Q4 2022 Urban One Inc Earnings Call
Participants
Alfred C. Liggins; CEO, President, Treasurer & Director; Urban One, Inc.
Peter D. Thompson; Executive VP & CFO; Urban One, Inc.
Unidentified Company Representative
Aaron Lee Watts; Research Analyst; Deutsche Bank AG, Research Division
Benjamin Yarbrough Briggs; VP of Credit Analyst; INTL FCStone Markets, LLC
Marlene Pereira
Matthew Sandschafer
Matthew Warren Swope; MD and High Yield Desk Analyst; Robert W. Baird & Co. Incorporated, Research Division
Bradd Kern
Presentation
Operator
Ladies and gentlemen, thank you for standing by, and welcome to Urban One's 2022 Year-end Earnings Conference Call. (Operator Instructions) During this conference 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 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 July 7, 2023. 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.urban1.com. A replay of the conference call will be available from 12:00 p.m. Eastern Time, 7/7/2023 until 11:59 p.m. 7/14/2023. Callers may access the replay by calling (866) 207-1041 within the U.S., international callers may dial direct (402) 970-0847.
The replay access code is 801-9907. Access to live audio and a replay of the conference call will be available on Urban One's corporate website at www.urban1.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 will 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.
Alfred C. Liggins
Thank you very much, operator. And we also have Jody Drewer, the Chief Financial Officer for TV One with us; and Chris Simpson, who is the General Counsel of the company, who is also joining us. Finally, our year-end earnings report in the middle of the year. Thank you, everyone, for bearing with us as we got through an unexpected (inaudible) audit. But we're happy to report that the year ended as expected with us right on top of our year-end guidance of $165.6 million of EBITDA. Leverage is below 4x, which was a great outcome, and we've indicated that, that was our goal, and that's where we landed. Couple of things just to give you highlights before I turn it over to Peter. You probably also know and seen in the press release, we monetized our MGM National Harbor investment. We did that in April. It ended up being a fantastic investment for us.
We invested $40 million of cash in the project. We ended up pulling that $40 million out in dividends over the length of time that we held it. And then our equity investment in the end was worth $137 million. So it's probably roughly 4.5x our money investment. Why did we do it? We did it, because we thought that their 2022 performance was, number one, a high watermark for the property. That was not expected. It was well ahead of where we had expected it to be. We also felt that given the macroeconomic environment, and a number of other things that it probably was not particularly likely that we were going to do better than that going forward. Things can happen. We don't know for sure. But that was our calculus.
The third thing is that on that $137 million, we were earning approximately $8.8 million of dividends, which is about a 6.4% return on the value of it which is the tremendous return on $40 million going on $137 million. It's just a 6.4% return. And we thought that we could do better than 6.4% investing that capital in other things. And the first place we started was even though we're not doing better is with U.S. treasuries, where we're getting about 5% on that money. So the fact of the matter is, is we're not giving up a ton of current income right now holding that in treasuries. And we're sitting on a bunch of cash right now as we live through an uncertain economic time, hoping that the uncertainty actually moderates, feels like maybe there's not going to be a recession but who knows.
And we got a number of things coming up where we may need to deploy that cash, whether it's debt -- continued debt buybacks, which we haven't been doing particularly since we hadn't filed our financial statements, but I haven't checked in a minute, but last I checked, our bonds are yielding like 10% -- north of 10%, 10.3%. So even that is a better investment than just continuing to hold the equity and give a 6.4% return. We are in the process of gearing up to run another referendum in Richmond for our casino project with our new partner, Churchill Downs. We believe that there is an exceptionally high likelihood that we will be running that referendum.
We've got some assurances -- some public assurances by the Virginia Senate budget negotiators that a Richmond referendum or this casino referendum being blocked to potentially move to Petersburg is a nonnegotiable item for them that was recently in the news press in Virginia. So we've got some real support there. City Council has voted it out. We're at the Virginia Lottery now for approval. And then we'll go to the circuit court to get the referendum scheduled. Early vote would start September 22 of 2023, Friday, September 22, and election day would be November 7. So if we're successful with the referendum, we'll obviously need cash in order to fund that, although the partnership in Richmond is different now. We are not the sole equity provider at this point in time. It's a 50-50 equity investment with us and Churchill Downs. They're a great well-capitalized company. The CEO is very engaged in this. We couldn't be luckier to have them as a partner. We also recently -- I don't want to say recently, a few months ago, announced the acquisition of four Houston radio stations from Cox Media Group. We expect for $27.5 million. We have also signed agreements to spin off two stations that we can't own, because we'll be over the limit for a total of $10.5 million. So we're going to be into that acquisition for about $17 million and some change. We expect that cash flow from that acquisition will equate to at least $5 million as we step into it.
