USA TODAY Co Inc (TDAY) 2014 Q4 法說會逐字稿

Good morning. My name is Simon and I will be your conference operator today. At this time I would like to welcome everyone to the New Media fourth-quarter earnings call. (Operator Instructions). Thank you. Ms. Sara Yakin, you may begin your conference.

Thank you, Simon, and good morning, everyone. I'd like to welcome you to New Media's fourth-quarter 2014 earnings call. Joining us today are Mike Reed, the CEO and President; Greg Freiberg, the CFO; and Kirk Davis, the Coo of New Media.

I would like to call your attention to the earnings supplement that was posted to the New Media website this morning. If you have not already done so, I would suggest that you download it now.

Briefly, before we begin, please let me remind you that statements made today are not historical facts and may be forward-looking statements. These statements, by their nature, are [uncertain] and may differ materially from actual results. We encourage you to read the forward-looking statements disclaimer in the presentation as well as the risk factors described in New Media's filings made with the SEC.

Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in New Media. The webcast and audio cast is copyrighted material of New Media and may not be duplicated, reproduced or rebroadcast without our consent. With that I would like to turn the call over to Mike.

Thanks, Sara, and good morning, everyone. Thanks for taking the time this morning to speak with us. 2014 has been a transformative year for the Company and we are excited to report our strong fourth quarter, the dividend increase and a compelling acquisition update.

As Sara mentioned, we posted a supplement to our website this morning and I will reference that throughout the call. Now I'd like to start on page 2 with a quick overview of our Company.

New Media is a leader in the large and fragmented local newspaper industry and, in fact, the largest owner of smaller market daily newspapers in the country. We own, operate and acquire local media properties that are the dominant source of comprehensive high-quality local news in the small to midsize communities we serve.

Including our recently closed acquisition of Halifax Media, which we closed on January 9 of this year, New Media operates in over 415 markets across 31 states. We publish over 490 community publications in those markets and that includes 115 daily newspapers. We are by far the largest owner of daily newspapers in the country with the majority of our dailies published for more than 100 years.

Our digital business is the fastest-growing segment of our Company and we think it is still early stage in terms of where it can go. We are particularly excited about our digital services business, Propel Marketing, which provides digital marketing services to small- and medium-size businesses. And as you will hear on the call later today, Propel had a very strong fourth quarter and we believe this business will be a major part of our future organic growth.

As mentioned on previous calls, we intend to manage the Company with gross leverage at approximately 2 times as adjusted EBITDA. And to maintain this modest leverage level we recently paid down $50 million of debt to bring our total outstanding debt balance to approximately $350 million. Net leverage at yearend stood at just under 1x1 as adjusted EBITDA.

Now let's turn to page 3 for an overview of what we have accomplished this past year. And with this past Valentine's Day we passed our one year anniversary since spinning into a separate public company. We are very pleased with what we were able to accomplish in our first year and we have detailed some of the main highlights of the year here on page 3.

Importantly, shareholder return during our first year is up 91%, including our Q2 and Q3 dividend payments. And we continue to see a path for growth through both organic and inorganic opportunities. We are on track to have deployed approximately $540 million in capital across eight acquisitions once our most recently announced deal for Stephens Media closes, which we expect to happen in late March.

On the debt front, we completed a refinancing of our credit facilities in June of 2014 which resulted in the lower interest and amortization costs while simultaneously improving operational flexibility and liquidity for the Company.

We also added incremental debt through this new credit facility in September of last year and January of this year for our Providence and Halifax acquisitions respectively. With our acquisition of Halifax Media now closed and the announcement of Stephens Media in progress we are very excited about our momentum as we begin 2015.

Now let's turn to page 4 to review some business highlights for the fourth quarter for New Media. We believe our strong fourth-quarter results reflect the investments we are making in our print and digital initiatives and also support our review that local newspapers are very relevant as they continue to provide unique local content to their respective communities.

Examples of investments we have been making to improve content and drive top-line growth include our digital services company, Propel, our digital automotive platform company BestRide, our Sunday Select distribution program which enhances our preprint revenues and our new design center in Austin, Texas. These initiatives are contributing to our results and will continue to do so for many quarters to come.

