Urban One, Inc.
Q4 2014 Earnings Call Transcript

Published: 12 Feb 2015

[Operator:]

Ladies and gentlemen, welcome to Radio One’s 2014 Year End Call. I've been asked to begin this call and the following Safe Harbor statement. During this conference call, Radio One will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance. Radio One cautions you that certain factors including risks and uncertainties referred to in the 10-Ks, 10-Qs and other reports it periodically filed 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 February 12, 2015. Please note that Radio One disclaims any duty to update any forward-looking statements made in the presentation. In this call, Radio 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.radio-one.com. A replay of the conference call will be available from 12 pm Eastern Time February 12, 2015, until mid-night February 14, 2015. Callers may access the replay by calling 1800-475-6701 in the U.S. international callers may dial direct 1320-365-3844, the replay access code is 350295. Access to live audio and the replay of the conference call will also be available on Radio One's corporate website at www.radio-one.com. The replay will be made available on the website for seven days after the call. No other recordings or copies of this call are authorized or maybe relied on. Now I will turn the call over to Alfred Liggins, Chief Executive Officer of Radio One, who is joined by Peter D. Thompson, Chief Financial Officer. Mr. Liggins?

[Alfred Liggins:]

Thank you very much operator, and welcome everybody to our fourth quarter results conference call. You've seen the press release and we are going to turn it over to Peter so you can do into the numbers in detail and I’d add some color to it and then we’ll go into Q&A and obviously the big headline is you know we finally came to agreement with Comcast on the buyout of their interest in TV One and we’ll discuss that in more detail after Peter’s comments. Peter?

[Peter Thompson:]

Thank you, Alfred. So net revenue was approximately $109.7 million for the quarter ended December 31, 2014, a decrease of 1.7% year-to-year. The decrease is primarily a result of lower advertising sales revenues from the radio division and lower direct advertising revenue for the internet division. We recognized approximately $39.9 million of net revenue from the cable television segment in the fourth quarter, an increase of 5.1% over fourth quarter 2013. TV One affiliate revenue was up 5.4% from prior year while advertising revenue was up 8.5% from prior year. Net revenue for the internet division decreased by 23.2% year-to-year. Our Charlotte, Indianapolis, Detroit, Cincinnati, Dallas, Raleigh, St. Louis and Philadelphia clusters showed revenue growth in the fourth quarter; however these gains were offset by declines in our four biggest clusters, Houston DC, Atlanta and Baltimore. For the fourth quarter local radio revenue was down at 10.5% and national was up 8.1%. Political revenue was approximately $2.6 million versus approximately $600,000 in the prior year’s quarter. Cable subscribers as measured by Nielsen finished the quarter at $56.6 million compared to $57.1 million at the end of December last year. TV One currently has 50.3 million billable subscribers. Operating expenses excluding depreciation, amortization impairments and stock based compensation decreased to approximately $79.9 million in Q4 from approximately $84.9 million in 2013. The main areas of savings were marketing expenses at TV One and sales commissions and compensation in the Radio division. For the fourth quarter consolidated station operating income was approximately $42.5 million up 8.6% from last year. Adjusted consolidated EBITDA was $32.4 million an increase of approximately 18.8% year-to-year. Interest expense was approximately $19.3 million for the fourth quarter down from approximately $22.4 million from the same period last year. Decrease in interest expense is primarily due to the lower interest rate associated with the 9.25% senior subordinated notes due 2020. Company made cash interest payments of approximately $10.4 million in the quarter. Net loss was approximately $13.5 million or $0.28 per share compared to a net loss of approximately $16.4 million for the same period in 2013. For the fourth quarter capital expenditures were approximately $1.3 million compared to $2 million in the fourth quarter 2013 and Q4 cash taxes paid was approximately $15,000. Company received dividends from TV One in the amount of $7.8 million in the fourth quarter and there were no share repurchases during the quarter. Company’s cash and cash equivalence by segment are as follows, radio and internet approximately $45 million, Reach media approximately $4.1 million and cable television approximately $18.7 million. In addition to cash and cash equivalence cable television segment also has short term investments of approximately $2.1 million and long term investments of approximately $817,000. As of December 31, 2014 Radio One has total debt net of cash balances of approximately $752.5 million, for bank covenant purposes our total net debt was approximately $669.5 million and our LTM bank EBITDA was approximately $95.4 million resulting in total leverage ratio of approximately 7.02 times and a senior leverage ratio of approximately 3.51 times. When thinking about the first quarter revenue pay since 2015 there are some timing difference s that I want to point out, both the Reach Media Tom Joyner’s Fantastic Voyage and Radio One Raleigh’s Women’s Empowerments Events have moved from the first quarter of 2014 into the second quarter in 2015. The revenues and expenses associated with each event in 2014 were approximately $6.6 million and $5.8 million for the Fantastic Voyage and $1.5 million of revenue and $638,000 of expense for the Women’s Empowerment Event. And with that, I shall hand back to Alfred.