So a very attractive multiple that we were able to acquire that once you factor in the amount of money that we've got for the spend. We also think that there are a number of other potential radio acquisitions that are out there that if you -- right now, the radio companies are trading kind of like in the 5s in terms of an EBITDA multiple. And so if you were to buy radio at a 5.5x multiple, you're talking about close to a 20% return, which is also better than our 6.4% that we were getting on the MGM investment. So there are a number of things that we think that we can do going forward that will ultimately net us a better return. So whether it's paying down debt at 10%, whether it's buying radio in the 5s that met you at 20%, if getting our referendum one and investing in the Richmond Casino is another. There is a process going on that you guys have probably seen in the business press, where Paramount is looking to sell the BET Media Group, which includes BET and BH1, our name is not never mentioned, but we are involved in that process with a number of other parties, still doing our diligence on it. Don't know where we land, but we're engaged, and we think that we have exceptionally complementary assets with the TV One and CLEO assets that could potentially create a lot of value. However, we remain disciplined from an acquisition standpoint. We're fully aware of the challenges that the Pay TV ecosystem has.
One of the reasons why we think that finding scale in this business could make a lot of sense as well. So we're doing our work and staying engaged on that. 2023 guidance. We are expecting 2023 EBITDA becoming better than our 2019 pre-pandemic EBITDA, if you go x MGM dividends. So that's our goal. We feel pretty good about being able to achieve that. We're thinking leverage will continue to be below 4x, call it, 3.7-ish by the end of the year. And given the macroeconomic backdrop, I think we'd also feel pretty good about that as an outcome, should that come to pass. So with that, I am going to turn it over to Peter Thompson to go more specifically into the numbers.
Peter D. Thompson
Thank you, Alfred. Before we get to the numbers, let me talk a little bit about the delayed filing and the MGM restatement. Since the inception of the MGM deal, we've been carrying our stake in that as an equity investment (inaudible) cost. However, once the put option that we had became exercisable, we should have reclassified the investment as a debt security available for sale. So really a sort of technical changes on how we should have carried it on the balance sheet. And once you end up in that bucket, that is debt security available for sale, you then revalue it every quarter. And we didn't do that. And obviously, we knew what it was worth. And I think we've done a decent job of telling our investors what it's worth. But when the put crystallize that. So the end state value of $136.8 million was known, but we had to go and hire an outside valuation specialists to appraise the asset for each quarter of 2021 and 2022 using multiple methodologies, which took some time to work through. Separate from this but also contributing to the delay in filing, our orders required additional documentation around the company's ASC 606 revenue recognition policies. And that required us to bring in a consultancy firm to write a bunch of technical accounting memorandum. We're not a big shop. We didn't have the resort to do that internally. And so we have to go and find someone to write those technical accounting memos for us.
And then finally, there was significantly increased substantive audit testing around journal entries and other things as a result of a lack of reliance on internal controls, but in prior years had been deemed sufficient but weren't this year. And all of that meant that it took many additional weeks of work to get the accounts signed off, which has been frustrating, both for the company and the investors. And I thank you all for your patience and support. I've been speaking to as many of the investors as I can, just to try and keep people appraised of what's going on, and we appreciate you being patient in bearing with us while we work through all that. Turning to the numbers themselves. Consolidated adjusted EBITDA was $31.7 million for the quarter, which was down 2.3% from last year. Full year consolidated adjusted EBITDA was $165.6 million, in line with the company's guidance and up 10.2% year-over-year. Fourth quarter consolidated net revenue was up 1.6% year-over-year. Indianapolis acquisition added approximately $4.2 million, and there was the absence of the Reach Cruise that generated $7 million last year in the fourth. Normalizing for those two things, net revenue was up 3.9% or down 1.4%, excluding $6.6 million of incremental political advertisers. Net revenue for the Radio segment increased 23.8% year-over-year and by 14.1% on a same-station basis.
According to Miller Kaplan, and on a same-station basis, our local ad sales were on par with the market at minus 1% and national ad sales outperformed, we were up 41.9% against the market that was up 17.4% helped by heavy political spending, and also our corporate sales effort. We recorded $8.1 million in net political ad revenue, of which $7.2 million was radio compared to $1.5 million in prior year. Government and Public was our biggest radio advertising category for the quarter, up 97.6%. Healthcare was up 53.6%, (inaudible) was up 86.3% Retail was up 12.7% and entertainment was up 8.9%. Services, financial, telecom, food and beverage, travel and transportation were all down in the quarter.
Q1 2023, radio revenue, excluding digital, was up 2% on a same-station basis or up 3.1% same station, excluding quality. Q2 is currently pacing down 5%, excluding digital on a same-station basis were down 0.9%, excluding political. So we're holding well on a same-station basis like political. Net revenue for Reach Media was $11.9 million in the fourth quarter compared to $12.3 million last year, excluding the cruise event. Adjusted EBITDA was $3.1 million, down from $3.8 million from prior year. The full year adjusted EBITDA increased by 13.3% to $15 million. Net revenues for our digital segment increased by 24.1% in fourth quarter to $24.2 million. The direct sales team had an exceptionally strong finish to the year, driven by continued demand to reach [flat] audiences at scale and increased midterm political revenue.