Total revenues for the fourth quarter which we reported this morning were up 16.5% to $186.8 million and on a same-store basis were up 1.2%. Our results were driven by strong growth in our digital category which increased 14.2% on a same-store basis, our best quarterly growth number of 2014.

Propel, our digital services business, contributed $5.6 million of revenue in the quarter, up an impressive 171% versus last year. To note, the revenue generated by Propel in the fourth quarter alone of $5.6 million represented 88% of our total revenue for Propel generated in all of 2013. We believe this further demonstrates the tremendous growth we are seeing in this business.

In addition to our organic growth we also continue to execute on an acquisition strategy. Since the end of the third quarter we have closed two more deals deploying $285 million of capital and recently announced another deal to acquire the daily newspaper group of Stephens Media for $102.5 million. Halifax Media, the biggest deal we have closed to date, was transformative for our Company and I'm excited to review this deal in more detail momentarily.

Looking ahead, our pipeline for future M&A remains robust and we continue to see opportunities for further investment at attractive valuation levels. To help fund these acquisitions the Company completed its second equity offering in January raising net proceeds of approximately $151 million. And we added incremental term debt and revolver through our existing credit facility and assumed $18 million of debt with our Halifax acquisition.

To maintain our intended leverage ratio of approximately 2 times, as I mentioned a few minutes ago, we did use $50 million of proceeds from our recent equity offering to pay down a portion of our debt. We intend to use the remaining proceeds from the recent equity offering to fund our Stephens Media deal.

With the stability we've seen in our business from an organic perspective, and the accretive acquisitions we've been able to execute on to date, I'm very pleased to announce that New Media's Board of Directors has authorized a dividend increase of 11.1% to $0.30 per share for the fourth quarter or, when annualized, $1.20 per share.

I'd like to take a moment to discuss our recently closed Halifax Media acquisition, [I'll] dive into the details a little further there. For that I'm going to turn to page 5.

As I mentioned, Halifax was quite transformative for our Company. We closed the deal on January 9 on schedule and as planned. There are many facets to the Halifax deal that make it a perfect fit for us and very exciting. I will run through a few of those.

The assets are the perfect size with an average daily circulation of about 30,000, the size we find to have the most attractive financial performance. They are dominant local franchises with a strong local editorial focus as evidenced by their multiple Pulitzer prizes. The assets further strengthen our geographic diversification as they are located primarily in the southeast where we had very little presence previously.

The purchase price multiple falls within our desired range, which is really terrific given that this was one of the larger portfolios of small-market newspapers in the country. We have a great synergy potential on this deal both on the cost side and the revenue side. And of particular note, they were not selling digital services, so we have a great opportunity to expand Propel.

This deal will improve the size and scale of New Media overall quite tremendously, which will positively impact our current business as well. With this acquisition we acquired 24 daily newspapers and about 750,000 Sunday print subscribers. And pro forma for this acquisition New Media will have $1.1 billion in annual revenue, $157 million in pro forma annual EBITDA and 1.6 million Sunday print subscribers. Quite a powerful company.

In addition to the Halifax acquisition, last week we announced the Stephens Media acquisition. Stephens Media is a leading newspaper publisher operating eight daily newspapers, over 65 weekly publications and more than 50 websites serving communities throughout the United States.

As mentioned in our press release, in announcing the deal opportunity met our operational criteria and financial metrics, including the purchase price multiple which fell within our target range of 3.5 to 4.5 times the seller's EBITDA. We expect this transaction to close in late Q1 and are equally excited about this acquisition and look forward to discussing it in more detail with you when we come back in a couple months to review our Q1 results.

Given the transformative nature of the Halifax acquisition we thought it would be useful to walk through what the Company looks like today pro forma for that acquisition. And for that I'm going to turn to page 6 of the supplement.