[Alfred Liggins:]

Great. Thank you, Peter. As Peter mentioned our Radio business continues to sequentially improve Houston has turned around with the launch of our Boom Classic hip hop format. Houston is currently pacing flat for Q1 but pacing up double digits for the year. Washington DC is our next big focus to fix and it’s the current drag on the Radio business. We’ve recently changed leadership there this week and we put in one of our regional Vice Presidents as the new market manager and so we are hyper focused on that market now as we speak as the next big fix in heavy lift. I must point out that we expect significant EBITDA growth still in our core radio business this year. And dramatic EBITDA growth at our Reach Media syndication unit fuelled by substantial cost savings there and top line revenue growth. Our combined Radio business is looking up and heading in the right direction. Interactive One continues to make strong progress with double digit positive direct revenue pacings in Q1. We also expect significant EBITDA growth there in 2015 in iOne. We recently purchased hip hop mobile Russell Simmons website, GlobalGrind to anchor our Millennial vertical strategy and iOne is a long time project as you know but a necessary project because advertisers are moving more and more into the digital arena and our strategy we believe is the right one, because we at iOne are selling display video and custom solutions not audio, so it’s not really trading at dollars, this is all new money for the company and the more conversations we have we realize that digital is here to stay and will be part of the advertising ecosystem in a very significant way. TV One finished 2014 right on budget with $53.2 million of EBITDA up from $49.3, you might remember we budgeted some significant programming investments, we’ve historically had stronger EBITDA increases, but yes 2014 was planned to be less but we hit our number as we said we would. And this is in the face of you know significant headwinds for a lot of other cable networks in terms of declining ratings, but TV One fared even though our ratings declined somewhat in 2014 it declined significantly less than most of our competitors in closing the gap between us and them. In 2015, we were off to a great start with the prime ratings currently up 26% in households and also in demo we expect a very strong year of EBITDA growth in 2015 for TV One. We are having excellent affiliate renewal conversations with the Comcast deal done and signed the affiliate deal – done and signed and by the way the affiliate deal is not connected to the buyout deal in terms of if for some reason the buyout does not get completed the affiliate deal still stands, so that’s done and signed. We are also in very positive in detailed negotiations with our other distributors and our other distributors include Verizon, AT&T, Cox, Charter obviously with the merger going on you know you are assuming that if Comcast ends up buying Time Warner that takes care of that, and if AT&T ends up buying DIRECTV that takes care of that. We expect to sign multi-year net positive to the network renewals with all of these distributors as well in the coming months. DISH Network continues to be the only distributor not carrying TV One – the Comcast buyout. Finally agreed to, at what we think is a reasonable valuation we have a $550 million, way up to the end of Q2 to close this transaction, there is no penalty for failure for some reason the transaction doesn’t close. We believe that there are significant cost efficiencies from us owing a 100% of TV One and combining it fully into the infrastructure of Radio One the acquisition of the Comcast stake further diversifies Radio One into a Multi Media company, we expect in the coming years our cash flow will reach 50% Radio and 50% digital and cable which is a goal of ours and we think that we are fulfilling on the promises we’ve made to investors and also to our advertising partners and this one solution platform continues to play out as an attractive option for advertisers in the continuingly browning America, multi culture advertising continues to rate strong and move forward and I think that we’re right at the epicenter of it and we’ve got some more exciting announcements and initiatives in the coming months as it relates to really firming up and filling out this platform such that it continues to be highly attractive to advertisers. So with that operator, I would like to turn it over to Q&A.

