Urban One Inc (UONE) 2011 Q4 法說會逐字稿

Welcome to Radio One's fourth-quarter conference call. For the conference all participants will be in a listen-only mode. There will be an opportunity for your questions; instructions will be given at that time. As a reminder, today's call is being recorded.

I've been asked to begin this call with 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-K's, 10-Q's, and other reports it periodically files with the Securities and Exchange Commission, could cause the Company's actual results to differ materially from those indicated by its projections or forward-looking statements.

This call will present information as of March 15, 2012. Please note that the 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.RadioOne.com.

A replay of the conference call will be available from 12.30 p.m. Eastern Time March 16, 2012 until 11.59 p.m. March 18, 2012. Callers may access the replay by calling 800-475-6701; international callers may dial direct 320-365-3844. The replay access code is 237-163. Access to live audio and a replay of the conference call will also be available on Radio One's corporate website at www.RadioOne.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 may be relied upon.

I'll now turn the call over to Alfred C. Liggins, Chief Executive Officer of Radio One, who's joined by Peter D. Thomson, Chief Financial officer. Mr. Liggins?

Thank you very much, operator, and welcome, everyone, to the fourth-quarter results conference call and also our year-end roundup. I am going to let Peter jump right into the numbers and then I'm going to follow up with a few comments and then we're going to open it up for questions.

Thanks, Alfred. Net revenue is approximately $98.1 million for the quarter ended December 31, 2011, an increase of 37.8% from approximately $71.2 million for the same period in 2010. We began to consolidate the results of TV One in the second quarter of 2011 and recognized approximately $31.3 million of net revenue from the cable television segment in the fourth quarter.

The radio division, excluding Reach Media, produced net revenues of $54.2 million, down 9.4% from the same period last year. This was the result of tough political comps, non-recurring major national accounts and certain format changes in select markets.

In the fourth quarter of 2010 we approximately $2.2 million of political net revenue versus around $600,000 for fourth quarter 2011. We also had approximately $2.1 million of net revenue from Comcast and Kodak which related to specific issues in the fourth quarter 2010 versus approximately $400,000 of issue money in the fourth quarter 2011. Normalizing for political and nonrecurring national issue money, radio division net revenue was down approximately 4.2%.

Markets in which we operate declined 3.8% for the quarter. Reach Media had net revenues of $10.5 million in the quarter which was up 13% year to year. The interactive division had net revenues of $4.8 million, up 30.5% year to year, and TV One had net revenues of $31.3 million in the quarter, which is an increase of 8.7% over the fourth quarter 2010.

Our four largest clusters performed as follows -- Atlanta was down 6.9%; Baltimore was down 14.1%; Houston down 15.7%; and Washington DC down 16.7%. Along with the largest clusters, six of our other radio clusters posted net revenue declines in the fourth quarter including Indianapolis, Richmond, Columbus, Dallas, Philadelphia, and Detroit. Clusters that posted net revenue growth in the fourth quarter include Raleigh, Cleveland, Cincinnati, St. Louis and Charlotte.

Our average unit rate was down 15% while the number of spots in the fourth quarter was up by 5% compared to prior year. Sellout was down 2.6 percentage points. By advertising category retail was our largest category at 18% of the total and that was down 17% from the previous year's quarter. Telecom was next; it was up 2% year to year followed by food and beverage which was up 2% year to year.

Entertainment was the fourth largest category and was down 13% year to year; financial was fifth, down 13%; and auto sixth, down 11%. Government [public] spending, which includes political, was down 30% and fell to 8% of the total from 11% in the fourth quarter 2010.

Operating expenses, excluding depreciation, amortization, stock-based compensation and impairment of long-lived assets, increased to approximately $71.3 million in the quarter of which $20.6 million related to the newly consolidated cable television segment. Excluding the cable television expenses, operating expenses were flat year to year.

Radio division operating expenses, including corporate expenses, decreased by 0.4% for the quarter. Reach's operating expenses increased by 16.2%. The Internet segment's operating expenses increased by 1.8%. Excluding non-cash intercompany charges, the Internet division adjusted EBITDA for the quarter was $45,000 compared to a loss of $794,000 for the same period in 2010.

For the fourth quarter consolidated station operating income was approximately $35.3 million, up 25.8% compared to the same period in 2010. Adjusted consolidated EBITDA was $26.8 million, an increase of 31% including TV One. Attributable EBITDA was down 11% for the quarter as a result of the radio division under-performance.

