Urban One, Inc.
Q4 2015 Earnings Call Transcript

Published: 26 Feb 2016

[Operator:]

Welcome to Radio One's Fourth Quarter Conference Call. I've been asked to begin the call with the following Safe Harbor statement. During this call, Radio One may share with you certain projections or forward-looking statements regarding future events or its future performance. The company cautions you that certain factors including risk and uncertainties referred to in the 10-Ks, 10-Qs and other reports periodically filed at the Securities and Exchange Commission could cause the company's actual results to differ materially from those indicated by its projection or forward-looking statements. This call will present information as of February 25, 2016. Please note that Radio One disclaims any duty to update any forward-looking statements made in this presentation. In this call, Radio One may also discuss some non-GAAP financial measures and talking about its performance. Its 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 the Web site at www.radio-one.com. An audio replay of the conference call will also be available at Radio One's corporate Web site at www.radio-one.com under Investor Relations section of the web page. The replay will be made available on the Web site for seven days after the call. No other recordings or copies of this call are authorized or may be relied upon. I'll now turn the conference over to Alfred C. Liggins, Chief Executive Officer of Radio One, who is joined by Peter D. Thompson, the company's Chief Financial Officer. Mr. Liggins?

[Alfred Liggins:]

Thank you very much, operator, and welcome to the fourth quarter results conference call, which obviously is also our 2015 year end conference call. We've had a year that we're proud of because we had a lot accomplished, particularly with the buyout of Comcast as a TV One stake and the refinancing of our debt, particularly ahead of the market turmoil and TV One's continued strong performance in 2015 led by an increase of ratings by about 15% and an increase in our affiliate fees, we finished the year with about $125.5 million of EBITDA. The bad news is our radio business, which most of you on the call know was soft. And a large amount of that was ratings related of which we've gotten turned around. And we're showing improving ratings continuing into first quarter. However, we still haven't been able to hit the inflection point yet on monetization. TV One's performance is offsetting radio's poor performance, but 100% of our focus at this point in time is stabilizing the radio business, and then, growing that cash flow. We've made some progress in a number of markets, but two of our big markets, Houston and Atlanta, and one of our middle markets, Indianapolis, continue to struggle, so the focus is there. Washington is doing fantastic. And actually Baltimore in Q1 is also really stabilizing and I'm very happy with that trajectory. We're going to talk a bit more about TV One in 2016 after -- right before we get to question-and-answer. But, I'm going to turn it over to Peter who's going to get into the details of the numbers.

[Peter Thompson:]