Adjusted EBITDA was $1.9 million for the quarter and $21.8 million for the year, up 24.1% year-over-year. Our radio, reach and digital segments of our audio business had combined Q4 adjusted EBITDA of $20.8 million for the quarter, up 12% year-over-year. We recognized approximately $49.7 million of revenue from our cable television segment during the quarter, a decrease of 8.2%. Cable TV advertising revenue was down 8.4% with a favorable rate volume impact of $900,000 cost set by unfavorable time of variance of $1.7 million, pre-video on demand and $1.6 million on favorable AVU (inaudible). Cable TV affiliate revenue was down by 7.4%, with a favorable rate increase of $1.2 million being offset by $2.4 million of net share $650,000 of increased. Cable subscribers for TV One as measured by Nielsen, finished Q4 at $46.5 million. That's $43.6 million at the end of Q3. And CLEO TV had $41.8 million.
Alfred C. Liggins
[They're] having trouble hearing us.
Peter D. Thompson
Okay. Sorry, I just heard that the sound quality is poor. We'll turn the air conditioning off here and move the microphones around. Hopefully, that will be better.
We recorded approximately $2.6 million of investment income from our stake in the MGM National Harbor property for the quarter, up 30% from prior year. Operating expenses, excluding depreciation, amortization, impairments and stock-based compensation of approximately $104.2 million in fourth quarter to $105.6 million in Q4 of 2021.
Event expenses decreased by $6.9 million due to the absence of the Reach Cruise event, which returned in May of this year. Cable TV content amortization decreased by $5.3 million. And the noncash charge for the CEO's employment award decreased by $3.5 million. Employee compensation increased by approximately $5.6 million, including incentive compensation across the organization for superior annual performance against plan. Revenue variable expenses increased $4 million. Travel, entertainment and office expenses increased by $2.2 million. And outside services, including contract, talent and consulting fees increased by $2.5 million.
About $3.3 million of those increased expenses were in relation to the Indianapolis radio acquisition, and it's included in those totals. Radio operating expenses were up by $4.8 million. The Indianapolis cost add in just over $3 million of that increase. Expenses related to revenue increases, such as sales commissions and bonuses drove the rest of the increase. Our Reach operating expenses were flat, except for the Cruise event. Operating expenses in the digital segment were up 36.9%, driven predominantly by variable expenses related to traffic acquisition costs, which were up $2.3 million, and ad production and marketing which was up $2 million, and content and streaming music royalties which was up by $1.7 million.
Cable TV expenses were down $4.9 million with content amortization expense down by $5.3 million due to some write-downs in prior years that didn't recur. Operating expenses in the Corporate and Eliminations segment were down by 4.7%. It was a favorable variance of $3.5 million for the noncash TV One employment award charge, which was offset by increases in employee compensation, including annual performance bonuses, outside legal fees, third-party software license fees, T&E, recruiting and marketing. For the fourth quarter, consolidated broadcast and digital operating income was approximately $47.6 million, an increase of 7.9%.
During the quarter, the company repurchased $25 million of its 2028 notes at an average price of approximately 86.4% resulting in a net gain on retirement of approximately $3 million. An additional $25 million of the 2028 notes was repurchased in the first quarter of 2023 at an average price of approximately 89.1%. Bringing the total gross debt balance down to $725 million today, down from $825 million at the start of 2022. So we've now paid down $100 million of the debt. Interest expense decreased to approximately $14.6 million for the fourth quarter, down 8% from last year due to the debt paydowns. The company made cash interest payments of approximately $625,000 in the quarter, including the accrued interest on the retired notes.
And the semiannual interest payment was paid on February 1, '23. And noncash impairment of $10.3 million was recorded for our radio market broadcasting licenses in Cincinnati, Dallas, Houston and Raleigh, and also for our Philadelphia market goodwill balance. Provision for income taxes was approximately $3.9 million for the quarter. Company paid cash taxes in the amount of approximately $1.1 million. Net income was approximately $856,000 or $0.02 a share compared to $5.3 million or $0.10 a share for the fourth quarter of 2021. Capital expenditures were approximately $1.5 million. The company repurchased 13,577 shares of Class B common stock in the amount of $57,000.
As of December 31, '22, total gross debt was $750 million. The ending unrestricted cash balance was $94.9 million, resulting in net debt of approximately $655.1 million, which compared to $165.6 million of LTM reported adjusted EBITDA, gives a total net leverage ratio of 3.96x. Pro forma for the Indianapolis acquisition total net leverage was 3.91x. On March 8, 2023, the company issued a put notice with respect to 100% [that is interested] in the MGM National Harbor LLC. And on April 21, 2023, we closed on the sale of the put interest. Company received approximately $136.8 million of proceeds at the time of settlement. During the quarter ended March 31, 2023, the company also received $8.8 million representing the company's annual distribution from MGM National Harbor with respect to fiscal year '22.
