021, total gross debt was $825 million. Ending cash was $151.7 million, and net debt was approximately $673.3 million compared to $150.2 million of LTM reported adjusted EBITDA for a total net leverage ratio of 4.48x.

We believe our stock is currently trading below market comparables given our valuable put option in the MGM property, our high cash balance, reduced net leverage ratio, strong adjusted EBITDA performance, particularly from digital cable TV and network radio segments and also our ongoing free cash flow generation.

We will continue to be opportunistic but prudent in terms of share repurchases and we expect the Board to authorize a stock buyback program as part of our capital allocation strategy.

We currently expect full year 2022 adjusted EBITDA to be between $145 million to $150 million, absent any significant economic slowdown with potential upside if political and digital revenues exceed expectations.

And with that, I will hand back to Alfred.

Thank you, Peter. The other important topic that people want some color on is what's going on with our efforts in Richmond on the second casino referendum. Yes, the City Council of Richmond, Virginia voted 8 to 1 to ask, to petition the court for a second referendum to be put on the ballot for this coming November. However, that was the first step.

And then there was a -- there is an effort in the general assembly of Virginia by a state senator that represents another city, Petersburg, to actually block that referendum and move the casino license opportunity out of Richmond to Petersburg.

There were 2 bills, 1 in the house, 1 in the Senate that would do that. The one in the house died, the one in the Senate also got killed. We've been down in Richmond following that and advocating for the opportunity for Richmond to have a second chance to vote on this. The City Council also committed to offering up legislation that would reduce property taxes and specifically target casino revenues to schools and other capital projects. So it is a different project.

Even though those 2 bills died, there is language that's been put in the budget bill currently that would effectively block Richmond from having a second referendum this year and would not allow it to have another referendum to until November of '23 and would study the viability of Petersburg as a potential location. So at least for this year, it does not look like the -- that it will move out of Richmond. Currently, this language would prohibit Richmond from having another referendum this year. But if they chose to, could do it in '23.

There's still a lot of moving parts in the general assembly. That session goes to till mid-March. There's a lot of politics involved with casino issue, quite frankly, that has nothing to do with the viability of the casino being in Richmond and has everything to do about certain legislators winning at other places and willing to trade off things in terms of votes for certain issues in order to get it. So very fluid at this point in time, but we're highly engaged.

Our partner in the Richmond casino, operating partner, Peninsula, P2e, they're called but Peninsula Entertainment has recently a week ago, announced that they were being sold, and they're actually being sold to Churchill Downs Incorporated, which is a much larger gaming entity that obviously, I don't want to say, obviously, that owns the Kentucky Derby, if you don't know who Churchill Downs is, but most people think of them as the Kentucky Derby, but they're also a very large gaming operator and own a number of gaming facilities and casinos, most of their gaming operations are Class III slot machines and also table games there in the Florida market.

They're in the Maryland market. They are all over Kentucky. They're in Ohio. They just won the Class III license in Terre Haute, Indiana. So a very large gold plated partner and even though our partner Peninsula is very committed, and we like working with them, the folks at Churchill Downs who I had an opportunity to talk to last week and actually meet yesterday are very excited about the Richmond opportunity and want to be very helpful in trying to make sure that, that is not lost, and we get a resurrected chance for a second vote.

So I don't have any news. I'm not here to tell you that it's dead. I'm not here to tell you that it's going to happen. It's 50-50 at this point in time, but we're still alive and still hopeful and still putting effort into it.

So that also dovetails into another topic of conversation because I think in the last conference call we talked about, and that's debt repayment. People -- we've got a bunch of cash as Peter articulated. And quite frankly, until we know what's going to happen with the RVA casino opportunity, we're kind of sitting on that for now. But I suspect that, a, as the year moves on, we're continuing to build more cash as operations continue to perform great as they have been. But I would not be surprised if we ultimately decided to purchase some of our debt in the open market, which we're allowed to do, therefore, retiring that debt. I don't want anybody to think that we're just of the mindset to stockpile cash for the sake of stockpiling cash. But it really is largely related to whether or not we're going to have to make a significant $100 million investment in the casino opportunity.

But things are going well. I'm optimistic about where we sit as a company. I'm sullen and nervous about the geopolitical backdrop, as I'm sure we all are in this country. And what does that mean for the economy here at home. But we're doing the best that we can in an ever-changing media environment and an uncertain geopolitical environment.

So with that, operator, I would like to open the lines up for questions.