Thank you, Alfred. Net revenue was relatively flat for the quarter ended December 31, 2015 at approximately $109.4 million. An increase in affiliate revenue from our cable television segment was offset by declines in the radio and interactive divisions. And a breakout of revenue by source can be found on page five of the press release. Net revenue for the radio division was down 9.1%. Our Dallas and Washington DC clusters showed the most significant revenue growth in the fourth quarter. However, this was offset by declines in other clusters, most notably in Houston, Atlanta, Baltimore and Indianapolis. From the fourth quarter, local revenues was down 8.8% and national revenue was down 6.2% for our radio stations. According to Miller Kaplan, the radio markets in which we operate were down 2% for the quarter compared to minus 7.3% for our clusters. Looking by category, revenue was up 13% in the automotive category and up 10% in the services category. Government category was down by 17%, driven by political. Entertainment was down by 15%. Food and beverage was down 13%. Health care was down by 12% and retail was down by 6%. Telecommunication was flat. Radio ratings continue to show steady growth. Fourth quarter ratings were up for Atlanta and Baltimore by a third in the 12-plus demo. And overall, our ratings were up 10% for the fourth quarter in the 25-54 demo. For Q1, our cable television advertising revenue is pacing up double digits, although we expect that to flatten out as the quarter progresses. And our radio advertising business is pacing down 4.3%. For January, 2016, the markets in which we operate for radio were down 3.3%, compared to our clusters down 6.1%. The underperformance was concentrated in Houston, which was down double digits in January. Excluding Houston, we performed in line with the market for January in our remaining clusters. We currently expect a strong first quarter performance from TV One to more than offset declines in radio, leading to the resumption of growth in adjusted EBITDA. Net revenue for Reach Media was up by 1.3% for the fourth quarter. Net revenues for our Internet business decreased 12.1% for the quarter, mainly due to a decline in alliance revenue as we reach the end of our diversity recruitment deal with Monster. We recognized approximately $44.7 million of revenue from our cable television segment during the quarter, compared to approximately $40 million for the same period in 2014, an increase of 12%. The increase is driven by an increase in affiliate subscriber rates. TV One posted 11% growth in gross time sales for the fourth quarter, but this was offset by under delivery against rate card. And the additional ADU liability resulted in a 3.5% decline in the net advertising sales for cable network. Affiliate sales were up 27.5% year-over-year. Cable subscribers, as measured by Nielsen, finished the quarter at $56.1, unchanged since the end of September. Operating expenses excluding depreciation, amortization, impairments, and stock-based compensation increased by 5% to approximately $83.7 million in Q4. Corporate SG&A expenses increased mainly due to approximately $2.5 million of annual corporate bonus expenses being recognized in the fourth quarter compared to zero in the previous year. Radio operating expenses were down 0.6%. Lower variable sales expenses were offset by higher marketing expenses, music royalties and bad debt expense. Reach expenses were down 8.3%, primarily from lower contractual talent costs. Operating expenses at Interactive One were down 4% year-to-year due to lower traffic acquisition costs. And TV One expenses were up 9% year-over-year, driven by higher content amortization than the prior year. For the fourth quarter, consolidated station operating income was approximately $41 million, down 3.5% from last year. Adjusted consolidated EBITDA was $28.9 million, a decrease of approximately 11.9% year-to-year. Interest expense was approximately $20.4 million for the fourth quarter, up from approximately $19.3 million for the same period last year. The company made cash interest payments of approximately $17.7 million in the quarter. Net loss was approximately $24.3 million, or $0.50 per share, compared to a net loss of approximately $13.5 million or $0.28 per share from the same period in 2014. For the fourth quarter, capital expenditures were approximately $1.5 million, compared to $1.3 million for Q4 2014. Q4 cash taxes paid were approximately $12,000. There were no stock repurchases during the quarter. As of December 31, 2015, Radio One had total debt net of cash balances, OID and issuance costs of approximately $957 million. The bank covenant purposes, pro-forma LTM bank EBITDA was approximately $126.6 million and net debt for that calculation is approximately $979.1 million for a total leverage ratio of 7.73x and a net senior leverage ratio 4.99x.

[Alfred Liggins:]