Stock-based compensation increased by 144% to approximately $2.3 million for the quarter due to the accelerated vesting of approximately 1 million shares of restricted stock. Depreciation and amortization expense increased to approximately $11.2 million compared to approximately $3.2 million last year. Approximately $7.6 million of that was recorded for the fixed and intangible assets of TV One.

Impairment of long-lived assets decreased to approximately $22.3 million compared to $36.1 million. 2011 annual impairment testing resulted in a non-cash impairment charge to goodwill in our Columbus market as well as a non-cash charge associated with Reach Media definite live intangible assets.

Interest expense increased to approximately $23.1 million for the fourth quarter from approximately $15.8 million for the same period in 2010, an increase of 46%. The increase in interest expense was due to higher interest rates associated with the new 2011 senior (technical difficulty) facility, the new senior subordinated notes and the notes issued by TV One. The increase in the overall effective rate of borrowing for the quarter was approximately 1.5%.

Approximately $2.4 million of the increased interest expense relates to the debt recorded as part of consolidation of TV One. The Company made interest payments of approximately $15.5 million for the quarter.

Benefit from income taxes for the quarter ended December 31, 2011 was approximately $17.7 million compared to $714,000 for the quarter ended December 31, 2010. Substantially all of the increase in the benefit for 2011 related to the deferred tax liability for TV One. Cash taxes paid were approximately $1 million in the fourth quarter.

Net loss was approximately $19.1 million or a loss of $0.38 a share, a decrease in the reported net loss of approximately $27.2 million or $0.52 per share for the same period in 2010. The fourth-quarter capital expenses were approximately $4 million compared to $937,000 in the fourth quarter of 2010.

Approximately $1.8 million of the CapEx relates to the Washington, DC market and corporate office move to Silver Spring; around $500,000 relates to the Houston news format switch; and $600,000 relates to a tower upgrade in Atlanta.

The Company received dividends in the amount of approximately $5.1 million in the fourth quarter and that was all from TV One and approximately $14.6 million for the full year. Of the $14.6 million, $1.7 million came from Reach Media and $12.8 million was from TV One.

As of December 31, 2011 Radio One's total debt net of cash balances were approximately $773 million. For bank covenant purposes, our total net debt was approximately $678.8 million and our LTM bank EBITDA was approximately $78.1 million given a total leverage ratio of approximately 8.69 times and a senior leverage ratio of approximately 4.68 times.

The Company's cash and cash equivalents by segment are as follows -- Radio One and Internet approximately $19.4 million; Reach Media approximately $1.7 million; cable television approximately $14.9 million. In addition to cash and cash equivalents, cable television segment also has short-term investments of $761,000 and long-term investments of approximately $7.4 million.

During the quarter ended December 31, 2011 the Company repurchased 25,250 shares of A -- of Class A common stock in the amount of $32,000, and 752,132 shares of Class D common stock in the amount of $926,000. Aside from repurchasing employee shares that were sold for tax, the Company was last active on the open market on November 15.

During the year ended December 31, 2011 the Company repurchased 54,566 shares of Class A common stock in the amount of $73,000, and 4,245,567 shares of Class D common stock in the amount of approximately $9.4 million.

So just to point out that we stopped buying stock actively in the market November 15, and that was the time when we realized that the fourth-quarter radio revenue was not going to come in -- was not going to turn around and come in as we had expected. And with that I'm going to hand back to Alfred.

Thank you, Peter. And as we had forewarned in earlier announcements, it was a very tough Q4 and it was due to the performance of our radio division. And we -- when we recognized that that was going to be a problem, we started putting ourselves in a position to perform in a much stronger manner in 2012 with a number of format switches, another -- and also, most importantly, a number of revenue generating efforts. And it's working.

In 2012 our radio division will rebound and, in fact, we expect mid- to high-single-digit revenue growth in the first half. Our Interactive One division made money in Q3/Q4 and will be full-year cash flow positive. We're debating with management as to how much cash flow positive that will be at this very moment.

But suffice it to say, we will make money and I'm very excited about that division, because the ad share shift to digital continues to grow at a [tort] pace, unabated, and we've got the number one African American targeted platform on line, and this is new money. This is not us shifting radio dollars to our radio websites. That division actually plays for digital dollars at a digital agency, so it's a bright spot.