Pro forma for the MGM put, total net leverage was 3.21x including $145.5 million of cash receipts from MGM and excluding the LTM adjusted EBITDA for the MGM stake of $8.8 million. On April 11, 2023, the company announced it had signed an asset purchase agreement with Cox Media to purchase a Houston radio cluster. Urban One will divest two stations to comply with FCC ownership regulations, transactions subject to FCC approval, and is anticipated to close either late in the second quarter or early in the third quarter of '23. And until that time, we and CMG will continue to operate our respective stations. And then finally, with the MGM proceeds, our current cash balance today is approximately $235 million. And with that, I will hand back to Alfred.
Alfred C. Liggins
Great. Thank you. Operator, I'd like to open the line up for Q&A, please.
Question and Answer Session
Operator
(Operator Instructions). We will first go to the line of Aaron Watts with Deutsche Bank.
Aaron Lee Watts
I've got a couple. Peter, sorry to ask you to do this, at least for me, your line was a little choppy at the beginning of your comments. Could you repeat what -- on the radio side, what your kind of same-station core advertising performance was in 4Q, 1Q and then also what you said 2Q was pacing at.
Peter D. Thompson
Yes. So let me go back. Q1 of '23, excluding digital, which is what we report, the Radio segment was up 2% on a same-station basis. Excluding political, it was up 3.1%. As reported, it's probably going to -- it's going to look like it was up about 11% in the first quarter because of the Indianapolis acquisition. Second quarter is pacing down 5% at the moment on a same-station basis. But obviously, political, there's a fair amount of political last year, a couple of million dollars. So excluding that same station, we're pacing down to 0.9% the second quarter on radio as reported, because we'll layer in Indi on top of that. We're probably looking more like -- we're going to be up probably low to mid-single digits.
And then on the Radio segment, on a same-station basis, 14.1% up for fourth quarter.
Aaron Lee Watts
Great. And as you sit today, guys, like how is the environment feeling to you as you enter -- you're entering July here relative to what you felt in the first half of the year. Any rays of light coming through in terms of advertising, willing -- advertiser willingness to spend, whether it's on the local or national level or it feels relatively steady with what you had been feeling in the kind of April, May, June timeframe?
Alfred C. Liggins
Yes. Look, there's definitely an advertising recession going on. I mean I was at the Cannes Lion Advertising Conference 2 weeks ago. And you hear it from the big holding companies -- and it's particularly taking root in national S.o you're seeing that come through with people who have national ad platforms, local feels stronger. But I mean you watch the news, CNBC, the economic data is still really strong and -- but just because advertisers are pulling back -- not sure they're pulling back because they're worried about something that's coming or exactly why, but there's definitely an ad recession going on.
We're still feeling a level of strength due to interest in diverse owned media. We're definitely still feeling that. Doesn't mean that we're not seeing less demand, but we're doing better than our non-diverse owned peers. One of the reasons why we also felt it would be good to be sitting on a lot of cash at this point in time. Don't know it's exactly what's going to happen, but I feel if there's a recession, it will be a mild recession. I think we're already in an advertising recession. We may not be in an economic recession at this point. And our radio business is going against some significant political headwinds, right? We had $20 million worth of political...
Peter D. Thompson
It was $13 million last year. That was the prior presidential cycle [over 20 years.] It was about $13 million. Still significant.
Alfred C. Liggins
Significant. Excuse me. And -- but I -- we're preparing to be okay regardless of what the economy does, but I would say I feel better about where things are going today than I did in January.
Aaron Lee Watts
Okay. That's helpful context. Second question, and I'm sorry if you already disclosed this, but with the stations you're picking up from Cox, are you able to share what the multiple you paid was on that purchase?
Alfred C. Liggins
No. I mean, we paid $27.5 million. I think I just said that we think with add backs and things of that nature that we'll have at least $5 million of the EBITDA.
Peter D. Thompson
Yes. So I don't know if you caught that, but the NAV spins.
Alfred C. Liggins
Yes, yes. So let's say, their EBITDA was less than $5 million. We think with add backs, we'll have at least $5 million. And when I say add back, duplicate expense stuff that we can take out day 1. And there's not a lot of it, right? we're not changing formats. But what was the surprise for us, to be honest with you, because we modeled something else was we were able to get out of the two radio stations for an acceptable price, right? And we didn't know what the marketplace was going to be like. And we were to find two buyers and got what we thought were not amazing prices, probably low watermarks for stations in Houston. But given the M&A activity in Radio period is pretty tepid, we felt -- feel pretty good about the sales there. And so we're going to be in to Houston for about $17 million.
Aaron Lee Watts
Okay, and one last question. You've mentioned your liquidity a couple of times, and it is a nice cushion to have given the uncertain economic backdrop. As you move forward here, you bought back bonds, but you also have this potential casino project. How should we think about the uses of those -- of that cash, whether it's debt paydown going towards a casino initiative or potentially more M&A activity, whether that's on the radio side or otherwise?