Thank you, Peter. As Peter outlined, radio in Q1 continues to struggle, although it's really about Houston. And if you ex-out Houston, we're actually performing in line with the markets, but the markets are still slightly down; not disastrous -- about 3%. But down just the same. If we can get Houston pulling to being down what the market is, that's going to be a big lift for us. Atlanta also down much more than the market in January. The good news, I think the market was down 1.7% or a couple percent. We're probably down 7% or 8% even though we've got a very strong ratings increase in Atlanta and we've also repositioned our stations. We had a simulcast up two signals in the market and we split that simulcast, so we've launched a fourth brand on a significant signal that covers the market in Atlanta. And that just launched in mid-January, so we're very hopeful there that we've got a strategic plan that's going to get us back to resume growth in Atlanta. And also ratings have stabilized in Indianapolis even though we're underperforming there significantly. We continue to work to monetize those ratings and stabilize that platform and get it back to growth. So that's the bad news about the radio division. I was hoping that the turn was going to come for us in Q1 because of the ratings trajectory we've had, but we're not quite there yet. However, TV One continues to do well. And it's doing well and the backdrop is it's a very strong ad environment in scatter for cable right now and TV One's well positioned. Our ratings were up about 15% last year and we lost Martin in October -- actually, the end of September. And it was about 38% of our prime schedule. And so we've taken a hit for that and we planned on that. We knew that we were going to take the hit. So right now going into Q1, we're seeing ratings decreases of about 12% in prime and on households. However, we're seeing that ratings decrease in the midst of a strong market. And we don't have a lot of big, heavy acquisition amortization, so we really have the ability to control and manage our expenses. And with that said, we will see significant EBITDA growth in TV One in 2016. So we're going to give you guys a guidance number of EBITDA for TV One of mid-70s up from 67 last year, so about 10% EBITDA growth for 2016. And again, we have the ability to manage the ratings softness that we expected because of the loss of Martin with our expenses in marketing and programming and employees, et cetera. We also have the ability across the radio platform to continue to optimize our expense base. We've taken out a fair amount of expense in 2015. We've got more productivity initiatives in place that we think will allow us to continue to bring down the overall expenses of the business in 2016. We're constantly focused on that. I'm optimistic that the radio business is not a falling knife. While I hate seeing us under perform, I love seeing other companies like Intercom and IHeart posting good numbers because that gives me faith and comfort in the long-term health and viability of the radio industry. So net-net, I think that we continued to be well positioned. We're building cash right now. A lot of people have asked us about bond buybacks given where the trading levels are. We think there are going to be significant opportunities to be aggressive in some form or fashion with things that will allow us to reduce our leverage and we think the key to taking advantage of those opportunities is having cash on hand. So we don't know which direction we're going to go in yet, but we're analyzing it and we're building a war chest for any opportunities that could create deleveraging for the company. So with that, operator, I'd like to go to the question-and-answer segment of the call.

[Operator:]

Thank you. [Operator Instructions] And our first question is from Timothy Stabosz, Private Investor. Please go ahead.

[Timothy Stabosz:]

Hi, good morning, gentlemen.

[Alfred Liggins:]

Good morning.

[Timothy Stabosz:]

Well, first of all, congratulations on the refinance last year. I'm sure you feel pretty good about being in that position. And then, that's got to feel good?

[Alfred Liggins:]

Yes. Now, look, we had some tough breaks in terms of over the last four years of when we hit the market and usually some natural disaster happens. The first time -- this wasn't a natural disaster -- but the first time we went out for a refinancing, the first Greek prices happened and we had a busted deal. And then, the next time we went out, the nuclear meltdown at Fukushima happened. So yes, we feel like we caught a break this year. We're really happy with our capital structure, the length of it. And with our debt service level, it's going to allow us to build cash and put us in the position to de-lever.

[Timothy Stabosz:]

I liked your use of the term war chest, by the way. And what is the cash on hand, by the way, as we stand now?

[Peter Thompson:]

At the quarter end, it was $67 million. Today, it's a little over $62 million. We added debt service between then and now, Tim.

[Timothy Stabosz:]

Does the imperatives and attractiveness in the debt market mean that equity buybacks are the less attractive? There is a buyback outstanding, of course, correct?

[Alfred Liggins:]

Yes. So that buyback was put in place specifically. And by the way, there's been very, very, very little executed on that buyback, probably 50,000 shares. And the reason we put that buyback in place is because we thought Third Avenue, the fund -- they're a big shareholder; they own over 2 million shares of stock -- and we thought that they might have to have an emergency liquidation, so we wanted to be in a position to support the stock because we got 2 million shares on our float hitting the market, that could be really, really problematic. It turns out that they're not going to have to fire sale immediately and do an orderly disposition. So I would say that we're not focused on buybacks now. That was specific for that particular potential event. And we are focused on building cash and building a war chest and looking for opportunities that could create deleveraging.

[Timothy Stabosz:]

Okay. Just a couple of others then I'll get back in queue. How comfortable are you with covenant compliance this calendar year?

[Peter Thompson:]

Yes. I think we've still got plenty of headroom. Covenants were set pretty loose. We've got guaranteed growth in affiliate revenue with TV One. So we know, within reasonable tolerance, where we're headed on that business. So I think we see radio stabilizing and therefore as we look ahead the next 12 months and obviously we had to convince the auditors of this, which we've done, we feel fine with where we're at in terms of headroom on covenants.