In addition, TV One continues to grow it's EBITDA; we are putting a number on the Street, its EBITDA will go from $32.7 million in 2012 to approximately $40 million -- excuse me, in 2011 $32.7 million to approximately $40 million in 2012. So another strong EBITDA growth year. And we believe that that unit continues to have upside even beyond that because of the nature of its business model.

We also continue to be very cost focused, but at the same time allowing for investments to support our growth initiatives, like our all new station -- our new all new station in Houston, Texas, which we believe has tremendous upside as well.

Another bright sport for the year is that we believe the back half of the year will also prove to be robust as well because of political spending adding fuel to our fire. We've had a number of conversations with different political issue entities and we think we're positioned well to take advantage of the political climate and dollars will flow our way.

People have questions whether the Company will have issues meeting our leverage ratio covenant step-downs in Q2 and Q3 of this year. We've been focused on this for that last six months and we expect to remain compliant throughout 2012 with all of our debt agreements. So with that, operator, I'd like to open it up to questions.

(Operator Instructions). Bishop Cheen, Wells Fargo.

Hi Alfred, hi Peter. Thanks for the update. I just want to focus on two things. Because the questioning of the covenant ratios, let's just go through covenants for dummies a second. The $78.1 million of EBITDA, that is your covenant EBITDA as defined in your credit agreement, is that correct?

Yes.

Okay. And is there a simple way that we can get to the $90 million back to the $78 million -- is there any simple math or is it very complicated?

It's complicated. The way to tackle it is obviously to back out the TV One and Reach EBITDA and then replace them with a dividend flow. So actually that's not too complicated. For the piece that you won't see then, we're allowed to add back non-cash charges and that is approximately $4.7 million for the quarter.

So with those you should be able to do it. If you subtract TV One/Reach EBITDA, add in the dividends and then add back about $4.7 million of non-cash charges that will get you to the $78.1 million. And Bishop, if you run that match and it comes out slightly different, then I'm happy to push you through it.

Okay. And then on the covenant definition of debt -- if I always understood it, the TV One debt is non-recourse in this calculation as long as it is under $120 million.

That's correct.

$119 million -- so what else is being netted out of the [689] and change of gross debt non-TV One?

(Inaudible) the Radio One and Internet cash balance up to $25 million and that's why for the first time I broke it out for you in the comments I just made. So you can deduct $19.4 million of cash.

Okay, that is very helpful. All right, second question is can you give us an update on a negotiation with Reach Media, where we are at? Because our focus obviously is on any cash impact to your cash balance or any other kind of impact that would impact debt or cash.

Okay, we're at a very advanced stage of discussion with them. And what I expect to happen is that there will not be a put event this year or some considerable period of time. But instead we're going to rework and extend our affiliation agreement such that we pay -- we do away with the cash payments that the Company had been making to Reach.

And in exchange for that we'll extend out a term by a year or so on the back end so that we will kind of guaranty them a longer tail on the income stream that they would otherwise have. And the net-net of all of that, I believe, is that there will no cash going out of the door either in terms of a put event or in terms of the affiliation agreement.

And the trade really -- the way to think about it in numbers terms, Bishop, is that we pay approximately $4 million of affiliation fees to Reach Media a year that will go away. But it will probably mean that our dividend stream will decrease by around about $2 million. So it will be about a net $2 million pick-up for Radio One with no cash out the door.

That is helpful. I'll pass it along. Thank you.

Patrick Fitzgerald, Gleacher & Co.

So I know you said it, and I'm sorry, I just missed it -- what dividends are included from TV One and Reach Media?

In the full year there was $12.8 million from TV One and $1.7 million from Reach Media for a total of $14.6 million.

Okay. And what portion of that came in first quarter of last year?

We did get a TV One dividend in the first quarter of last year and I can't remember if that's (inaudible). It was a small (inaudible) dividend, kind of $1 million-ish.

Okay. So you guys have -- you guys gave the cash number at TV One as about 15 million, right?

Yes, and I kind of expanded on that because they've got some cash kind of tied up in long-term investments, but they've staggered the maturities with a view towards being able to pay a dividend through the rest of this year. So I think the way to think about that cash balance, it's not simply the $14.9 million, but also to add in the $7-million-and-a-bit of long-term investments, so that's that way.

Okay. And under the TV One indenture you can dividend cash out of there as long as there's $5 million on the balance sheet, right?

Yes.

Okay, so you have $15 million to $17 million that you could dividend out in the first quarter, I guess, if you converted those long-term investments into cash like you're saying?