The blue shaded area of each column represents New Media's actual results for the full year of 2014, so those are our reported financial statements today. The purple shaded area of each column adjusts for material acquisitions that occurred in 2014 and specifically that is the Providence Journal, which we closed in September of 2014 and therefore only 3.5 months of results are reflected in our 2014 actual results. There is a pro forma look as if we had owned Providence for the full year.

And then lastly, on the right hand side of each of these charts you can see the green shaded area of each column which adjusts for Halifax Media as if we had owned that business for all of 2014. Important to note these pro forma numbers do not take into account synergies we expect to realize, which we believe will be between $5 million and $15 million for Halifax and there are an additional few million from Providence that will roll through in 2015.

As noted on New Media's -- as noted on this page, New Media's pro forma revenue, as adjusted EBITDA and free cash flow have grown to $1.1 billion, $157 million and $125.5 million respectively. And given the accretive acquisitions we have been able to execute on, as I mentioned a few minutes ago, the Board of Directors did authorize an increase of the dividend by 11.1%, we are quite pleased with that.

Before moving to the operational side of the business I would like to take a minute to share some thoughts around current valuation of some important financial metrics that I pay attention to and why we continue to see upside to our current share price. And for that I'm going to turn to page 7 of the supplement.

Given our strong cash flows, modest leverage and growing dividend we believe there is substantial upside to our equity. Despite the significant growth in our share price in 2014, New Media continues to trade well above a 4% dividend yield while our peer group trades at an average dividend yield of 2.9%. In addition, only 9% of media stocks that trade on the New York Stock Exchange or NASDAQ trade above a 4% yield, that includes New Media.

We believe the free cash flow growth we have demonstrated we can drive with accretive acquisitions, the stability we have demonstrated we have in our business from an organic perspective and the prospects of a growing dividend as demonstrated this quarter will lead our equity to trade at a dividend yield more in line with our peers, which we believe will lead to a healthy rise in share price.

For example, a dividend yield of just under 4% and a free cash flow yield of just under 9.5% equates to a price of more than $30. We don't think that is unrealistic. We believe the dividend increase this quarter also supports our positive outlook for 2015.

Now turning to page 8, I want to give you a brief overview of New Media's differentiated position in the market. And we felt it was important to review this morning in case we have new investors to our story who happen to be listening this morning.

As I know we hear far too often, newspapers our dead or nobody reads a newspaper anymore. It is easy to say that, it might be cool to say that; however, the facts don't support that. Local newspapers remain vital to people in small communities due to the relevant and unique local news, information and advertisement they deliver.

According to the 2013 community newspaper readership study conducted by the Reynolds Journalism Institute, in an average of a typical week over two-thirds of people in small communities read a local newspaper at least once during the week. And importantly, more than half of US adults say they made a shopping decision based on a newspaper ad.

Our value is delivering both comprehensive local news, information and advertisements and, as just noted, an incredibly large number of adults still read a newspaper. So while it may be easy to say newspapers are dead, the real facts don't support that thesis.

Our Company is a leader in the large fragmented local newspaper sector as measured by number of daily publications. Including the Halifax acquisition we now publish over 490 publications in over 415 markets across 31 states. We also publish 117 daily newspapers, soon to be 125 when we close the Stephens acquisition.

We are going into 1.6 million homes on Sundays with a printed product consumers desire and are paying for. That number grows to nearly 1.9 million homes on Sundays after we close the Stephens deal.

In addition to our strong local content and highly diversified portfolio of assets, we believe there are several other very compelling characteristics to our business that give us comfort around the long-term sustainability of our business and our ability to execute on our strategy.

These include: our strong and trusted local brands which are the dominant providers of unique and valuable local content in their respective markets; our national footprint and platform which provides meaningful leverage when operating the Company and acquiring new businesses; our large in-market local sales force which is nearly 1,500 strong now, and the barriers to entry remain quite high for potential competitors to enter our smaller size markets.

Our community focused newspaper business has proven more resilient than many very large market newspapers and we believe we are well positioned in each of the communities we serve. And as I mentioned earlier on the call, and I've mentioned on previous earnings calls, we are seeing a positive change to our revenue mix which is helping to lead to the stabilization we see.