[Timothy Stabosz:]

Then one other. Why the delay in the return on audience -- getting better ad rates or whatever you get from stronger audiences? And is this unusual? And does it normally come quicker? And do you attribute it to the instability in the financial markets?

[Alfred Liggins:]

I don't attribute it to the instability in the financial markets. Why is the $64,000 question that me and David Kantor who runs our radio group in particular are asking our managers. There's always a lag, but the question is, is it a three-month lag, a six-month lag, a nine-month lag? And we're down a number of account executives across the company right now and we're replacing them -- sales people. As the radio industry has matured, it's become more difficult to recruit folks into the business. At one point in time, this was the go-to business. Everybody wanted to be in it. And now with a lot of the digital companies in place, younger people have got more options. It's still absolutely possible to recruit good talent, it's just not as free-flowing. So I think we've got caught flat footed in the number of account managers that we have on hand and we haven't been able to monetize these ratings as fast as I would like. I'm highly disappointed in that. And every day this is my focus because, look, we stabilize the radio business and just stop it from going down, right? Then this story works, right? And so we're continuing to pull expense levers, but what I need to stop from going down is the top-line. So I do not think its financial market related. Look, the markets from an economy standpoint aren't great, but they're not free falling, right? And I've always been of the mindset that radio was a flat industry. And so I think we got a good shot at that coming true this year. So as I said earlier, I feel better about the radio business today in terms of its long-term health. So it's an issue specific to us. We are not doing a good job right now. And David Kantor and I talk about it on a daily basis and he talks about it with our managers. And we're going to fix it. We've fixed it many, many, many times before in the long period of time that I've been running this company and it will happen again.

[Timothy Stabosz:]

Always appreciate the forthrightness. I got one or two more, but I'll get back in queue. Thank you so much for the color.

[Peter Thompson:]

Thanks.

[Operator:]

Thank you. Our next question is Matt Dretch from Road Capital. Please go ahead.

[Matt Dretch:]

Hey, guys. Thanks for taking the question. So could you just explain and flush out a little bit what happened in the fourth quarter on TV One in terms of the under delivery versus the rate card for the network and if you expect anything like that to impact 2016? The other question, I'll give you them all so you can just check them off. The other one I was curious on is, can you talk a little bit about the upfronts on the cable side? And then also, I know political could be interesting for you guys this year, so I'm curious what you're seeing there.

[Alfred Liggins:]

So look, TV One under delivery -- we knew we were losing Martin and we planned for that. But I just think the under delivery -- the falloff from Martin was more than we thought and just, it wasn't made up by enough from our originals in Q4. We're continuing to see audience erosion in Q1 from not having Martin. We were plus 15% total year last year in terms of ratings. And so far in Q1, we're probably about minus 12%. We're continuing to look for things to make that up. So it's too early to tell whether the ratings trajectory is going to stay at minus 12%, improve, or decline further. I would say that the management team at TV One and the CFO have given me kind of a range of shortfall that we could have and I took that into account when I gave you the guide of mid-70s. There's a lot of levers in that business to get you home from an EBITDA standpoint. Martin was a seismic event, if you will, so I don't expect further dramatic drop-off of the ratings. We know why this is occurring now. And we didn't actually acquire anything to replace it. We looked at a number of things, but got outbid on them. Our decision was to stay -- instead of biting off a big number on an acquisition that we hope would replace Martin and take the gamble that it would produce the same kind of ratings, we decided to take the ratings hit and leave ourselves flexibility to control our programming budget in order to meet our EBITDA growth targets.

[Peter Thompson:]

And on political, Matt, I think we've said before we're budgeting about $7.5 million of political dollars for this year and through today we've booked a little over $700,000 in Q1. So there's a ton more political still to come. So we think that gives us some tailwind Q2, Q3 and through that cycle.