Well, there's another governor and that is our deal -- our operator agreement with Comcast, which is more restrictive than the $5 million. So effective January 1, in order to automatically be able to dividend out money we have to keep at least $15 million in there. I mean, we can always go back and discuss with Comcast where we need to change that number, but for us to have the automatic rights it's got to be above $15 million.

Okay, thanks.

So that changes your math a little.

Okay, thanks, that's helpful. In terms of TV One, how many subs are you getting paid for now?

High 40s.

High 40s?

Yes.

You're on all MSOs at this point, correct, all major --?

No, no, no, we do not -- the only one we don't have -- the only large one we don't have is DISH.

Okay. And where do you expect to subscribers to be at the end of 2012, paid subscribers?

I don't know for sure because there's a number of factors that will go into that and I'm not sure I want to get a subscriber number because it's just fluid. Our earliest agreement doesn't come up for another four years, so it ain't going backwards.

The question though is, how many adds we get with additional -- excuse me, any additional adds we get with our existing distributors and that's just hard to handicap. There are some things that we're working on that could change that, but I can't guarantee it.

But we're comfortable with the EBITDA number and there are some things that could happen that could make that EBITDA number be better. Our ratings could go up, we could get more subscribers, but we wanted to give you guys a number that you could put your arms around and put in your model. And beyond that I don't really want to give any more guidance on TV One.

Okay, fair enough. Thanks a lot.

Michael Guarnieri, Nomura.

I've got a few. So back to the TV One dividend. Peter, can you just give us guidance on the formula? I understand now the minimum cash balance as you kind of described it under the two agreements. But if we're modeling out $40 million, okay, of EBITDA and kind of looking at interest expense, is it simply that you could just pay out free cash flow as we would calculate it subject to the $15 million minimum cash?

Yes, I think that -- that's how we look at it and then we obviously test to make sure they're going to have enough cash to pay it. But in my model I'm assuming we get paid our share of net income.

Okay.

There's very little CapEx, so really if you knock off the interest expense you should be in that kind of ball park.

In the ballpark, okay, terrific. Thank you. And in terms of the TV One per sub price increase, right, as I understand it goes up a penny a year. Can you tell us at what point in the year that happens? Is it -- should we roughly model it (multiple speakers)?

It depends on the agreement. It's on the annual cycle of everybody's agreement and agreements are staggered.

Oh, okay, okay. So there's no real way for us to model it, it just happened staggered throughout the year?

Yes, everybody's agreement happened at a different time and the payments are on annual -- the increases are on annual cycles.

Okay, terrific, terrific. And then lastly on TV One, I know you talked about paying subs in response to a question just a moment ago. But I understand your total subs to be higher. So can you comment --?

Yes, the difference is Nielsen. Nielsen is obviously the ratings service and is what we sell with -- to advertisers and there's always a gap in between the number. Well, two things -- one, there are some subs from some distributors that are still in a free period, okay. So that's a difference between contracted subs that are paying and don't -- and contracted subs that don't pay and that free period will run off and then those subs will start paying as well.

But the big gap is Nielsen. Nielsen counts more households than you're actually getting paid for. And I forgot why, I think they take -- there are a number of places that actually get your signal that you never get paid for, they may account for theft and things of that nature.

Next time we have the call I'll get a more -- I'll have a more detailed -- actually it doesn't even need to be next time. You can call us and we'll get you the difference. You can call us later today or whatever, I'll just have to call over to TV One. But there's always a gap between the Nielsen reported household number and peoples' paying subs.

Okay, terrific. Thank you. And that part you just mentioned where there are some contracts that are still on nonpaying, will those all become paying within the next 12 months and what would be the (inaudible) in paying subs?

I don't want to give that level of detail at this point in time because, A, I don't have it right now. And B, I mean today -- I think we just want people to know that the cash flow is going to grow strongly to $40 million. And we believe there's a possibility, given different factors, like I said -- ratings could go up, more distribution -- that that number could be better, but right now count on $40 million.

And then we're debating internally whether or not we put a more forward looking model out on the Street with subsequent years, 2013, 2014. But it's a business that has two revenue streams and the sub fees go up contractually.

And also very important to note, I was just reading Inside Radio I think yesterday, [Zenet] came out with their projections for (technical difficulty) industry growth. And I think they said that ad industry revenues were going to grow 2.5% or 3% this year. But Internet is going to grow 17%, we're positioned with the number one Black platform there. And cable television is going to grow 10%. So there continues to be more dollars shifting to cable TV from broadcast television networks. So we're in a good space with these two businesses.