And for those of you following along with the presentation, I am now turning to page 9. Year to date 62% of our revenue for the full year of 2014 has been generated from stable or growing categories versus 45% in 2008 and 58% in 2013. We continue to see this positive revenue mix change in the right direction.

The continued shift to a more diversified mix is important because it demonstrates why we believe stabilization of our business is fast approaching. The revenue categories that have historically been under the most secular pressure are local print and local classified print advertising. These categories continue to represent a smaller portion of our overall revenue mix.

Further, we believe future declines in these categories will be less substantial and we are seeing that in our financial results today. For example, classified print has shown significant improvement over prior quarters driven by obituaries revenue growth along with legal advertising revenue growth.

In fact, those are our two largest revenue categories within the classified category now. And while we do not believe local print or classified will become growing categories in the very near future, we are beginning to see signs of stabilization.

Inside the Digital category is our fastest growing business, Propel, and that revenue stream today still represents only 3% of our total revenue. We believe the continued strong demand we see from consumers for our local content, combined with the ongoing shift in revenue mix away from traditional print advertising, and the opportunity Propel and Digital present is leading to the stabilization we are seeing in our revenues today and, more importantly, is positioning us for future growth.

Now let's take a moment to quickly review our business model for those of you that are new to the story and I'm going to turn to page 10 of the supplement. New Media's business model for creating shareholder value is really quite simple: we focus on growing the top line and our cash flows through Digital initiatives such as Propel and BestRide and by making accretive and strategic acquisitions.

Our core newspaper business generates significant recurring cash flow and, as we grow our business organically and inorganically, we intend to distribute a significant portion of our free cash flow to our shareholders in the form of a dividend. We believe the growth in our cash flows combined with current income to shareholders with our dividend will continue to create a very compelling overall return for our shareholders.

Now let's spend a minute reviewing our continuously growing and evolving Propel business and for that I'm going to turn to page 11 of the supplement. Propel Marketing is our full suite Digital marketing services business that helps small- and medium-size businesses navigate the complex Digital sector and better positions them for success. We think we have some very distinct leverage points that make this a huge opportunity for us.

First, we have a full suite of products that allow Propel to help businesses in four different phases of growing and interacting online. Number one, we build a presence online for them; number two, we help them get found online; number three, we help businesses grow their customer base online; and four, we help businesses engage with both potential and current customers.

Second, distinct leverage point, small businesses do not have the time, resources and expertise to do this for themselves. Our research indicates that they would prefer to partner with a local, trusted business for these services, they would rather outsource it.

And third, we have strong trusted local brands and an in-market sales force that puts us in a lead position to be the provider of these complex products to local businesses.

In the fourth quarter Propel generated $5.6 million in revenue, which was up 171% versus the prior year. For the full year revenue increased 189% to $18.5 million versus $6.4 million last year. Though Propel only accounts for 3% of our total revenues today, we believe there is tremendous upside for this business as we expand our product offerings, further penetrate our current markets and enter new markets through acquisitions as well as an expanded sales force.

In addition to the exciting growth prospects Propel presents from an organic perspective, we have also generated compelling growth from our acquisition strategy. And to talk a bit more about that I am now going to turn to page 12 of the supplement.

The addressable market for newspaper acquisitions in the United States is big, in fact we estimate it is approximately $26 billion. With a little less than two years remaining to complete our initial goal of acquiring $1 billion of assets we feel very comfortable with pacing and that we are aligned to achieve this goal.

Since inception we have announced eight transactions worth approximately $540 million. It is important to note that all of these acquisitions were dominant local media businesses that met our operational and financial criteria. In 2014 there were 23 transactions in the newspaper sector across the US totaling $760 million of purchase price. Halifax is included in that number even though we actually closed it in very early January of 2015.

We expect a similar deal volume in 2015 with approximately $650 million to $800 million of transactions again this year for the industry. We believe we are very well positioned to continue to consolidate the fragmented newspaper sector and to actually have an advantage given our size, scale and unique centralized services platform.