[Alfred Liggins:]

Yes. We're loving the tight Bernie Sanders and Hillary match-up. And actually if Donald Trump ends up being the nominee, I think that bodes well for us too because Donald's out saying that African Americans love me, Hispanics love me and I think love is a very strong word from him. But I can tell you that Trump probably resonates more with a black audience than Mitt Romney does, right? So I think that there's going to be a fight for our audience all the way into November and we're hoping we benefit from that.

[Matt Dretch:]

And on the upfronts on the cable side, how are those going?

[Alfred Liggins:]

Yes, upfronts were plus -- we finished plus 10% and CPMs were kind of plus 3% or 4%. We're very happy with our upfront performance. That was the first positive year-over-year upfront that we've had in probably four years or so. So we were very happy with it. I think the same thing that happened in network broadcast TV over the years is happening in cable. Even though cable ratings are going down for whatever reason, whether it's Nielsen not being able to capture tablet viewership or viewership that's going to other services like Netflix, as these audiences, as these ratings shrink, advertisers still primarily love television. And so they need to place this money. And so right now, you're seeing a strong add environment, strong scatter environment, and rates are going up. That happened in broadcast television as well as cable proliferated and CBS and ABC and NBC and Fox's audiences got smaller, the CPMs went up on the advertising that was run. And I feel that's what's happening in cable right now.

[Matt Dretch:]

And so if we have that kind of upfront backdrop, how do we think about the impact of the ratings being down? Is it --

[Alfred Liggins:]

We're just having to reserve more liability for ADU and the teams managing it. We're taking more direct response revenue now than we have in the past because it doesn't come with any audience guarantees and we're taking more direct response to minimize the amount of ADU that we'll have. And that's how we're managing through it.

[Matt Dretch:]

Okay. And then the last question on sort of a move to delever or use your cash to capture some of the discount, particularly on your sub-bonds, are there any limitations on your ability to do that in your credit agreement or in your indentures?

[Peter Thompson:]

No, and the nine and a quarters are a permitted investment, so we don't have a restriction on repurchasing those.

[Matt Dretch:]

Okay, awesome. Well, thanks, guys. Appreciate it.

[Alfred Liggins:]

Thank you.

[Operator:]

[Operator Instructions] Mr. Liggins, there are no questions --

[Alfred Liggins:]

Great.

[Operator:]

I'm sorry. We do have one from Andrew Finkelstein from CQS.

[Andrew Finkelstein:]

Hey, guys. Thanks for taking the question.

[Alfred Liggins:]

Sure.

[Andrew Finkelstein:]

Just was -- I think I was looking at the corporate line, if I was looking at that right, did that go up year-over-year, causing -- there was a difference between the change in station operating income and the EBITDA line. I was just wondering if you could talk more about that.

[Peter Thompson:]

Yes, I called that out in my comments earlier, Andrew. The real difference there in fourth quarter was we didn't pay any bonuses to the corporate staff in 2014 and we did in 2015. And we accrued all of that in the fourth quarter, so there was about a $2.5 million swing in fourth quarter corporate expense and that's what it related to. Is that what you were looking for the explanation on in terms of the numbers?

[Andrew Finkelstein:]

Yes, apologies. Sorry I missed that.

[Peter Thompson:]

No, no, not at all. No, I just wanted to make sure you'd got it because it does stand out.

[Andrew Finkelstein:]

Yes, and should we assume you guys accrue, I guess, bonuses through 2016?

[Peter Thompson:]

Yes. We'll accrue -- I mean, generally if we're on or close to our numbers, we'll accrue them quarterly, so yes.

[Andrew Finkelstein:]

Okay. So 2015 is probably closer on a full-year bases to the right corporate run rate?

[Peter Thompson:]

Yes. I hesitate because one of the things -- and I was going to get into in the Q1 call -- we have a management charge between corporate and TV One of $1.7 million annually, and we always have that as a negotiation with Comcast. Now they're no longer in the picture, we'll just take that out. So there'll be a couple of puts and takes in that line, which is why you heard the hesitation in my voice. But yes, the run rate at the end of 2015 is not a bad run rate for 2016, subject to some changes we may make on allocations, which I'd expect to spell that out for you in the Q1 call.