And so, right now we don't want to get too far ahead of ourselves with giving you too much forward-looking information. There's a chance that we will put a model -- we've done this in the past, by the way. I forgot, when we launched TV One seven years ago, eight years ago, I think shortly after -- maybe a year or two into it we actually put a model out on the Street that had five years of projections so people could understand the value that we are creating.

There's no more analysts for the most part covering our Company. So I don't know if anybody has that model. But we may do that again.

Okay, terrific. Thank you very much. One more quick one for me is on the radio stations, in terms of the amount you're reformatting. I guess, are you done in terms of what your plan was, first part of the question, and --?

For this year, yes, we are done. And look, we're a specifically kind of broadcaster, we're an urban broadcaster. And PPM basically shrunk the audience opportunity for African-American formats, so there were a number of places where we just had too many urban radio stations. And we reformatted a few -- Houston, Columbus, Cincinnati.

So when I say we're done for this year, I think that there's not a lot more to do period. But certainly we're just focused on the positions that we've taken with these format changes and executing on that and marketing those and building those brands right now and we're not thinking about anything else. We're not even going to look up and decide whether we should be doing something different for a year.

Terrific. Thank you very much, appreciate it.

Aaron Watts, Deutsche Bank.

Maybe just two on the radio side of the house. Alfred, can you maybe just talk about the shift that took place from the end of last year into this year, moving from kind of negative territory to positive? And kind of what you're feeling out there as we move month-to-month so far in 2012 in terms of the environment?

Yes, yes, yes, look, I've said before -- we had an awful Q4, I mean it was just -- if we dropped -- I think you can get back to the numbers in that -- we dropped double-digit million dollars of cash flow off our radio division in 2011 and 60% of that was in Q4. It was shocking to me.

And we ultimately dissected it and figured out why and it was a combination of -- one, you're seeing the numbers come out now and kind of everybody was down mid-singles, right, 4, 5, I think Cumulus just reported 4 in Q4. And then we had some additional dollars that people didn't have. And then we had some positions that were not optimum in the market because of PPM.

So because our strategy has historically, since we've been public, outgrown the industry. So we under-performed and we got our game together and changed the way we did things. We also had to respond to some rate pressure, Clear Channel established this centralized inventory management policy called Best Rate.

So, my understanding -- I don't work for the company so it has to just be my understanding -- they got a bunch of guys in San Antonio with computers acting like an airlines reservation system and it's not controlled at the station level, now it's controlled centrally in San Antonio. But they're using technology to be able to lower rates faster than anybody else.

That's ultimately what was happening to us in Houston in the first half of last year. And we got hurt, it's our biggest market. Well we figured out a pricing strategy to combat that. One of the reasons we also went to all news is when you got two big urban radio stations with big ratings and high rates and we had a gospel station and your music formats, you don't have a lot more inventory to play with. You don't have other dog radio stations that you can package to be more cost efficient.

So not only was there not an all news radio station in the number six market in the country, Houston, Texas, all news -- you're running 24 commercials an hour, it's an inventory machine. So it helps our pricing position in that market. And so one of the things that happened, you cycle through a bad year, you come into a better year, but we're also seeing ratings improvements in places where we've made format switches like Cincinnati and Columbus.

One of the things that I haven't talked about a lot that's been a big driver is back in the fourth quarter of last year we LMA'd one of our competitors in Detroit. So we reconfigured the competitive landscape and we launched a new format and our ratings are up 40% in Detroit, Michigan, which had been a tough market for us where we were barely making money. And now our revenue trajectory is up dramatically and we're going to do well there.

And so, those are the things that we've been doing in addition to redefining, re-cutting our cost space and keeping an eye on that. But as I said in my comments, making sure that we continue to reduce cost but continue to feed the things that we need, like we need to advertise our Houston radio station -- our Houston news station on television, that's essential. And we're going to continue to do that.

And so that's -- I don't know if that answered all of your questions, but -- oh, you said the outlook. I've been a bear on the radio business, and when I say a bear, I'm like it's a flat to up 2 or 3 business for the next five years, that's what I've said always, it's the reason we're in the cable television business, it's the reason we're in the Internet business. And I think I'm being proven out right.

You're hearing the guys come out with the different companies and say that their Q1 is flat to marginally up and their Q2 is starting to get better. We're seeing the same thing. So, everybody else -- almost everybody else. The average industry company may be flat to up 1 and we're going to outperform that in Q1. Q1 is basically almost over so we know where we're at in Q1.