Importantly, we believe our centralized services platform improves the quality of our local products, lowers the operating cost structure of our individual papers and improves their opportunity for growth, especially on the digital front.

With that I'd like to turn the call over to Greg for a few minutes who will run you through some very -- the details around our financial results for the quarter. Greg?

Thank you, Mike, and good morning, everyone. I am going to speak to page 14 of the supplement. Total revenue for the quarter was $186.8 million, an increase of 16.5% to prior year on a reported basis and an increase of 1.2% on a same-store basis. This is the second consecutive quarter of positive year-over-year revenue trend on a same-store basis.

Clearly acquisitions have impacted the as reported growth of 16.5%, but we also have some terrific underlying trends playing out in our favor. Traditional printed revenue declined 0.4% on a same-store basis to $98.5 million, which is a solid performance given the secular pressures our businesses face. Local display declined 5.5% and preprints declined 1.3%. This was on was completely offset with growth in classified print of 6.5%, our best performance since before the recession.

Within classifieds this performance is driven by legal, advertising, obituaries; we are also seeing auto, real estate and help wanted trends starting to show improvement. We think this is reflective of a stronger economic environment in small markets across the country.

Preprint revenue is down by 1.3% to prior. Digital revenue grew by 14.2% on a same-store basis to $16 million. Propel contributed $5.6 million to this total and was up $3.5 million or 171% to the prior year -- our strongest quarter of the year and this is all organic growth. Subscription and commercial printing group by 0.8% on a same-store basis to $72.4 million. Subscription revenue was up 1.2% while commercial printing declined slightly by 0.2% to the prior year.

Operating income was $17.5 million and net income was $11.5 million in the quarter. As adjusted EBITDA was $34.3 million in the quarter, an increase of 3.3% to the prior year. This reflects the benefit from acquisitions but it is also burdened by investments into digital, content, design and corporate infrastructure. Examples of this are Propel Marketing, BestRide.com, Sunday Select and the Austin Center for News & Design. And we believe there is a direct correlation between our improving top-line trends in these investments.

Free cash flow was strong in the quarter at $27.8 million or $0.74 per share, this represents an 81% cash conversion rate for EBITDA to free cash flow and demonstrates the strong cash flow nature of our business. As a result of these strong cash flows, and as Mike noted earlier, we were pleased with the Board authorizing an 11.1% increase to our quarterly dividend.

Looking at the full-year performance, total revenue for the year was $652.3 million, an increase of 26.3% to the prior year on a reported basis and an increase of 0.1% on a same-store basis. Traditional print revenue declined 2.7% on a same-store basis to $341.5 million, local display declined 6.5%, and preprints declined 0.2%.

Classified print had a full year decline of 0.4%, but I'd really point you back to my fourth-quarter comments to see the positive momentum in this category as we finish the year. Preprint revenue was essentially flat to prior year at minus 0.2% to prior. Digital revenue for the year grew by 8.3% on a same-store basis to $57.9 million, Propel contributed $18.5 million to this total and was up by $6.4 million or 189% to the prior year.

Subscription and commercial printing for the year grew by 2.4% on a same-store basis to $253 million. Subscription revenue was up 0.9% while commercial printing posted growth of 7.8% to the prior year.

Full-year operating income was $26.4 million and net loss was $3.2 million. Full-year as adjusted EBITDA was $89.4 million and free cash flow was $67.6 million or $2.11 per share using the weighted average shares outstanding during the year. This represents a 75.6% cash conversion rate for EBITDA to free cash flow for the full year.

We ended the quarter with $123.7 million of cash on the balance sheet and $20 million of cash available under our revolver. Gross leverage against our pro forma as adjusted EBITDA including Halifax is 2.2 times and net leverage is 1.1 times.

So in summary, this is a very strong quarter. Our trends sequentially into prior-year are moving in a very positive direction. The investments we are making have turned around the top-line performance of the business on a same-store basis, we continue to have strong cash flow performance and we are maintaining a modest amount of leverage. I would now like to hand the call back over to Mike.