(Operator Instructions) And we're going to take the question from the line of Patrick Wang with Voya Investment.

I noticed that the debt balance is down to $811,000. Does that mean that you have repurchased some of the notes in open market at this point? And also we got cash on hand at this moment.

No. So that's just when we reported, we reported net average issuance costs so any OID. So that's just a net number. The gross debt is $825,000. As I mentioned earlier, and I think we're in the mid-130s in terms of today's cash balance. I will just pull that up in a second.

So yes, no, the gross debt hasn't changed. There have been no purchases and the cash balance as of this morning was about $137 million.

Okay. Okay. And so what is the time line now that when do you -- what's going to happen next? And just kind of give us a playbook on the development of the casino project.

I think that over the next 30 days, we'll know where we sit on our chances of running a referendum in '22 versus having to run one in '23. And a number of things. If it goes to '23, we got a -- there's a number of other things that have to happen to sort of secure, whether it's us. I mean, our deal with the city doesn't go that far, right? So the city's got to ultimately decide that they're okay wanting to go to '23, right? So those discussions are ongoing.

Right now, everybody is working hard. The city and us to try to get it in '20. If where we end up is that we can't run to '23, then everybody's got to sit down and say, "Okay, are we willing to stay committed to this project for another year and 3 quarters, right? Actually, it's not a year and 3 quarters, about 1.5 years.

And I've been in and out of Richmond pretty much every week. I was just there yesterday. So we're working lockstep with the city. They want to see this happen. Obviously, they don't want to have this opportunity move to another jurisdiction. And so we're all working on the same page. So I'd just say in the next 30 days, we'll know whether or not we're going to be able to run one this year. And then I think over that period of time, we'll probably have some clarity on whether or not the coalition all wants to hang together and pursue it in '23.

Right. So what's the likelihood that Petersburg will get it?

I have no idea. I mean it's not going to happen this year. Look, everybody wants me to handicap this. This is politics. I can't handicap. And even if I gave you a handicap, I also can't handicap the boat, right?

So last go around, we had polls that said that we were -- prior to the RFP, 62% of Richmonder, were in favor of gaming. After the RFP process because there are a number of proposals that were proposed in kind of middle to upper middle class neighborhoods and people went bananas, the whole NIMBY thing. At the end of the RFP process, it was 47% for gaming, 45% against gaming. Then after we got chosen, it was 52% to 53% for gaming, 5 undecided and the balance against it. And then once the referendum was run and you had a surge of conservative voters across Virginia come out. We lost 50.85 to 49.15. So I don't want to lead anybody on. That we're working this.

The political thing, the political environment right now is uncertain. But even if we get it, right, even if we get a chance to run a referendum, Again, it was -- it's a 50-50 shot, right? So if you own our securities or own our stock, you should really be focused on the fundamentals of the base business. Our cable networks, the return of our radio business, the digital business, which is now really starting to take flight. The value of our MGM stake, which we own. The put is at maturation. They're doing exceptionally well. And think about the casino as upside if it were to happen.

Right, right. Could you also talk about your strategy on radio before you talked about potential station swaps to get more economy of scale. Is there any recent update for the plan?

Yes. We continue to look at stuff. We're focused primarily on opportunities that allow us to get in market scale. And we're currently analyzing a number of opportunities. We do not have a definitive agreed upon deal to do anything at this point in time. But I continue to believe that scale in the radio business makes sense. I'm of the opinion that the -- actually, it's not an opinion. The radio business, at least in the markets that we've operated in, have been declining over the last, whatever, 10 years, kind of low single digits. I think our markets, the average decline has been like minus 2%.

Some markets are doing better than others. And again, I'm just looking at the markets that we're in. So it's a slightly declining business, and you can make money in it. And I'm not saying that, that doesn't ultimately -- if you get further consolidation -- and ultimately, the radio is undervalued in terms of its cost per thousand. And I do think as the industry consolidates and you've got more big players really out there harping on that and being able to deliver value for advertisers. And ultimately, I think you could get some lift in CPMs.

But anyway, notwithstanding that, when you underwrite any sort of acquisition of radio, I think you need to do it from the mindset that this is going to be a business that could be declining in low single digits and how do you manage that? That should inform what you pay, that should inform how you're going to manage that business. And so that's what we're going through. And so you got to look at acquisitions, I think, through those lenses through that lens.