[Andrew Finkelstein:]

Okay. And then I guess, one more if I could just jump back to I think, Alfred, what you were discussing looking at some bigger opportunities and building a war chest of cash for bigger deleveraging of that. I don't know if there's any other color. I was just wondering, I mean, generally what you're thinking there.

[Alfred Liggins:]

We get all these inbound calls about bonds, right? That's one. I think we're still not at the ownership caps in the radio business. In a shrinking or flat industry, you can delever through consolidation. So there could be opportunities for us to buy in-market competitors that would allow us to take out significant expense and have a deleveraging event. There's lots of things circling around like that. Nothing's imminent. We haven't made a decision to buy bonds. I mean, when they're trading at 75, the question is -- and they're not really trading that much, right? Is the world going to get worse and do people panic and there's a better opportunity for the company? We've had some conversations with people about potential in-market acquisitions that would allow us to delever, but also nothing imminent. But I believe something's going to happen. There's too much chatter right now. And I also, at a minimum, think the country is going into a rest break on the economy. I don't know if I would call it a recession, or even if it is a recession, hopefully it's a two-quarter recession like we used to have. And when that kind of stuff happens, asset prices get cheaper and opportunities arise. And so it would be great if we could do something, have an event of some type that would allow us to delever. So we're preparing for that.

[Andrew Finkelstein:]

So either -- or maybe even both -- deleveraging M&A deals, or if the bonds go down further on weak markets, looking at the opportunity, could be either?

[Alfred Liggins:]

Correct, yes. And we still have our MGM casino investment that we will make this year. Right now, we're supposed to make it in July. The casino's up. It's not open -- it will probably open later in the year, probably in Q4. That investment will end up going in closer to when it's going to open. The good thing about that investment is the closer we put it into opening, once it opens, we're going to get a revenue stream from that the following quarter that we can book. We won't actually get the cash till year end, but at least we'll be able to book revenue on it after it's been open a quarter. And we continue to think that's going to be a good deal. We've got to make sure that we've got our $35 million laid aside to do that. We still have a tower portfolio. You've seen people sell towers. We could -- we're looking at potentially monetizing that to add to our cash trove. And so we -- one of our investors said to me not that long ago at an investment bank outing, sitting on a lot of cash would be a very good thing in this kind of environment. And plus, the good thing for us is cash nets down our debt under our covenants, so it's a win-win, right, you know.

[Andrew Finkelstein:]

Yes, sure. And then just not replacing the Martin -- it's such a big part. I mean, you're not strategically sort of retrenching on the network side? Is it just that the right program opportunity didn't show up because that seemed like a pretty important --

[Alfred Liggins:]

There's not a lot to buy. A couple of things that were there to buy, there was a Tyler Perry sitcom called House of Payne that we were focused on buying, but we got outbid by BET. And it was a big number from the standpoint that it's a lot of episodes; it's 250 episodes. So it ultimately went for like $100,000 an episode. But that's like $25 million over a four-year license, period. So we just weren't prepared to commit $6 million a year of programming expense to something like that because if it underperformed in the ratings for us, it didn't do as well as Martin, we were going to be locked in, in terms of our ability to manage our EBITDA growth. So we absolutely -- and there was one other Tyler Perry acquisition that we got outbid for too. But that's really kind of -- those are the only two things that have been in the market. There's not a lot of on-the-shelf black syndication that we can buy to plug the hole. So we're not retrenching. We're continuing to try to look for stuff and uncover stuff, but there's just not a lot of product out there, so we got to come up with alternative strategies.

[Andrew Finkelstein:]

Okay, great. Appreciate the answers. Thanks.

[Operator:]

And we do have a follow-up question from Timothy Stabosz. Please go ahead.

[Timothy Stabosz:]

Yes. You guys thought you were going to be out of here, right?

[Alfred Liggins:]

No, we're good.