Right now the weird phenomenon that you have in Q2 is you start out with incredible pacings, and then the pacings come down and you get down to something more normal. But if our pacings get cut in half from where we're at with Q2 today we're going to be very happy.

That's really helpful, Alfred, thanks.

Marci Ryvicker, Wells Fargo.

Just drilling down a little bit in radio, can you talk about the performance in the different ad categories? What we've heard it sounds like so far from both radio and TV, that the strongest category has been auto and we're trying to figure out if the other categories are at least picking up into the second quarter. So kind of following on the comments that you just made, Alfred, that would be great.

I'm going to throw it to Peter. I don't have the ad category information. We probably don't have it (inaudible) its pacing in Q2 maybe --.

We don't have forward pacings by category. All we've got is how it played out last year in the fourth quarter. And also year to year we were actually off about 10% in the fourth quarter.

Anecdotally can you talk about the direction of volume?

Yes, (multiple speakers). Look, first of all, anecdotally we've been public since '99 and we always get this question. And my general feeling is ad categories on average, unless you have some major exogenous event like an earthquake in Japan that disrupts the supply chain for Japanese auto makers, okay, on average most things move in lockstep.

So if one industry spends a little less and one spends a little more; if the economy is good people are spending more and if it's bad everybody is cutting back. And radio has never had the preponderance of auto money that television has. A local television station could have 40% plus of its revenue be out of dealer groups or car dealers, radio has always been much more dispersed.

But anecdotally, we're starting to see the auto makers come back. Business is getting better, the supply chains are back in shape and they're a stronger category now going into 2012. But the mix of industries has never mattered in radio.

For you guys maybe, but for others it has. In terms of -- just a longer-term strategic question, Alfred, you said the radio business is flat to up low singles. Is that core radio or is that growth coming from digital -- do you think?

I think it's one and the same, all right. I think the average radio company's digital is their radio number. I think that what is happening is we are transitioning our advertisers from just buying spots, audio spots to buying digital products from us, buying a stream, buying a banner ad.

But if it was new money you'd see the radio industry's top line growing in the radio industry's top line isn't really growing all that much, it's growing tepidly, 1% or 2%. So I don't think that radio companies are getting into the digital ad shift yet.

When you're 70% local business and you go out to the local grocery store, the local car dealer or the local retailer, that guy may have $20,000 a month for his advertising budget. 10 years ago you were selling them all radio spots, now you're selling them radio and digital. And largely for us also, there isn't a local digital industry or budget that we're participating in.

Ad agencies aren't coming up with local digital avails. So there's money there. That money is going to Living Social and Groupon and other more targeted local online sites. But most of the digital money, most of the digital ad shift is occurring nationally, which by the way is also my theory as to why you're seeing national be disproportionately down in the big markets.

Why the big markets are getting hurt in national is because I think that marketers are shifting those dollars that they would normally spend on national spot radio in the top 10 markets, they're putting in digital. And I think you're going to continue to see that trend, because the $16 billion of display advertising that you see quoted is largely national money.

Thank you very much.

[Ernest Davis], private investor.

Thank you and good morning. There seems to be a great opportunity for Radio One. It seems like you're well positioned to capitalize on content development and content utilization. Alfred, can you speak to the opportunity that you guys are doing in terms of the strategy you're putting in place, in terms of cost-utilization platforms with all of your content?

Yes, we've got a unit called One Solution. It's a small unit; it's like two people. Everybody wears different hats, so essentially we have a One Solution team. Like I said, it's two people. The guy who heads -- the Chief Revenue Officer for TV One and Interactive One heads it up. And a woman who's in charge of integrated marketing, name of Peggy Byrd, are the team.

But then each unit has an ambassador. So the radio group has a person that works with the One Solution unit, TV, online, and we go out and we make pitches to Walmart, to Toyota. And it's a great story because when you put all our assets together we reach about 82% of Black America.

And why that's important -- and we have multiple platforms. And why that's important is it gets us big meetings with CMOs and not just fighting for dollars at the ad agency level. And we did about, what, $6 million last year? $5 million or $6 million? Yes, about $6 million and it's growing.

But what happens 70% of the time is we make a One Solution pitch, get people familiar with the assets and they may end up buying something, but they default back to their own media plan and they'll just buy radio or they'll just buy TV. But that's okay because at least the company as an entity is in front of them.