Alfred C. Liggins
Look, it's -- when we win this casino referendum, we're going to have to write a -- it's not certain exactly what the equity check will be. It's 50-50 right now, but let's assume that it's $80 million for each, us and Churchill, and that's assuming you put some debt on it. We may not go that route depending on how expensive project financing is. So we may need to write a slightly bigger check, but assume that, that's going to be something that we will spend cash on starting in Q4 beginning with closing on the land acquisition. And then I think we sit back and just look at stuff opportunistic.
I mean the good thing is that our bonds trading at a discount, call it 90 or something change or whatever, 10.5%, right? So that's always -- that's a good use of capital at that point in time. And if we can make some radio acquisitions that are a better return than that, then we should look hard at that. But paying down debt. I mean, we're also starting to get into a strike zone of leverage in the 3s, you get leveraged 3.5, low 3s, you're starting to get in the strike zone of what other kind of capital -- returns of capital that you look at. But we've got some significant projects on the plate right now that we need to see how they're going to turn out.
Operator
We'll next go to the line of Ben Briggs with StoneX Financial Inc.
Benjamin Yarbrough Briggs
So a lot of mine got answered, but I still have a couple of more here. So using your guidance, and again, thank you for providing guidance. You said that you expect to come in above where you were in fiscal year '19, while adjusting out the roughly $8 million MGM dividend that you received. So that gets me to roughly, let's call it, like just north of $130 million of EBITDA. I just want to kind of sanity check that and make sure I'm doing the math right there.
Peter D. Thompson
No. I have $133.5 million with MGM and MGM, I think, was 6.6%. So I think you -- I think it's like high $120 million. $126 million, $127 million. Yes.
Benjamin Yarbrough Briggs
Okay. So $126 million, $127 million. And then if I subtract out, call it, between $60 million and $65 million of interest expense and some CapEx, it looks like you guys on an EBITDA minus interest minus CapEx basis.
Should still be comfortably free cash flow positive in fiscal year '23. Is that a safe assumption?
Peter D. Thompson
Yes. I've got a kind of mid-60 in free cash flow. But depending on where CapEx comes out, we've got a couple of (inaudible) projects consolidating in Indianapolis and in Charlotte, but probably we don't get to spend all of that this year. So that's why mid-60s in free cash flow is what we're pointing at for this year.
Benjamin Yarbrough Briggs
Okay. Perfect. That's right around where I was getting to. And then the second question, so Churchill Downs. Thank you for the clarity on what size the equity check might be and a little bit about what your thought process is there. Could you give a couple more details on what the operations of that might look like? So I know, obviously, with the MGM Casino, that was very much -- you guys were essentially silent partners, not like you had a hand in operating the casino. You left that to them. Is the Churchill Downs project going to be similar? Or are you going to be taking a more hands-on approach with this opportunity?
Alfred C. Liggins
They'll be the operator. We're just going to own it 50-50 with them, and they'll be responsible for operating. However, they'll use their corporate expertise to work with us to build a management team locally at the property. They've got a number of partnerships with other people, including one with Rush Gaming and Chicago and Best Plains. I think they've got one in Miami with Delaware North. I think it's Miami. So they've got -- good thing about them, they've got experience with having large partners, meaning not somebody who owns 7%, but somebody who owns 50% along with them, right? So -- but we will be relying on them to be the operator.
Benjamin Yarbrough Briggs
Okay. Got it. Got it. Okay. And then finally -- and I'm hoping you can answer this. So obviously, you just released the fiscal year '22 10-K. Do you -- and I know this is officially the fiscal year '22 conference call. Do you know when you might release the first quarter '23 10-Q?
Peter D. Thompson
We haven't said that. I think we'll know more next week. We're just working through some stuff there in terms of timing of that. And obviously, we're mindful of -- we got an extension from NASDAQ through [9/27.] We don't want to take that length of time. But I think we'll put something out next week, which we'll shed some light on that in terms of time and filing that.
Operator
Our next question will come from the line of Matt Swope with Baird.
Matthew Warren Swope
Peter, could you give us a sense for -- out of that large cash number you mentioned? What half hit will be around MGM and any other sort of unexpected or unusual uses that we should think of coming out of that cash number?
Peter D. Thompson
Yes. You just went a bit out as you said it, but I think you're asking, is there any tax leakage on the MGM sale, right?
Matthew Warren Swope
That's right. Yes.
Peter D. Thompson
Yes, minimal, because we got enough NOLs to cover it. So that's roughly $100 million gain. And what it will do, it will burn through our NOLs faster. So would probably accelerate as becoming a federal tax power from 2027 to 2026, somewhere in that region. So the good news is we'll have the cash on the balance sheet, and there will be minimal tax leakage.
Operator
(Operator Instructions) We'll go next to the line of Bradd Kern, a private investor.