But I think, ultimately, it makes sense. I also think that it will take us out of. I'm not saying anything that we buy won't be in our format wheelhouse. But I think if we do participate in further full-scale radio consolidation, it will necessitate us going outside our traditional box of urban radio, but that's not bad. We did that in our swap with Entercom in Charlotte, North Carolina, and that's turned out to be great for us. We now have a real cluster there that's got some scale and instead of being a market where we had $800,000 or $900,000 of EBITDA and used to just breakeven. Now we have multimillions of dollars of EBITDA, and we've got a real broad offering for advertisers, including Urban. I'd like to have a collection of clusters that look like that in markets. So that's where we're sitting right now.

One last question on the margins. This quarter, you have about $10 million shy of last year's EBITDA level. Is that just all because the political advertising the lack thereof for there's some other onetime investment on digital side that's driving down the margins. And then can we look for 2020 margin probably a bit higher than the first quarter because of these investments?

Yes, so look I try to -- yes, revenue is great. The political, obviously, was high margin. that wasn't there this quarter. And if you think about the crews, for example, that was $7 million of revenue, $400,000 of profit, we were very happy with it. We wanted to run a big scale event post pandemic and see how it went, but obviously, very dilutive on margins.

And then as I also mentioned, Q4 was expense heavy and it's not really representative of a regular quarter. We had the TV One amortization higher. We had incentive payments that were for the full year but we didn't know what those were going to be until fourth quarter. So there were heavy incentive payments booked into fourth quarter. So to your point, the margins were depressed in fourth quarter, unnaturally so. And we would expect to see margins generally return to historic kind of run rate.

(Operator Instructions) We have a question from the line of Raphael Leeman with Eaton Vance.

Just wondering if you could talk about your full year guidance in EBITDA for '22? Just some of the puts and takes, what could go better or worse? And with it being political, why you see it being down year-over-year?

Yes, good question. So our digital business has exploded. I mean I think the budget was -- last year was $30 million, give or take, and we did close to $60 million, right, like high 50s. So this is a business that we started in 2008, and we struggled with it for a very long time. Now digital publishing is hard because it's switched from being sort of domain -- website domain-oriented then to search oriented, then to social-oriented. And now every time any one of the big platforms changes an algorithm, it changes your audience size, content is expensive. You got to give Google and Facebook a large part of your revenues. So for years and years and years, this business either broke even, lost $1 million or made $1 million.

Prior to going into the pandemic, we started to cut a lot of expenses. We made, I think, $900,000 in 2019, correct me if I'm wrong, Peter. We had a low expense base going into the pandemic. We trimmed it some more, although be it not as much as other places. But then you get this uplift in African-American audiences, target social equity and demand that started to really increase dramatically. And then we made $6 million, I think, in 2020 in the pandemic.

Going into '21, we were like, okay. And by the way, traffic has been the same or declining. We didn't know where the demand was really going to go. '21, the demand was even stronger, right? And so we ended up making like $17 million last year. So quite frankly, the answer is we're budgeting for digital to go down just because we don't know where that demand is going to sort of peak. We don't know how much of it is a moment of time -- moment in time. I do believe that the paradigm has shifted as far as advertisers wanting to put dollars towards this audience and towards minority-owned entities. But I just don't know when it levels off, if it declines, et cetera. So we budgeted digital down. And so that's -- and yes, we do have political, and I just don't know. But quite frankly, we took digital down from a $17.5 million performance to a $10 million budget. That's a big number, right?

Ironically, though, it's actually doing really well in Q1. So there is potential upside. We're just allowing -- we're allowing for there to be some withdraw of the extraordinary demand that we've seen. So that's how we're thinking about it, and political could be off the chart as well. And I think Peter articulated that there could be upside there. Do you want to...

Yes. I mean look segment by segment, radio properties, we're anticipating higher revenues and higher adjusted EBITDA year-over-year in '22. And the same for TV One, incredible performance, great ad sales growth. And we expect EBITDA growth this year.

So really what Alfred is saying is when we kind of balance out all the segments, we're least certain about digital. It's a newer business to us. It's been going -- it's been growing like a weed. How long can we continue that? And there are more factors at play like how many impressions can we deliver? What's traffic doing, who's changing their algorithm? So we kind of dialed that back as Alfred said, but to your point, the other segments, we're forecasting in that guidance to be up.

And so look, here's the thing. You'll know what we print in Q1, right? You can track how we're doing quarter-to-quarter. So at some point in time, people will be able to figure out, oh, they're going to do better than this $145 million to $150 million. We contemplated not giving guidance at all, but people kind of like to know something. And so we felt comfortable putting out $145 million to $150 million. We also don't know what's going to happen in the world, right, in terms of is there going to be a recession? Is there going to be fallout from what's happening in Europe? But anyway, that's how we came to guidance, and I get one could argue that we should do better, right, than our guidance.