So what happens with that One Solution pitch, even if they only just buy TV, at least now TV One is on their radar screen because TV One is part of the platform that reaches 82% of Black America. Or at least our radio stations, our radio group or our syndicated shows are on the radar screen because it's part of that platform. So we think that it gives us the ability to have a conversation that most radio groups, other than a Clear Channel and a Univision and a CBS -- they can't have it.

Great. And the second question is -- is HD on your radar at all? And are there any opportunities there to utilize those streams for different content?

We program one HD channel and that's in Houston because when we killed the gospel format there we wanted to make sure that it was available in the marketplace for the community, so we put it on HD. But other than that, we don't spend any money programming our HD channels.

Thank you.

Michael Kass, Blue Mountain Capital.

I just wanted to go back to some of the comments you guys were making about PPM. I understand a little bit better when you think that the impact of that is going to roll through and --?

It's done, it's done. So like kind of the last markets that rolled through for us a year ago were kind of like the Columbus', the Indianapolis', the Cincinnati's. Once those rolled through and we saw where our numbers were, that's what prompted some of the format shifts.

And the negative effect of PPM has cycled through. So now I think you should see a bounce back -- we are seeing a bounce back in Indianapolis, we are seeing now a bounce back in Columbus after our format shift. So I think we should -- we can take PPM off the table as a reason for our non-performance.

And then on the TV One guidance for $40 million of the EBITDA, could you just give a little bit of color whether it's quantitative or qualitative regarding what's driving -- what you think is going to drive that on a year-over-year basis?

Contractual increases in sub fees of a number of millions of dollars and ad revenue growth and actually that's it.

Okay, I'm wondering how much of TV One's revenue comes from affiliate versus (multiple speakers)?

About 50-50.

About 50-50?

Yes.

And just (inaudible) -- is it mainly that you're interested in getting a lot of new subs despite the -- I understand not wanting to quantify it (multiple speakers)?

It's ad revenue growth and increased -- well, we will get some new subs because some of the -- the industry will grow modestly and there will be internal growth. And even if the industry doesn't grow, we're on digital tiers, digital penetration will grow and so our sub count will grow. So, yes, there's growth embedded in there, there's license fee increases and --.

And jumping in for a second, Michael, if you think that on average license fee is kind of $0.12 or $0.13, a penny on that is quite a high percentage. And that's one of the reasons that you'll see that affiliate income stream growing pretty strongly.

I guess I was also just trying to understand does that figure embed a certain amount of -- like you're saying non-organic sub growth? Meaning not merely a function of tiering and not really a function of population growth, but are you expecting to increase Reach? And is that baked in or (multiple speakers)?

For this year, no. One of the things that we've done with TV One now that we're consolidating it -- when you're private you can have all the robust projections that you want because there's -- nobody sees them and if you don't hit them it's just an internal family issue. So we've taken out all of the speculative upside, if you will, and the numbers that we're giving you now on the Street are stuff that's going to happen.

Okay. And then can you just remind us what the basket is for restricted payments and (multiple speakers)?

It was [15] and we've spent [9.6] -- actually we spend [9.4] and we've got [5.6] left on it.

Okay, thanks a lot.

Richard Lee, Post Advisory.

Last month Comcast announced its intention to launch two new African-American cable networks. It doesn't come as a surprise because this is something they'd always promised as part of the NBC Universal acquisition. But just wanted to get your thoughts on how involved do you think Comcast will be in terms of building up those networks? Do you see them using their might to get the carriage up to the levels where you guys are?

Yes, one, the answer is they didn't -- they're not involved in running those networks, they just gave those networks distribution. And then those networks are independent networks that will have to go out and get distribution from the rest of the industry on their own. And Comcast is not involved, they don't own any of them.

One of the reasons why we didn't -- we weren't -- we didn't compete to be one of those networks to launch is because they own 48% of TV One and that was problematic. They told Congress that they wouldn't own any of it. So -- any of these networks. So it's just distribution. I think you can expect them to not work to get those guys more distribution.

Put it this way, the reality is that Comcast actually -- they gave us our distribution deal, they invested some money, but they didn't help us get any of our distribution deals. We did all of those internally. And so, I've been in business with those guys for eight years and they're busy people. So I don't think that they're going to be focused on helping Magic Johnson and P Diddy grow their networks, particularly if they don't own any of it.