Bradd Kern
First one is on the Richmond Casino. What's the likelihood in your view of a favorable vote? Are you doing any polling yourselves or tracking any sort of local polling that you can maybe give us some color on? And what work are you doing to improve local sentiment for the project among like the voters in addition on the casino?
It's a 50-50 partnership, but who's going to be controlling that the decision should you decide? I think it has your name on it. So who are you -- who's going to be making the decisions when you get down to the tough ones?
Alfred C. Liggins
There'll be joint decisions. If we disagree, there's a dispute resolution mechanism, but we're 50-50 partners. And we got to agree. Otherwise, we go to our dispute resolution mechanism. We've got a 50-50 shot. The referendum, we lost it 50.85 to 49.15. Sentiment continues to be divided in the city. And we got to do a better job of telling voters how the money that the casino will generate is going to be spent. We didn't do that last time. We got to work with the city on that. That's not our unilateral call. I think that we've got to articulate the other aspects of the resort, not just the casino part, the entertainment vehicle. We got to do a better job of getting out our voters, but it's 50-50. I've always said that people should look at our company as a baseline and decide whether or not they're comfortable with our existing operations and our balance sheet and look at the casino as upside like gravy. And so that's where we sit.
Bradd Kern
Okay. That's helpful. And so assuming that is approved, what do you anticipate the payback will be on the casino and sort of for modeling purposes in terms of number of tables and slots and gross gaming revenue across each of those? Are there some preliminary figures you can throw out? (inaudible).
Alfred C. Liggins
You should assume that the gaming revenue, this is -- the state has its own gaming analysis for each of the proposed casino licenses of five different jurisdictions. The one for Richmond, Virginia is a little better than $300 million of gaming revenue a year. And you can probably operate better than a 30% margin on that. So assume that the property would be $100 million of EBITDA if not better, but as a minimum, I think you should assume it's $100 million, it could be better.
Bradd Kern
Okay. That's really helpful. And then on the radio and TV side, are you seeing -- do you anticipate any potential slowdown in appetite for DEI advertising, particularly given the affirmative action ruling? What are you hearing from your advertising partners (inaudible)?
Alfred C. Liggins
Everybody is asking that question. And so my general gut is that if the political climate changes significantly in the country that sort of progressive and inclusionary politics will take a hit. However, I believe that many of the corporations that have committed to D&I efforts believe in it and are doing it, because it's good business in today's world. I mean one of the things that you cannot run from is the changing face of America. That's just what's happening. Black and Brown and our Asian populations are growing at a considerably faster clip than the traditional Caucasian population. And that's not a race war, that's just the economics of the country, right? And so there will be different consumption patterns for those populations that -- and different types of consumption for media and how you communicate with them and talk to them, et cetera. They will become more and more of a force from a consumer standpoint. And it's no different than any other customer. You got to cater to that customer. And so -- and that's the conversation that I'm hearing among advertisers now.
But yes, if the government doesn't give a hoot about diversity and inclusion, then I think there will be some corporations that will pull back on that. Because generally government pressure or fear of some sort of government regulation or retribution causes good corporate citizenship but that's my general view, but you never know. I mean I forgot who it was, but Donald Trump on his way out the door, pardoned and we've got a number of rappers or whatever, like I forgot who it was, it was like who would have thought, right? Was it 'Lil Wayne? I don't remember who it was. If he wins the presidency, maybe he ought to be setting aside a good business as well. You never know but that's my view. I mean, look, the progressive wing of the Democratic party right now has got a lot of people talking about fairness and equity and justice. And then the traditional faction of the Democratic party is, yes, those are things that we believe in too, right? And so that helps with this way.
Bradd Kern
Okay. I appreciate that. That's helpful response. On a related note, your core audience, are you seeing the sort of existential time for the radio listenership and secular pressures there? Are you seeing better consumption trends? Or how -- can you just talk about consumption trends of your core audience versus...
Alfred C. Liggins
Everything in traditional media is going down and seeing less consumption. And so -- but radio feels safer and better and less of and then less of a free fall than the pay TV ecosystem does. But I think what we're also seeing is with radio, we're dealing with less rating points right now. But if you looked at our revenue, Peter, you did that analysis, our revenue is really kind of on par, or what was the analysis you did?
Peter D. Thompson
When you look at audio looking across the radio segment, Reach and digital audio, we're still above pre-pandemic levels of revenue and EBITDA, despite the fact that the universe of listeners has gone down fairly significantly post pandemic as you might imagine, given different working patterns and commuter pattern.
Alfred C. Liggins
So I'm going to give some credit to one of the premier CEO in the industry. Bob Pittman, I had a conversation with him in [Cannes] at this advertising festival, and we were talking about the radio business. And he hammers the point that radio still has 90% reach even though the numbers may be small. There's a 90% reach in America and reach in television continues to decline. Historically, advertisers have paid more for less in television. And I think Peter's analysis would say that we're doing pretty good on pricing versus where audience has gone. So that's the world we're living in. And I don't know what the answer is. Nobody except Netflix is making money in streaming right now, maybe Discovery turns the corner here. I think they were supposed to turn the quarter -- turn the corner this quarter or next quarter. But people are starting to dial back on their investments in streaming.