[Operator:]

[Operator Instructions]. Our first question is from Aaron Watts of Deutsche Bank. Your line is open.

[Aaron Watts:]

Hey guys congrats on the Comcast deal.

[Alfred Liggins:]

Thank you.

[Aaron Watts:]

Lot to cover here, so let me ask a couple of questions. I’ll start with the Radio business though. Alfred, can you maybe give us a sense for what happened between like a few weeks ago when you were going through the credit facility amendment and today in terms of pacings for the first quarter, maybe what specifically was driving kind of the slowdown in January?

[Alfred Liggins:]

Yes look I’m not sure and by the way when we give you guys pacings, and look that was unnerving to me obviously right. You know because we just did remember. But when we give you pacings, we just read right off the pacing sheet. So there is no interpretation of it, but having checked with other companies and channels, I think that we’ve seen a slowdown in January I talked to a number of companies and they saw it as well. So I don’t know what’s driving it. Ultimately if you ask me to pontificate what I think is driving it. Radio is a traditional medium, so I do believe that there’s ad share shift, which is why I’ve said that I thought Radio, although still a good business with low CapEx, high margins, low cost of goods sold. We’re sharing ad dollars with digital mediums, whether it’s Yelp or Google or what have you. So, I think that you’re going to continue to see a moderation of that growth. It doesn’t make it a bad business, just – I like to say that, it’s not the TV, but excuse me, it’s not the newspaper business by any stretch of the imagination. The newspaper business, they print on paper, they deliver in vans and trucks or they mail the newspaper. We deliver audio, very simple. In fact if you really dug into it, our audio delivery is free and actually costs people to stream. I think at some point in time, those facts have to play into it. But our audio deliveries, not less or any more inferior than Pandora’s, and quite frankly offering up different selections of commercial free or any of that, those kinds of strategies fully within the Radio industry’s capabilities. However, I don’t think commercial free is going to be in anybody’s ultimate business models. Certainly the digital guys are starting to run many more commercials. So going back to answer your question, I can’ pinpoint it specifically. I think the economy is generally healthy, which is good for us. And I still feel confident in our ability to grow our Radio cash flow in 2015 based on things that we’re doing with our cost structure, and in addition, I mean, our Q2 right now is pacing up strongly, but I’m hesitant to go out on a limb and beat the drum on what the revenue numbers are going to be, because it can change week-to-week. But what I am willing to beat the drum on is our ability to grow the cash flow of the Radio business. And that’s core radio and as I said before on my comments, Reach is going to be up dramatically, because they are – their revenue is pacing up quite nicely and they’ve got substantial cost savings. So at the end of the day my job, our job is to deliver you cash flow growth. And so we’re going to moderate what we can do on our topline with what we need to do on our bottomline and make sure that we deliver that cash flow growth in the Radio business.

[Aaron Watts:]

That’s helpful context. Just one other question around kind of the operating environment, is it fair to say what you’re seeing, is that the big markets continue to kind of be a little weaker for you than your smaller markets? Or any specific categories that are ailing across the platform, or is there…?

[Alfred Liggins:]

Yes. I’ve never been a believer in categories. Radios never had a concentration of categories that were big enough to drive it in one direction or the other. It’s not like automotive to the TV sector. Peter, maybe give more color on big markets versus small market.