Got it. (Inaudible) interesting point. Would you think if they helped you get more distribution deals do you think you would be able to get higher fee rates if you (multiple speakers) what part of the NBC Universal platform?

The problem with that, prior to the NBC merger there was -- the problem was the leverage that Comcast has to get distribution for networks that it owns is it gives other guys distribution. So it gives Cablevision distribution for some of Rainbow's networks in exchange for distribution for Comcast networks.

So if they were to do that for TV One they would probably look to extract something out of us as their partner because they're going to commit their cable systems to pay fees and they're only going to get half the -- they're going to pay 100% of the freight and only get half of the upside.

So that was probably the main reason why we never tried to get them to leverage and we just did it on our own. And quite frankly, we were very successful, we did get Cablevision last September. We've got a fair license fee.

We didn't have to position this network -- this network was not an expensive network, but it wasn't a nickel network either. It wasn't carry me, I'm not really all that expensive, it's chump change, don't worry about it -- that wasn't a sales pitch. The sales pitch was, this is a high-quality network for African-American adults. There was one competitor at the time. And so we were able to get everybody, but DISH, at our rate and we still have hopes that we'll ultimately get DISH based on the strength of the brand of the network.

So, no. But subsequent to the NBC merger they signed a consent decree that severely restricts them -- the distributor, Comcast Cable, and the networks that they own from leveraging the two against other operators for fees and everything. And so our understanding was there had to be a Chinese wall between what TV One did as a distribution strategy and what Comcast and NBC/U could actually know.

Like when we did our Cablevision deal they could not be privy to the actual terms of the deal and the rates, etc. I don't really understand what goes on in the Justice Department and what big companies agree to to get things done, but that's what came out of that for us. So there really wasn't an opportunity for us to do that there.

Got it. And then can you give us just a few blurbs about how ratings have been on TV One?

They have been soft and this number -- this $40 million of EBITDA number that we gave you takes into account those soft ratings. So far they're down year over year. We are doubling our hours of -- number of hours of original programming. However, most of those original shows don't hit until Q3 and Q4.

One of the reasons for that is we made a CEO transition last year. Our founding CEO, Johnathan Rodgers, retired. We had a new CEO coming in, Wonya Lucas. And we didn't spend any money on new programming because I wanted her to have the opportunity to guide the network's programming strategy and the manner that she saw fit as opposed to committing a bunch of dollars.

Because when you do programming deals it, create shows, it's millions of dollars and they always overlap from year to year. So what we did in 2011 would have hampered her ability to set a 2012 strategy.

Got it. And then -- I apologize if you said this, but what are your thoughts on political revenue in terms of how it will compare versus 2010 and '08?

You know what, it's going to be -- well, actually I don't think it's going to be more than '08. '08 was a juggernaut because of Clinton versus Obama. But I do think that -- I don't now know how to handicap it yet. We've had some recent very positive conversations with a number of political campaigns.

And so -- and the reason I'm hedging is because in our numbers we generally put a very conservative political estimate. So we're saying $4 million this year. So we're saying that we're going to do $4 million this year; we did what in 2008, $6 million?

$6 million.

We did $6 million in 2008.

And we did about $4 million in 2010.

In 2010. So we're projecting to do the same. And we thought 2010 was kind of a crappy year for us as a company. Politically we didn't really benefit that much. And you know what, it wasn't a great year for the Democrats, right. So we're hopeful that the Democrats are going to take our demographic much more seriously this year because of what happened in 2010.

And even though the Republican nomination race has kind of turned into a very long, drawn out battle of sort of imperfect candidates, if you will, whoever ends up being the ultimate nominee given the mood of the country I think people still think that the president is going to have a tough race on his hands.

And Democrats are going to have a tough race on their hands because there's just some people who are just against the Democratic Party no matter who the Republican nominee is. And so, that should bode well for us because we obviously are a big part of getting out the African-American vote.

Great, thanks, guys.

Michael Guarnieri.

Yes, and this is our last question.

Thank you very much, just really quick, in terms of ad revenue versus sub revenue, is that like ad revenue is 90% of sub revenue at TV One or is it something different, 100%, 80%? I'm just kind of curious for a ball park.

It's really close for this year to 50-50, affiliate revenue is slightly under 50% versus advertising.

Versus advertising revenue. Okay, terrific. Thank you, that was it for me.

Thank you, everybody, for dialing in. If you have any additional questions please feel free to reach out to Peter or I off line and we'll talk to you soon. Thank you for support.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.