Maybe just to -- yes, that's helpful. And maybe just on political to drill down a little bit. Lots of folks talking about midterm election cycle versus presidential and typically, that's lower, but a lot of folks are thinking at least in certain markets could be equal or maybe even more, where do you guys come out on that, do you think?

Look, we kind of look back in 4-year cycles, 2020 was obviously exceptional. And if it's anything like that, then we're going to beat our number. I think when we go back and look at 2018, we did about $7.4 million net, and we're kind of thinking it will be somewhere in that ZIP code, give or take $1 million, but it could go -- that's kind of what we baked into our guidance and our budgets. But if it ends up being more akin to 2020, then we will -- we will beat that. The previous high watermark we've had just for references in 2012, we did $9.1 million.

So we did -- in 2020, we did about $18.9 million net and in 2012 prior to that, we did $9.1 million. So there's some kind of bookends as to where it could go.

Okay. Great. And maybe if I could, one more. You talked about some of the one-off expenses, but I didn't necessarily hear in there, I think, kind of inflation. I don't know if there's anything supply chain related, but maybe just more inflation or maybe on the wages. Yes, anything to mention there?

Yes, we did do salary increases midway through last year from memory. And that's the first time in a long time that we've done across the board increases. So yes, that will drive expenses up. And there is -- obviously, there is inflationary pressures on various things. I think for us, we're pretty fixed cost.

Yes, and most of our escalators in our agreements are very low single digits, stuff that we've been able to negotiate over time. I mean, we kind of -- we kind of got away from the CPI sort of escalator a lot of years and kind of focused on trying to get things to be 1%, 2%. I mean, I don't know all of our contracts. I don't remember all of our contracts off the top of my head, but if there's a 2.5% number in one of our contracts, that's like the outlier. We long ago rejected that 3%, 4% and 5% increases. We're now -- yes, they weren't the norm, right? Because there was no inflation for a long time. And so we spent a lot of time negotiating those down and...

Got it. Sorry, I said that was my last question, but I did think of one more when you mentioned in your last answer, what could happen in the world in recession, et cetera. Any comments on kind of how your business would be affected in a recession maybe versus some other similar types of business. Do you guys tend to be a little more resilient?

I mean if you -- well, I mean, look, we sell advertising, right? I mean, so. And it depends on what kind of recession the recessions off the top of my head are like that I remember are like 2009, 2010 and then the pandemic sort of catastrophic economic meltdown recessions, right, not just like GDP has gone backwards by 1%. And so we -- we're a management team that does what it takes in order to get to the other side.

We had a lot of debt. I mean, I think at 1 point in time, we were close to 9x, and we've cut that ratio in half without having any sort of major issues with debt holders and things of that nature. So I think the management team is willing and used to doing what it takes to keep the company on a good financial footing. But our mix of assets, I think protects us. Our diversification against a number of things, certainly during the pandemic, our radio business in April after the pandemic really started in full force was down 70-plus percent. I mean, it was unbelievable.

And you saw the radio companies, you saw their EBITDA get cut by more than half. And we actually ended up doing okay on the other side of that, even though we all took pain, we all took salary cuts and stuff like that. And we got through it. And a large part of that is because our cable television business, flourished and our digital business did well.

We've got -- of our $500 million-ish of revenue, $100 million of that is from subscription fees, from affiliate fees from cable television operators that aren't prone to swings in the economy. Prone to churn, yes, but not the swings in the economy.

So I think compared to other radio companies, we obviously are more protected because we're more diversified. And so -- it depends on what kind of recession it is. But the answer is yes. I think that we do better because we're diversified across more -- different types of businesses. We've got more of a unique position I think the desire for people to spend against our audience and with minority-owned companies right now will help further insulate us. And we've also gotten our debt down, yes. And we like being not in a stressful leverage position and plan to stay in that zone.

The other thing is that when I say management to do what it takes, even though the family owns a very large percentage of the company, we're not hesitant to sell equity when we need to, right? So during the pandemic, we accessed the ATM market, and we sold $50 million worth of equity at different points in time when it made sense. And that helped us immensely. So proper capital allocation, extraordinary expense control, diversification, a great demographic. This is a battle-tested management team that I'm really proud of all the way down through all the different divisions.