[Peter Thompson:]

Yes. I’m just looking at the Miller Kaplan for fourth quarter and it’s really kind of mix. So if you look our four big markets. DC is a market according to Miller Kaplan was down 2.8, Houston as a market was 3.6, Atlanta was down 3.4, Baltimore were down 2.1 and overall across all of our markets, the market was down 1.5. So that would suggest that the bigger markets are under indexing, if you want to call that. But it’s not -- we have seen DC down much higher than that.

[Alfred Liggins:]

Yes. And look – and the big markets just probably where you’re seeing more competition for digital dollars whether its where Pandora is put into sales forces and where some of the local guys like Yelp and Groupon are focusing in their sales force. But I just read something in inside Radio. I think it was inside Radio was or one of the trades, maybe it was inside Radio. But anyway, so the Pandora was selling advertising in 37 markets and they had a 111 local sales people out there. When I looked at that, that actually made me smile, because that’s not a lot of sales people to cover 37 markets, I mean, we’ve 20 sales people in Washington and at the end of the day I think we’ve got a significant advantage with our local sales forces in these markets and we’re going to continue to fight that good fight and we just got to make sure that they have the right product to sell our local advertisers. And so it will be a war of attrition and I think the Radio guys have a significant advantage, I think we’ve got a significant advantage. Look, we’re all leveraged more than we should be for the most part, but we’re all making money and I don’t think that there’s going to be anything on the horizon is going to change the royalty backdrop for digital Radio guys. So I don’t see those companies becoming cash flow positive, significant cash flow positive any time soon. The question is how long our investors going to feed those losses if you don’t see light at the end of the tunnel. So that’s what I have.

[Aaron Watts:]

Let me just ask you two questions on the TV side of the business. you talked about the valuation that you achieved in this purchase, how should we think about that, if we want to think forward-looking, what does that valuation look like, if we give you some credit for maybe this new distribution deal with Comcast as well as savings you might benefit from owning a 100% of it. Does it become a little bit more – I’m think about leverage go forward?

[Alfred Liggins:]

So two things, one, without giving you guidance I think I said we expect significant EBITDA growth at TV One. And yes, you’re right, the new distribution deal is playing into that. I would say that you should think that it is a single digit multiple to us on forward. And quite frankly that just on the existing business as is without us really going in and figuring out what any cost efficiencies are from the combined operations. Believe it or not, we haven’t actually done that exercise yet. We figure out whether or not we could finance this thing just as the platforms are currently operating, and at the price that we’re paying. Comcast is going to take a small note that will end up sitting parry [ph] with our subnotes, and everything fits inside the baskets and the leverage governors within our existing indentures. So we’ve spent a lot of time. When we made this deal we’ve figured out how we were going to finance it before we made the deal, and that part of the negotiation was, okay, you can say you want x but I can only pay y and this is why. And so when it comes down to what’s that forward multiple going to be to us, it’s going to be single-digit.

[Aaron Watts:]

Okay. And just a follow-on what you were saying there, so it sounds like the financing, you’ll have a note to Comcast. And that you said will sit even with your bank debt or will that be even with kind of your unsecured note?

[Alfred Liggins:]

I said, unsecured, I said parry [ph] y with our subnotes.

[Aaron Watts:]

Got it. And the rest of the financing you think you can do at the secured level? Is that right?

[Alfred Liggins:]

Up top, yes. There probably be something – they probably need some additional dollars so they have to go with the subnote level, but not a lot most. The vast majority will go up with the total global refi of our first lien debt.

[Aaron Watts:]

Okay. All right. And then….

[Peter Thompson:]

And just the clarification, we’re going to – the purchase agreement we’re going to file in the next couple of days within 8-K and you’ll see a bunch of numbers in there and that will help, bridge you from the 550 to the net price and then what the loan amount is. So you’ll get a good amount of – you’ll get a decent amount of detail on the numbers, because we’re going file.