Radio is kind of hanging in there. But I -- there was a time when I was a lot more worried about radio, and I was really good that -- I felt really good that we were in the cable television business. Today, I feel really good that we're diversified among all of these things and radio feels like it's hanging in there. And we're making our Cable TV business hang in there right now with the way that we're managing it. But I do feel like we need to do something strategic there, whether it's picking up more distribution, programming investments, some sort of consolidation opportunity, because that landscape is changing, and so we got to figure that. But the good news is we're at a leverage level now where we're going to have time to do that. We're going to have time to make those investments. We're going to have time -- we're not going to be under any pressure that will make us have to operate in a non-effective, nonstrategic way. I think that we're going to have the runway to make the turn.
Bradd Kern
Sure. On the balance sheet, I mean we've talked about the -- I know you talked about the economics of the casino. So in the world where in the 50-50 shot where it doesn't go through, you mentioned on the call that it's leverage kind of -- leverage in the low 3s that there's other forms of capital return you might be looking at. So how do you -- how are you thinking about that versus potential strategic actions on the radio and TV side or other industries, whether it's gaming or other ones.
Alfred C. Liggins
Yes. Look, we match -- everything for us is -- so strategy is often very overused in terms of a rationale as to why you do something. Something -- strategy has to be accountable to what your current return options are. I don't think you make a strategic decision and not match that up against what's the best use of capital, right? So I would not -- if we can pay -- if we can buy our bonds and get -- retire our debt and get a 10.5% return, there's no strategic decision that we would make that would net us a 5% return. We wouldn't do that. You can pay down your bonds, right? Because if it's strategic, then it should actually yield you an outside return, right? It gets you -- it should have you create value. And the value that it creates needs to be better than what else you can do with the capital. That's how -- that's the lens under which we look at self. And it's worked for us. Does that make sense?
Bradd Kern
I guess I'm just wondering is there at some point, is there a leverage level that you -- I know the stock isn't terribly liquid, is there a leverage level that you start to think about? You shift from debt reduction to whether it's share buybacks or whatever is it is to (inaudible) that cash.
Alfred C. Liggins
Yes. Maybe -- I mean we were buying back shares last year, then we bought back $25 million worth of shares at $5.30. And if I go up or sat, it comes down, but it's kind of...
Peter D. Thompson
But given the macro that we're just -- we got some strategic options ahead of us. That will be on the plays at some point, but it ends on how revenue goes, our EBITDA how we feel about it.
Alfred C. Liggins
And the share buyback analysis goes through the same return rigor that buying a radio cluster does, us buying more cable assets, us investing in the casino. If -- we're not going to buy back our stock and earn a 5% return over paying down our debt and a 10.5% return.
Bradd Kern
Okay. And last question for me is just a housekeeping. When you mentioned the 2.7x leverage by end of year, is that I assume that's...
Alfred C. Liggins
We said 3.7.
Bradd Kern
Right, 3.7. That's on a net basis? And that's -- is that pro forma for any other uses of cash? Or what is -- what are the underlying assumptions in the 3.7?
Peter D. Thompson
It assumes that we win the Richmond referendum when we buy the land that Alfred referred to in fourth quarter. So that cash goes out the door, and it assumes that we close on the acquisition in Houston. So that net $17 million goes out the door as well, but we pro forma in, call it, $5 million of EBITDA from that transaction.
Bradd Kern
No additional debt buybacks in that number?
Peter D. Thompson
No.
Bradd Kern
Not [holding] to that number? Okay.
Peter D. Thompson
No.
Operator
We'll go next to the line of Matthew Sandschafer with Mesirow.
Matthew Sandschafer
Just a couple of housekeeping questions. What are you guys planning to spend on content this year? That number was obviously pretty high in 2022.
Peter D. Thompson
Yes. It was high in '22. I was just looking. I think, mid-50s. Joey is here with us, he can speak to it if he like. But I think we're looking at cash. I've got on my share at least cash spend in the kind of mid-50s.
Matthew Sandschafer
I said did you say mid-50s? I'm sorry, I'm having a sound issue.
Peter D. Thompson
Yes, mid-50s.
I think it normalizes better than last year from a cash standpoint.
Matthew Sandschafer
Okay. Great. And were there any unusual cash expenses in the radio or digital segments in the fourth quarter specifically? Because margins took a little bit more of a hit than I might have been expecting. And I'm sorry if I went through that during the first part of the call when (inaudible) was on, but I missed it.
Peter D. Thompson
Yes. There were a few things, Matt. There were some noise in the numbers. So obviously, we had the high watermark year. So bonuses were higher than me otherwise normally would be. So there was some of that. In margins in digital, we talked a little bit about the fact those were impacted by higher traffic acquisition costs. That was $2.3 million, also higher content costs at digital and ad production costs. So those margins compressed. Other than that, there wasn't anything particularly material.