Thanks for that report, Greg. Before opening the lines up for questions I'd like to conclude with a couple thoughts. First, our revenue trends continue to demonstrate stabilization and we are very excited to see how the investments we are making are impacting both our print and digital initiative.

Second, the combination of organic and inorganic growth from our evolving digital platform and accretive acquisitions continues to create a very attractive growth profile for our Company.

And lastly, with our strong cash flows, a healthy dividend and the right capital structure we are very excited about our opportunity to continue to create substantial value for our shareholders. Thanks for your interest in New Media and for your time this morning. And I would now like to turn the call over to the operator who will open up the lines for questions.

(Operator Instructions). Jason Bazinet, Citi.

I just have a -- maybe a simple question. The one thing that is sort of hard for me to wrap my head around is that when I look at the multiples that you guys are buying these assets at and I compare it to the same-store revenue trends --.

I can't quite figure out if you guys are just good negotiators or you are buying assets that are declining and then you -- when you get in there you sort of push them to sort of flat revenues or even growing revenues.

So, if you can just talk about those sort of dynamics to help us sort of bridge the intellectual gap between the low multiples and the relatively stable revenues, that would be helpful.

Yes, thanks, Jason. Well, I think first of all the disconnect starts with just the general perception that newspapers are a dying business and that -- the whole industry gets painted with a broad brush. And our belief is that that small to midsize markets actually are approaching stabilization and have the opportunity to [actually] grow in the future.

So we are able to buy at lower multiples because there is such a disconnect in terms of the perception of the long-term future of the business. So that is one factor.

Second factor is we are trying to buy markets and assets where we think we do have an opportunity to improve the business and put it on a position to grow. So we're very selective. There are a lot more deals we have passed on than we have actually done, so we are trying to actually do the right acquisitions.

And then third, we do think that our operating strategy does position the newspapers to have a better opportunity to grow. We are focused on investments into the areas of the business that are stable today or growing today. And so, by putting more focused and more investment into the opportunities where growth occurs we are then seeing more growth.

So really a combination of misperception of where the value for these assets are, buying the right assets and then applying our strategy. We believe that is what is leading to this.

Hi, Jason, it is Greg. I'd just add one other thing. The one material acquisition we had last year, Providence, was in September and Halifax was in January of this year. So you won't see the large numbers materially changing the underlying run rate of the business until you get into 2015.

Sure. Very helpful. Okay, thank you.

Jim Goss, Barrington Research.

I have got a couple. First, you indicated print advertising decreased 2.7% on a same-store basis. Could you break that into ROP versus classified, just in terms of the relative health?

Yes, local ROP was down 5.5%, classified was up 6.5%.

Okay. Also the pace of execution I think seems to me to be ahead of schedule by perhaps quite a bit. And I am wondering if you are already reaching the potential need to revise and set your targets even higher because you are running through that $1 billion over a several year period and you are halfway there, about three months into it. Any thoughts?

Well, we feel really good about where we are, what we've executed on to date where we are. And obviously as I stated in my comments today, we feel really good about our prospects for the future. We think we are in a great position to continue to grow organically as well as to take advantage of accretive acquisition opportunities.

So as those opportunities come our way we put our pencil to them. It runs through a pretty tough process and if the deal makes sense we are going to do it. And if we end up doing well more than $1 billion worth of deals the next couple years we'll be quite pleased.

All right. And you talked about the 23 transactions of $760 million in 2014 and then you gave that framework of $650 million to $800 million expectations for 2015. How are you arriving at that?

Are these things that you think are already somewhere in the pipeline or just some guess as to how they are going along? I know you are very experienced at the acquisition side. I wonder if you might share some insights on that.

Yes. No, obviously I am very close to the acquisition side of the industry. And the $650 million to $800 million is actually the range that transactions have fallen into in each of the last four consecutive years.

Okay.

And so based on the last four years I see -- the deal flow that we see today and based on the last four years of experience we think 2015 sets up to be a pretty similar year.

Okay, and lastly, when you have an acquisition like Foster's, sort of a one-off type thing, what motivates you to do that vis-a-vis a Halifax or a Stephens where they're more a substantial mix of properties?