[Aaron Watts:]

Can you give us the amount of a Comcast note now or you need to wait?

[Peter Thompson:]

It’s a whisker on the $12 million.

[Aaron Watts:]

Okay. All right. Got it. And last question from me, just as you think about your leverage going forward this maybe moves the needle some, but what’s like a realistic target for you maybe a year out or two years out that you’d like to get to and think you can get to? Thank you.

[Alfred Liggins:]

Look, we’re going to -- in order to do this, we have to do it around our 7 times leverage test and I’d like to be below 7 times by the end of the year. And then, what’s our target? The whole reason that we wanted to buy the other half of TV One is because of the long term locked in nature of the affiliate revenue stream, which I think gives us the ability to delever the company significantly over time, and not have a gun to our head to have it delever in the first 18 months, because we’ve got these long term deals. We can assure ourselves that we’ll have time to delever the company. And look, where would we ultimately like to be? I mean, I just had my 50th birthday. I’d like to have no debt. So I think that we have to be very careful about the changing landscape of the entire media business. I’m not even just talking about the Radio business now, because some people have called into question the efficacy of the cable bundle and where is that going, and over the top, and there’s so many changing dynamics of the way content is distributed. But what I know is that TV One is getting a new set of runway that is going to be a significantly long period of runway. And will be insulated from those changing dynamics for significant period of time. And my goal is during that period of time where I know we’re insulated, we will to use our cash flows to delever, so and then figure out how and where is the best place to monetize content, and what the media business looks like in the future. And that’s what we’re going to do. So we’re going to focus on delevering. And you guys already know about our diversification strategy. We’re going to make the MGM casino investment which we think is going to be a home run, but we’ll focus on deleveraging any potential acquisitions that we might make will also be delevering acquisitions. And I’m just talking philosophically, there is nothing on horizon right the second. But if we were able to buy our competitor in Dallas in the Radio business, we know that that would be significantly delevering because we create a bunch of cash flow by combining our operations there. But the way we would look at that acquisition and in the price that we would be willing to pay is does it delever us quickly. And that’s the strategy. It’s a sleep at night strategy. I think our platform is plenty big. We’ve got a great story. We’re multimedia. Quite frankly, we’re spending lot of our energy right now building ideation in agency capabilities in house so we can develop more compelling ideas for our clients, because we’ve got enough impression to sale them, and they can buy impressions anywhere where they really want our more ideas than we got a big enough platform where we can have conversations with CMOs and CEOs. We reach 82% of Black America. And so because we’re big enough we got a good story. We’re now going to own 100% of TV One, job number one is to delever the platform.

[Aaron Watts:]

All right. Thanks. Appreciate all the color.

[Alfred Liggins:]

Yes. Absolutely.

[Operator:]

Our next question comes from David Farber of Credit Suisse. Please go ahead.

[David Farber:]

Hi, guys. Good morning.

[Alfred Liggins:]

Good morning. How are you?

[David Farber:]

Good. Thank you. Number of my questions have been discussed obviously, but I just want to touch base on a couple of things real quick. First is, you guys obviously sound quite encouraged with 2015 and you’ve talked a little about sort of cost savings opportunity in the top line and how to sort of manage that. So I’m just curious to the extend you would maybe just talk about maybe quantitatively what you think is available for the company on the cost saving side and just maybe bucketed you know maybe what they are if its one thing or the other and then a couple of follow-ups? Thanks.

[Alfred Liggins:]

Yes. I can’t do that yet. We’re just on the front end. We spend most of our time working on just getting this deal done and been able to finance at given our existing operations kind of the cost savings stuff that we’re going to do. I bucketed into – that’s okay, we’re going to be able to finance this thing and let’s say after we finance around of $1 billion of debt. So now the cost savings are what’s going to go into the – hey, we need to get our leverage down below 7 times as fast as possible. So we’re saving that exercise for after this conference call and getting folks on that. We will have that data and that plan by the time we come to market to finance this, but we don’t have those details just yet. But we know there is significant cost savings there.