So they're probably sick of me shouting the mantra of we've got to reduce debt, we've got to do this but it served us well, and the troops have really leaned in and instead of being resentful of our need to do tough things in order to get it down, they did it. And we've gotten through to the other side.

Our next question will come from the line of Sundar Varadarajan with Lord Abbett.

I just wanted to kind of step back and maybe have you discuss a little bit more about what your ultimate leverage targets are and then put that in the context of you mentioned authorization to buy back stock as well as you evaluate this referendum, what happens if in 30 days, it doesn't look like it's going to happen in '22, but there's a chance it may happen in '23. Are you still going to hold on to the cash until you figure out what happens in '23. So if you could give us some kind of time line or surrounding that would be very helpful.

Yes, look, I have to think -- I haven't sat here and thought through all of that, but just off the top of my head if it ends up being that it's going to happen in '23. And if we hold the coalition together and we're going to move forward and support it in '23. The company generates a lot of cash. So there is an opportunity for us to pay down debt, buy some stock back if we choose to even do some opportunistic M&A and still be in a position to make the $100 million investment that we need to for the casino.

So no, we won't just hold on to the cash, right? We're paying 7 and 3/8 on our debt. And we'd like to continue to increase our free cash flow generation. So these assets generate a lot of free cash flow. So I would feel comfortable dwindling down the balance sheet because I know we'll still be in a position to be able to execute on the casino opportunity.

Got it. And then in terms of your leverage targets for the core business, where do you want to get to before you say you've done enough and then move more towards equity returns.

I don't want to see a 6 handle on our -- on our leverage ratio again, right? And we're at 4.5% now. And if we do nothing, it's going to be below 4 by the end of the year. We'll probably be in the high 3s by year-end if we don't -- if nothing happens. That's a great place to be, right?

And so I'm not saying that we wouldn't consider doing something that took the leverage up to 5, to do something in the very short term that we thought was going to get us back down quickly, strategic. But I got to tell you where I want to be for the long term as I want to be below 4, right and I want to stay there, yes.

And so that's how I think about it. I don't think -- and again, we sell equity, right? So I mean we've done it. We will do it. We like to do it opportunistically. I mean we bought back probably over half the shares of this company over a 10-year period. And we've bought them back at prices that like when nobody -- when the world -- they think the world is ending, people think the world is ending and we have a real good viewpoint on our business and what we're actually able to do with it, we've been opportunistic, and we bought back shares at very low prices. I think during the pandemic, we bought -- forgot how many shares. It was almost 4 million shares at $0.76.

And so turnaround and then selling those shares at $5 is a great trade. But at the end of the day, I'd like to see this company go below $4. And I don't ever want to see a $6 handle again. And I would try to avoid anything with the $5 handle if it wasn't just for a short period of time in order for us to work through sort of an integration of an acquisition that eventually got us back down into the floors and on the path to go below $4.

Just one clarification point on that, when you said a strategic transaction that could get you at or close to 5x on a -- for a short-term basis, do you also. Do you kind of include the gaming investment as part of that? Or when you say strategic, you're talking more within the quarter.

That's an extraordinarily good question, and I hadn't really thought about that. I don't want to answer that because right, if the $100 million goes out the door and then -- look, I'm risking here. I mean -- but if the $100 million goes out the door, then that's going to make our leverage X ratio right? We're going to take that into account in whatever M&A opportunity that we're looking at, right, at that time, right?

So if we spend $100 million out the door for the Richmond Casino and then there's an M&A opportunity and then all of a sudden, in order for us to do that, our leverage is looking like 5.8, 5.9 or God forbid 6x, we're probably not going to do that transaction with all debts, right? We'll probably do it in a way that our leverage is lower.

Now by the way, if we're spending $100 million out the door to do the Richmond Casino, our stock is not going to be $5, right? Our stock is going to be something way higher because the market has shown when they thought we were going to get it last time, but they're willing to give us some value for that ahead of it actually being open, yes. And so we'll have other tools at our disposal to manage our leverage. Does that make sense?

Yes. No, that makes a lot of sense.

Okay. Operator, thank you very, very much for your help with today's call. Everybody, thank you for attending. Thank you for your support.

And as I always say, Peter and I try to be exceptionally accessible offline. So feel free to send an e-mail or blow in a call if you miss the question or think of something later that you need to answer. And thank you very much and see you next quarter.

Ladies and gentlemen, that does conclude our conference for today. Thank you again for using the AT&T teleconference service. You may now disconnect. Thank you, everyone.