Yes, so the Foster's, which is in Dover, New Hampshire, a family owned property, family had owned it since the late 1800s -- and we had a paper within about 30 miles. We actually had a cluster within about 30 miles in Fort Smith, New Hampshire. So that is a great -- that kind of a paper is a great acquisition opportunity for us because we actually get to take advantage of all three of our synergy expense buckets.

Number one, we get to take -- to right size the cost structure for things the family might have been hesitant to do because they had owned it for more than 100 years.

Number two, we get to take advantage of our centralized services which we think improve quality on a local level, but also reduce the cost structure at a local level.

And then three, we can to take advantage of regional cluster opportunities by moving certain functions or leveraging certain functions already being done in that region of the country.

So a deal like that one, we paid $5 million for it. It had $1.5 million of EBITDA. And after our first year of ownership we expect to have $3 million of EBITDA. So those are really quite lucrative transactions for us and we are on the prowl looking for those all the time.

All right, thanks very much, Mike.

(Operator Instructions). Amy DeBone, Compass Point.

Just as a follow-up to Jason's question, what was the EBITDA multiple implied by the $102 million price for Stephens?

We haven't publicly disclosed that, but it did fall within our range -- our guided range of 3.5 to 4.5.

Okay, thank you. And then can you provide an update on liquidity or the liquidity position post the Halifax close?

Yes. So we will use most of the last cash raised in our last equity offering for the Stephens acquisition. But then we've got two major acquisitions with Halifax and Stephens to digest so we are going to be quite busy with that. We are going to -- we do have a pretty good pipeline of smaller deals, family-owned deals that we are looking at.

We're going to generate -- if you assume a dividend rate as if the Q4 dividend stays constant, if you just make that assumption, we are going to generate organically another $70 million to $75 million of free cash flow this year and we have about $75 million of availability of debt under our current credit facility. So we have got about $150 million of capital that we can deploy this year towards M&A.

And so, we feel -- obviously feel great about the liquidity position and our ability to execute on some deals throughout this year. And again, with two big deals closing in the first quarter we are going to spend a fair amount of time integrating those throughout the year as well.

Okay. And the $75 million of available debt under the credit facilities, that is post Halifax?

Amy, it is Greg. There is about $73 million available and that is the accordion feature on the credit agreement, that is post the acquisition of Halifax.

Okay, great. And then was there any incentive income paid to Fortress for the fourth quarter?

Yes, there is. It is about $100,000.

Okay. And so, this is the first time that the threshold was met, right?

Correct.

For incentive income? Okay. And then we also noticed that in the Fortress earnings release today it looks like AUM for New Media actually decreased to $487 million from $505 million.

Yes, that is right, Amy.

(Multiple speakers).

It is actually driven by the accounting treatment. Since we have negative net income for the full year the $18 million that we paid in dividends is treated as a reduction of assets under management.

Does that impact future incentive income or is that (multiple speakers) calculation?

It does indeed. It does indeed.

Okay, so it could -- does it reduce the threshold?

Well, it could reduce the threshold, yes. And also then it is a lower base for management fees.

Lower base for management fees. But given that it reduces the threshold, it is -- it would be -- we would assume that incentive income would be paid in 2015 depending on I guess quarterly volatility, right?

Depending on the performance -- how we do and for that formula, the adjusted net income against the 10% threshold of that asset under management.

Okay, thank you. And then just real quick, for Propel, what was the split between monthly and one-time fee income? Is that continuing to transition into more monthly fees?

Yes, it is. We are evolving the Propel business model as we go and we are highly -- highly focused on selling more annuity like products that have monthly recurring revenue streams with automatic renewals. So (technical difficulty) we continue to make progress in that regard.

Okay, great. Thank you.

Ladies and gentlemen, that concludes the time we have today. I will turn the call back over to Mike Reed.

Again, thanks, everybody, for dialing in this morning and listening to us. We look forward to updating you again at the end of the first quarter on our progress for the first quarter. Thank you very much, have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.