[David Farber:]

Okay. We’ll look forward to that. And then, just finally, any number you could share with us away from the high single multiple on what sort of impact you’d have on the affiliate deal or the renewals or anything like that or ways for us to think about sort of the LTM and what you think the entities looks like on a go forward?

[Alfred Liggins:]

Nothing we can give you on this conference call. A couple of things, one, our affiliate deals were bound by confidentiality agreements of what we can and cannot say in a public form. However what I can tell you is that, you will be able reverse engineer and extrapolate from any financing documents that will help [ph] the industry, right, because we’re obviously going to have disclose a certain level of financial information in order to get the deal done and you guys are smart, you better figure it out and we’ll disclose as much we can. But we said it. We said that we’ve got multiyear. We’ve got net positive progress in our rates. We’re talking to every distributor about net positive rates on continuous basis, more subs and multiyear. That’s the conversations we’re having with every single distributor.

[David Farber:]

Very good. Okay. And the rest of my questions have already been answered. So thanks again.

[Alfred Liggins:]

Thank you.

[Operator:]

Our next question is from Lance Vitanza of CRT Capital. Your line is open.

[Unidentified Analyst:]

Hi, guys. It’s actually Brad [ph] in for Lance, and congrats again on the Comcast deal. Just had a couple of quick follow-ups on that transaction. The first being, I know you just mentioned briefly of global refinancing as part of a capital rates [ph] for the acquisition? That would include our refinancing the 10% TV One notes?

[Alfred Liggins:]

Yes.

[Unidentified Analyst:]

All right. And the other question is just more broadly. Now that you’re going to own a 100% of TV One, does that change it all how you think about programming in terms of investment in original content and how you operate the TV station going forward?

[Alfred Liggins:]

No. Well, it would change how we operate TV station going forward, because we don’t have to have double infrastructures if you will. But that’s more back office, actually I don’t to say, it just back office stuff. We cross promote TV One, but we cross promote TV One from the perspective that we own 51% -- there are things that we would do for TV One that now we could really fully do. Open up the entire war chest to help it. And also when we go out and we’re selling advertising, there is certain arm’s length things that you have to resolve under one roof that you can make more creative deals because it’s all the same money inside the house, so you can do more on cost sharing when you’re creating, programming that might end up going across multi platforms. Just think in general it’s just going to be so much better not to have to worry about the fact that you got a 47.5% partner. Is this Arm’s Length, et cetera? The other thing most of you guys don’t know, we’re in the same building I’m sitting here on the 14th floor of 1010 Wayne Avenue so TV One in Silver Spring in TV One is on 9 and 10. So in our Radio stations are across the street so it’s really setup to work quite synergistically. And it’s been working for Univision and quite frankly I think one of the things, I mean we’re an independent network, right, not with a gigantic programming budget vis-à-vis our competitors like the Ycom networks, VH1 or Discoveries, Open Network, but we hold our own from a rating standpoint and bunch above our rate. And I think one of the reasons is we’ve got this cross promotional platform. The fact of the matter is we’re going to be able to promote our shows that people know about TV One on continuing on a daily basis and hourly basis and that keeps up top of mind with the black consumer and viewer. And I think if you pour all of your energy and resources into growing a brand and not dissipate your efforts than that brands is going to flourish and that’s what I think going to happen.

[Unidentified Analyst:]

Great. Thanks for the color guys.

[Operator:]

Our next question is from Davis Hebert of Wells Fargo Securities.

[Alfred Liggins:]

Good morning, Davis.

[Davis Hebert:]

How are you guys?

[Alfred Liggins:]

Good.

[Davis Hebert:]

Just wanted to confirm couple of things that I’ve heard. It sounds like TV One is going to be part of the restricted groups. So the credit group would essentially have full reliance on this assets and the cash flow stream there. I just want to confirm that?

