Urban One Inc (UONEK) 2004 Q1 法說會逐字稿

Welcome to the Radio One first-quarter earnings release conference call. All participants will be in a listen-only mode until the question and answer session of the conference. (OPERATOR INSTRUCTIONS) Today's conference is being recorded; if you have any objections you may disconnect at this time. I would like to introduce your first speaker for today, Mr. Alfred Liggins, Chief Executive Officer and President of Radio One.

Welcome everybody to our first-quarter results conference call. Before we get into it Scott's going to read a little something.

This conference call includes forward-looking statements within the meaning of section 27a of the Securities Act in 1933 and section 21e of the Securities Exchange Act of 1934. Because these statements apply to future events they are subject to risks and uncertainties that could cause actual results to differ materially including the absence of a combined operating history with an acquired company or radio station and the potential inability to integrate acquired businesses, need for additional financing, high degree of leverage, seasonal nature of the business, raising of rights to acquire certain portions of the acquired companies (indiscernible) radio station operations, market ratings, variable economic conditions and consumer tape (ph) as well as restrictions imposed by existing debt and future payment obligations. Important factors that could cause actual results to differ materially are described in Radio One's report on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission.

Thank you very much. We are clearly pleased with the results that we've released; net revenues up 10 percent, station operating income up 17 percent. Also pleased to finally announce the resolution of the Mableton radio station in Atlanta, Georgia. We will be happy to discuss any and all items, TV One, Mableton, operations after Scott goes through the details with you.

Good morning everybody. The first-quarter of 2004 was clearly one of our stronger ones in quite a while. The Company performed admirably on virtually all metrics of performance including revenue growth, cost containment, margin expansion and free cash flow generation. All this on top of a first-quarter in 2003 that saw net revenue grow 9 percent. Additionally we have continued to deleverage the balance sheet utilizing our strong free cash flow. We are starting to see some decent deal flow; we closed on a $35 million acquisition in Philadelphia in the first-quarter and funded that deal out of free cash flow and TV One is off to a great start; truly an all cylinders quarter.

As for the specifics; Radio One's net revenue grew approximately 10 percent in the first-quarter of 2004 to $69.7 million. This growth was pretty broad based with particular strength in Atlanta, Baltimore, Dallas, Detroit and Washington, D.C. while Richmond, Louisville and Columbus were weak. Overall we showed positive revenue growth in 19 of our markets and went backwards in three. The growth in the business was balanced between local and national with both increasing at the same rate while particular categories of strength included automotive, financial, entertainment, travel and transportation, government, public and services.

Station operating income was approximately $34.1 million, up 17 percent from last year, representing a strong conversion ratio on revenue of 1.7 to 1 and a margin of 49 percent, up from 45.8 percent last year. Adjusted EBITDA, which ignores the impact of the losses from TV One, came in at approximately $29.9 million, up 18 percent from last year, and free cash flow was approximately $15.3 million, up 86 percent. Finally, net income before preferred dividends was $8.8 million or 8 cents per share. The income statement impact of TV One's operations was a loss of approximately $2.4 million which represents approximately 40 percent of TV One's net loss for the quarter.

Turning to the balance sheet we reduced our debt by another $13.1 million during the quarter and ended the quarter with gross debt of approximately $584 million and debt net of approximately $50 million of cash of approximately $535 million or 3.5 times LTM bank EBITDA of approximately $154 million. We continue to have an undrawn revolver of $250 million which is fully available to us at this time.

Other relevant financial items in the quarter included capital expenditures of approximately $1.5 million. This was down considerably from last year's 3.2 million which is more timing related than anything else. CAPEX for the full year should be in the $10 to $12 million range consistent with last year, although this number as before in CAPEX associated with any acquisitions we may make during the year. Cash taxes were $332,000 as the Company continues to not be a federal cash taxpayer.

The only other item of note was an increase in non-cash compensation primarily associated with a grievance with two key Radio One on-air personalities whose deals included modest stock grants. Locking down these two individuals and aligning their interest with the rest of our shareholders we thought was in the best interest of the enterprise.

Turning now to the second-quarter. All signs point to another period of good growth. We are forecasting net revenue to the up approximately 6 to 8 percent. April for us appears will end up in the high single digit and May is pacing strong. We are going into May above 8 percent and inventories are tight. Pricing appears to be firming and optimization of pricing will become more of an issue as the months progress if the business continues to run at this pace. For markets where we get forward pacings in those markets May improved about 150 basis points in the past month and June improved 400 basis points, all positive signs.