[Timothy Stabosz:]

Most of my questions were answered by the last questioner. But -- so I mean, if I understand you correctly on the debt, in a way, you're looking to leverage the deleveraging because it's a great opportunity?

[Alfred Liggins:]

I don't understand what leveraging the --

[Timothy Stabosz:]

Well, what I mean by that is we're not really looking at using the cash in our balance sheet to de-leverage. We're looking at other ways to manage.

[Alfred Liggins:]

Yes. Look, we strongly considered buying bonds at 75. But at the time that this was happening, it was like one crappy day after another in the market and a lot of the folks that we sought counsel for who are stakeholders in the company said, well, maybe the bid is 65, right? So it's kind of like, let's wait -- I mean, we don't know. Let's wait and see where it's going. And it was market dependent, right? This is just a crappy market all together, so if for whatever reason it disconnected to the point where there was a screaming buying opportunity, we wanted to be able to take advantage of it. But all of that said, we knew the number one thing that we should do was have cash on hand and available to do it, which motivated me to ask Peter to start pursuing the tower sale.

[Timothy Stabosz:]

Do you potentially have stakeholder support in delevering?

[Alfred Liggins:]

What do you mean?

[Timothy Stabosz:]

Financing?

[Alfred Liggins:]

Now, we haven't had any of those conversations. I think the stakeholder conversations we've had was, hey, should you be using your free cash to take advantage of discounts in your debt to delever? We haven't had any conversation about people coming to us and investing additional money to do it.

[Peter Thompson:]

Tim, more of an organic conversation. And also, we'd like our bonds to be trading better. So once we stabilize radio and grow our cash flow, we would expect the bonds ultimately to trade up. We're not in the habit of talking down our own bonds. Quite the opposite -- we think as cash flows grow, hopefully that firms up which will help us when we come time to refi. But as Alfred said, if there's a dislocation in the market and we can take advantage of it for a period of time, we would have to consider that.

[Alfred Liggins:]

Yes. Our understanding is that every company that's got bonds rated where we're at, this category of rated bond is just --

[Peter Thompson:]

Getting punished.

[Alfred Liggins:]

-- just getting crushed. And to the extent there's a market factor that's causing abnormal price depression, should we take advantage of that?

[Timothy Stabosz:]

And just so I'm clear on this, it could just as well be acquisitions as well as divestitures of assets that fund a potential delevering transaction?

[Alfred Liggins:]

Yes. I mean, delevering M&A -- can we buy in-market assets that allow us to create more EBITDA with bigger revenue base on a lower expense base? I mean, that was radio consolidation during the 1990s and the 2000s and pretty much all the big guys are full; they own the full complement of stations and we don't in most of our markets. But look, again, I would be very careful on how we did that. So we got a little bigger in Columbus, Ohio. We bought two radio stations for $2 million there to bolster our position. We just closed on them in January, so we haven't started to see the revenues turn around in that market yet, but we like that price entry point. So we've been very, very cautious from an acquisition standpoint over a long number of years. What did we buy before? We bought Columbus and then the last thing we bought was Charlotte, right? And our acquisition in Charlotte actually helped turn that market around from negative EBITDA to positive. And it's actually performing well for us in Q1. So we're mindful that there could be other things like that.

[Timothy Stabosz:]

Thank you. My final question -- and maybe you want to have this type of conversation offline. If so, just say so. But in terms of new business initiatives, I know you've got the casino and radio is not loved, it seems like, on the Street, of course. So I'm wondering if you want to talk about at all, are you doing anything with Jeff Smulyan in Emmis on the NextRadio, which is the FM chip being turned on in the cellphones.

[Alfred Liggins:]

Yes. I mean, we're participating. We are part of the NextRadio Consortium. We help market NextRadio by running the ads.

[Timothy Stabosz:]

My question specifically about that is, is there something that you believe about that about the nature of your audiences and markets that would make that more potentially successful or useful for Radio One?

[Alfred Liggins:]

Yes. Our audience is the most mobiley connected audience in America, the African-American audience. So I think have our radio stations accessible on the cellphone is tremendous and Jeff's making a lot of good progress with the carriers in making that happen. He's showing great leadership. And I think it's a strong positive for us.