[Alfred Liggins:]

Obviously, that is a strong consideration and we’re not committing to anything. The game plan is to go market like that. We’re going to come to market with this financing with the package collateral that’s going to get us the absolute best pricing execution. We have been led to believe that if we bring TV One as a guarantor and a restricted subsidiary, that will happen, right. But we haven’t gotten into the details of whether or not it will actually unfold like that. But we believe that will, that’s our game plan. Obviously we could finance it in a number of ways. Look, it would be very disappointing if we go to market and we bring TV One as a guarantor and in the restricted sub and people say that well, you rate is the same, right. We believe that this substantially improves the credit of the company and the collateral package. And we talk to a number of our largest lenders who also say that they believe that our rate should be better. So we’re hopeful to get a better rate. And if we can get a better rate we’re absolutely moving into that direction because that helps the delivering profile.

[Davis Hebert:]

Understood. And you mentioned getting this done around 7 times in currency [ph] test, I believe. But are there any covenants that we should be aware of that would limit this ability or would you potentially need to get consents from bondholders, anything to be aware of there?

[Peter Thompson:]

We don’t think we need any consents, the only – so we got really two hurdles, we got 4.5 times lien test, so essentially we can do up to a 4.5 times seem firstly lien [ph] secured and that will be pro forma for the new affiliation agreement at any cost synergies and then 7 times overall leverage. Aside from that, we just have $220 million [ph] that’s in current basket, so they can go on top of the 7 times in currency so you could have your 7 times plus up to $40 million of other basket that you can fill. And those are the baskets would sit parry with the 9.25, so that roughly $12 million Comcast note will fit through one of those $220 million baskets. Aside from that I don’t think there any other guide rails – those are the guide rails that we will be operating within.

[Davis Hebert:]

Okay. Got it .That’s great. And then, on the 8-K filing pre-amendment, you mentioned in your deal with Comcast that there was a pass to increase subscriber levels, can you just remind us, what percentage of Comcast subs have TV One and what are the triggers for that pathway to higher sub levels?

[Alfred Liggins:]

Currently, we have about 13.4 million Comcast subs. They’ve got 22 and we’re not at liberty to tell you what the triggers are for the higher subs. But we’re more than happy with our deal. And by the way there are some scenarios under which we may want to take less subs than more subs, because everything plays into a net effective rate which you got to give to other people, so quite frankly we negotiated to have flexibility. Having more subs isn’t always the best thing, having more subs at the right rate, that you don’t necessarily that doesn’t trigger any other issue. So it’s fairly complicated but we got a path and we’re happy where we sit.

[Davis Hebert:]

Okay. And you’ve mentioned the lot of the renewals that you have coming so, is the Comcast rate, I know, you’re going to probably not at liberty to say what it is, but is it comparable to other carriage deals you have currently or do you believe this sets us sort of new market rate for you renewal?

[Alfred Liggins:]

Everybody in the industry now is on the same TV One rate cards subject to people get volume discounts based on the size that they have in the number subs they give us, but you know everybody is on the rate card and then bigger guys get bigger discounts, smaller guys not so much but there is a bandwidth there that you know is fairly tight.

[Davis Hebert:]

Okay, helpful. Thank you. And just a couple on the Radio side, encouraging pacings out of Houston, just it seems like a format it’s taken hold across the country. Do you expect any competitive response from that….