Matthew Sandschafer
Okay. Great. And then that mid-60s free cash flow number you mentioned, does that include the MGM dividend this year? Or are you rolling that up into the sale price?
Peter D. Thompson
That was in the sale price. So that's not -- so that's mid-60s, I don't know...
Unidentified Company Representative
Good point. Let me just double check before I speak on that. Shouldn't have -- yes, we have. Actually, no, sorry, that does include it, Matt. That has rolled up into the 8.7 of receipts is in the mid-60s.
Matthew Sandschafer
Okay. And I guess, just generally on the digital side of things, you mentioned the higher traffic acquisition costs. There's some guidance for what looks like kind of persistent lower margins going forward. What do you think about that competitive landscape overall? It feels like as you guys know, it feels like every radio station -- and not just radio obviously, but every radio station company has been trying to get into that business in a significant way. What do you think is driving the higher acquisition costs?
Alfred C. Liggins
Yes. Our digital business is different than everybody else's radio business, digital business. We -- our digital business is largely as a content publisher, where we sell video ads and display advertising, probably roughly 40% of our revenue this year will be digital video. We've got some streaming revenues, forgot what it was. I know it's at least 5%. I don't know if it is -- excuse me, at least $5 million. I don't know if it's going to be a little higher.
Peter D. Thompson
It's 5.7% in the file.
Alfred C. Liggins
Yes. And we've got a bit of podcast business, like the Cumulus and Odyssey models are podcast driven. iHeart has got their iHeart media streaming platform, and they've got a big podcasting business. We're much more of a publisher. And then Town Square does digital services, right? So they act as a local small digital advertising agency for small, medium-sized clients in the markets that they operate in. So our digital business is different than everybody else's. With that said, it's benefiting from still demand.
We've got the largest African-American targeted audience in the space, so we're the scale player in that space. And I don't know what the (inaudible) is going for. I hope it continues to remain profitable. We've got to figure out how to see if we can grow that margin. Digital publishing is a tough business. You can see from BuzzFeed and Box and a bunch of these other, [VICE], they're having a tough way to go. We've been doing better. We've got to figure out how to manage through that. But it's a better business in the podcasting business. Yes. So -- in my viewpoint.
Yes, 11:06, I was going to say we got time for one more question, operator.
Operator
We'll go to the line of Marlene Pereira with Bank of America.
Marlene Pereira
Most of them have been answered, but a quick question. You had mentioned BET at the top of the call. So any other information on that or thoughts or what that could potentially look like in terms of the impact on leverage?
Alfred C. Liggins
I mean it's a competitive process. We're under an NDA. I just figured -- people ask us if we're interested in it. So I just figured I'd mentioned that we are in the process. I couldn't -- we're not far enough along on anything at this point in time to comment, and we wouldn't be allowed to comment anyway. But I just get tired of people asking me, hey, are you guys looking at this? And so I decided to admit that we were, but that's all the information I can give.
Marlene Pereira
Got it. And then just a quick kind of reframe given the current environment overall, secular and cyclical. How high would you be willing to have your leverage in the current environment, or what you kind of see the environment to be over the next year?
Alfred C. Liggins
Look, we like our leverage, 4 or below. We like it here. If we have to write a $100-plus million check over the next 12 months for the casino, that could change our leverage profile. I'm sure Peter has the numbers, but we -- $100 million goes out the door with no cash flow coming in for, call it, 24 to 30 months is going to raise your leverage. But I'm also assuming that we win a casino referendum that we're probably going to get some credit for that in our equity value. And who knows, maybe we'll raise some more equity. I don't know how we'll think about that. But I would suffice it to say we sleep good at night when our leverage is below 4. We like that.
Peter D. Thompson
Look, it probably pops up above 4 in Q1, excluding the pro forma for MGM but the cash wasn't received until Q2. So I guess we'll get pro forma numbers in Q1. But excluding the pro forma, it's probably north of 4. And it drops down hopefully mid-3s. And as Alfred said, we're hoping to finish about 3.7x this year. And then if I look at our long-range plan, it's out in the low 3s and eventually in the mid-2s. So assuming we can hit our plan.
Marlene Pereira
Got it. And sorry, if I could just squeeze in one last one. Early on the top of the call, you also had said kind of more generally that radio multiples are like 5x if I heard you correctly, what...
Alfred C. Liggins
There's lots of comps out there. Last I looked, I thought the average radio multiple was kind of like 5.5x or something like that. So again, that's what I -- I think I remember saying Abbott.
Peter D. Thompson
It's variable within that, depending on who you look at. I think that was about the mean.
Alfred C. Liggins
Thank you. Thank you, everybody. We look forward to talking to you at a point in the near future.
Operator
Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T Event Teleconferencing. You may now disconnect.