[Timothy Stabosz:]

Is there an aspect of disposable income and the fact that bandwidth costs money and the use of FM does not that is particularly attractive to your audience or --?

[Alfred Liggins:]

Put it this way, that's the theory period, right? I mean, why pay to listen to music -- particularly since Pandora runs ads now too -- why pay and have it count against your data caps when you can get it for free on FM? But the other thing is that what we program on our stations is different. I mean, we have local brands that have local content that talk about things that happen in the local markets. And a lot of people like that. I just saw something -- an announcement from Nielsen talking about increasing audience shares for terrestrial radio amongst millennials. People are listening to radio and it's not true that millennials don't listen to radio. There's just a lot more audio competition out there. But I think this thing shakes out. I mean, Pandora's now trying to sell itself, I guess? I just read something that they're looking to strategic alternatives. Their business model doesn't work. The royalty rates don't work. They're having to sell ads just like we sell ads. They're building local sales forces. And yes, they're a competitor and they hurt our business. But in the end, if they can never really make any money, at some point in time, that competition's going to subside and our boat's going to level out and rise again.

[Timothy Stabosz:]

Thank you for the commentary. It was a great call.

[Alfred Liggins:]

Thank you. Operator, is that it?

[Operator:]

We do have another from [indiscernible] from Mariner. Please go ahead.

[Unidentified Analyst:]

Hey, guys. Just a quick one. Could you give us some more color on how you expect kind of advertising versus affiliate revenue to grow in 2016? I know you gave us a $75 million EBITDA number, but --

[Alfred Liggins:]

It's about $50 million -- no, it's not. It's changing.

[Peter Thompson:]

You're going to see ad revenues grow mid single digits and affiliate a little higher than that.

[Unidentified Analyst:]

How is the loss of Martin affecting those numbers? So if you hadn't have lost it. I'm assuming there's kind of three quarters of that next year, right? So would that mean that by pro forma, it should be -- like, organic, if I were to strip out Martin last year, would have been much -- or would be double-digit growth in advertising next year? Do you guys get what I'm asking?

[Peter Thompson:]

No, you might need to repeat that. But I just pulled up my TV One forecast while you were speaking. So affiliate sales, kind of mid singles and ad sales, both mid singles. Ad sales, actually growth projected to be slightly stronger than affiliate, so it was the other way around, netting to just above the mid single kind of top line growth is what we're anticipating.

[Unidentified Analyst:]

Okay, all right.

[Peter Thompson:]

So do you need to repeat your question?

[Unidentified Analyst:]

No. I can follow up offline. That's fine. Thanks.

[Operator:]

And sir, we do have a follow up from Matt Dretch. Please go ahead.

[Matt Dretch:]

Hey, guys. Thanks for letting me follow up. So just a couple quick ones. The bank leverage ratio -- can you guys disclose where you stand currently versus the test? And then on the tower sale, are there any limitations on use of proceeds from that sale? And could you comment on the potential size? Is that a $10 million, $20 million -- like, what kind of monetization of a tower portfolio are you thinking about?

[Peter Thompson:]

Yes, Matt. We have a $25 million carve-out for that in our credit agreement, so that's probably the size of the cash infusion that we would be looking for. So we'd back into that number and then we would have to figure out the rent that we got to pay to achieve that number. So if we did $25 million, then we really have no limit on the proceeds. It's kind of carved out as to we don't have to repay debt with it, for example. And then on the covenants, we have two tests. We have a limit on net senior leverage of 5.85x and we're at 4.99. And then we have an interest coverage. We have to have at least 1.25x interest coverage test and we're at about 1.7, 1.69x.

[Matt Dretch:]

Okay, awesome. That's very helpful. Thank you.

[Operator:]

And there are no further questions in queue.

[Alfred Liggins:]

All right. Thank you, everybody. And as usual, we are available offline for any additional questions. Thank you and talk to you next quarter.

[Operator:]

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