[Alfred Liggins:]

Yes we launched this format and then everybody else followed us and started launching it and launched some places we took competitors with us. So we took a competitor in the Indianapolis, we had a competitor already in St. Louis but they switched to this format. So look, what I say about this format? This format takes off like a rocket and then the ratings come down to earth. Yes, that what’s happened with every last one of our stations? The question is, are you better off than what you had before, right. And so far for us that has been true and you know in the vast majority of cases so we’re happy with it. But you know I do not believe that it’s a format you know that will maintain the level of initial audience and excitement that it gets but for us it works because in most places we’re operating multiple stations. So in most places we have a hip hop station. So the idea that you have one mainstream contemporary hip hop station and the classic hip hop station is a great compliment and a bookend. So that’s very different and somehow you just launch as a classic hip hop station is a standalone without other urban stations to support it. So it’s a nice compliment and a cluster strategy for us. So, I would see us continuing to really nurture this format, but look a lot of people in the Radio business are just like you know struggling for new ideas so they are jumping on the bandwagon with the new idea – I still – and we launched this new idea because we already had a hip hop station and we needed to fend off a competitor in Houston, but I would like to see the guys in the Radio business maybe try to figure out as opposed to just going to the next new format try to figure out how to do a more competitive job where they are in already competitive format battles. So the stations that flip are stations that are generally losing to another competitor. What I found is that provided your signals are equal, it’s possible to battle to a draw even with the incumbent insurance player that’s been there a long time if you put the resources and the brain power and the time into it. But people like to go for the next new shiny thing, but again, we’re an urban Radio operator. So classic hip hop is a new format for us that will be in our arsenal of many different urban formats and I think that we’ve got the ability to utilize it in the most efficient way and I think for some of these folks that are just jumping on it you know it will go up and it will come down and then I’ll be stuck with this classic hip hop station that will be kind of all fit [ph] in the cluster and what do they do with it, that’s my thought.

[Davis Hebert:]

Okay, that’s great color. And then last one from me and I’ll jump off. Reach Media in the 8-K you detailed $8 million of contractual cost savings, just wondering if you could give any color on that? And then you mentioned you could see I guess some reduction in revenue and just maybe a comment on the Network Radio environment right now?

[Peter Thompson:]

Reduction in revenue? I mean the $8 million of cost savings is contractual, that’s basically you know compensation salaries stuff like that most of it related to the new joiner agreement I don’t know what we said about revenue reduction because you know Reach is forecasting to increase their topline in 2015.

[Davis Hebert:]

Okay, helpful. Thank you.

[Operator:]

[Operator Instructions] Our next question is from Nick Brown with Zazove Associates. Your line is open.

[Nick Brown:]

Hi, just kind of question on the bank re-financing. Do you have a timeframe for when you plan to come to market or you’re ready, have you already started that process?

[Peter Thompson:]

Nick, we haven’t really started, we want to get our 10-K out which we are planning on doing next week. So we got some fresh numbers on the street and then we’ll start to figure it out. I think the two things that are on our mind in terms of timing are – we got a couple of core premiums. We got a core premium of 2.5% on the TV One notes that rolls off I think March 16. So that’s one day we got in mind. And then we’ve got a one on one core premium on the existing Radio One firstly and that rolls off April 1. So it’s somewhere in the late March, we like to be closing in that kind of late March timeframe ideally you know subject to market conditions.

[Nick Brown:]

Okay, thank you very much. And just one other question also related to that. When you talk about the total seven times total leverage so that will include whatever debt is you used to refinance the TV One notes, is that correct?

[Peter Thompson:]

Yes so the thinking there is to refinance that out essentially with a bigger Radio One first lien. So all being well, the structure that we are thinking about is about $119 million goes away at TV One and is refinanced at the first lien level at Radio One.

[Nick Brown:]

Okay. Thank you very much.

[Operator:]

And there are no further questions in queue at this time.

[Alfred Liggins:]

Great. Thank you, operator and thank you investor community, you guys have been supportive with the company. Really appreciate it, and this TV One deal has been a long time coming and we’re not home yet, obviously we had to finance it but I think that we’re executing on what we told you that we would do and we appreciate your continued support. And as always, we are available off line. Thank you, operator

[Operator:]

Ladies and gentlemen that does conclude our conference for today. We’d like to thank you for participating and using AT&T Teleconference. You may now disconnect.