The only word of caution on all of this is that the range in market growth for April varies from down 13 percent to up 13 percent; again these are for the markets. And for May from down 10 percent to up 21 percent; so those figures -- there's still a significant amount of variability in the industry. On the expense side we have lifted our hiring and wage freeze. As business builds we must invest in our infrastructure and our people. We will be prudent but we will not jeopardize morale or opportunities for long-term growth. Thus station operating expenses should grow in the mid single digits in Q2 and corporate expenses will continue to grow as we build the management team and continue with our Sarbanes-Oxley for '04 compliance, which is going very well.

However, as always, we are focused on achieving as much operational leverage from our revenue growth as the business and environment will allow. We firmly understand (indiscernible) to investors focused on this industry. We will also continue to manage our balance sheet by making scheduled principal payments on our term loan and funding acquisitions out of free cash and cheap revolver borrowings. Today we announced the $35 million acquisition of New Mableton Broadcasting Corporation which owns WAMJ-FM in Atlanta, a station we have been operating under an LMA for approximately two years. We expect that deal will close in the fourth-quarter of this year. The M&A pipeline is good and we are hopeful that we will have other deals to announce over the course of the next few months and/or quarters.

As for TV One, it launched in January and is off to a good start. I'm sure Alfred will have more to say on this in the Q&A session. With that, I'll turn it back to you, Alfred.

Let's just go right to questions.

(OPERATOR INSTRUCTIONS) Victor Miller, Bear Stearns.

On the operating expenses for the quarter, the programming technical up 8, SG&A up 1, kind of a trend we've seen over time, what's driving the differential in those growth rates and should we consider that to be the trend for the year? And on Mableton, obviously you spent the same amount of money in the Atlanta market as you did in the Philadelphia, about 35 million, and Atlanta is a bigger radio revenue market. According to the BIA you've got $4 million in revenue there, the power ratio is only .45 according to that data. Could you talk about how you determined that even though it's in the 6th versus the 11th market there is more money in the Atlanta market, but how did you come to a devaluation of $35 million and what's the upside for that station? Thanks.

On the expense side you're referring to Q1 growth. I guess the way to think about that, Victor, is that between programming and technical programming is the much bigger category and obviously that's where all of your on-air talent resides in terms of cost. And while we've been in a hiring and a wage freeze, at the end of the day we have certain contractual obligations that obviously a wage freeze does not supersede -- or the contractual obligation supersedes the wage freeze. So while we've been very good holding the line on personnel costs in most of the functionaries of the enterprise, obviously in the programming area if you've got to pay people more money because that's what their contract calls for, you've got to do that. and some of these people have pretty high compensation rates.

Additionally, as our ratings grow there are bonuses made to these individuals independent of the economic environment, independent of any wage freeze. That's really been the driver there. Otherwise we were flat, as you pointed out, because we've been doing a good job of holding the line on cost. Technically there's nothing going on in the technical arena that is necessarily driving those costs higher. It really is mostly focused on the programming space.

With regard to your second question on Mableton, you're right; coincidentally the purchase prices in both Philadelphia and Atlanta are the same, $35 million. Atlanta is a larger market; we think it has better growth prospects. But at the end of the day, what we had -- and in fact, the two radio stations are both Class A, so there's a lot of consistency between the Philly deal and the Atlanta deal. We look at the Atlanta deal the same way we look at every deal. If this is effectively a Stick radio station so we built a forward-looking model. We just kind of backed the future cash flows; we applied market multiples and market growth rates and we looked at the margin that we're currently making in that market and we applied that down the road to the revenue that we expect to generate on that radio station.

And there was a negotiation between the Company and the owner of the radio station and we felt that the $35 million was Fair. We had an independent appraisal -- we had several appraisals done. We also had B&Y (ph) Capital Market provide us with a fairness opinion -- and we also looked at comps. Philadelphia obviously was a great comp. Another thing that we looked at was we acquired another station -- another Stick in Atlanta last year for $55 million. And in fact, that station has just sort of modestly better POP count coverage in Atlanta. So from a variety of different perspectives we felt that this was a good purchase price and we went through the same analytical rigor that we go through for every deal.

So BIE is an estimate of $4 million power ratio, .45 basically cash flow breakeven, that's basically what we should be thinking about?

Yes, I hate to comment on the individual performance of an individual radio station. At the end of the day this station has a 1.7, 2 share in that market. When you think about the potential for the station, which I think is much more important when you're buying a Stick, rough numbers put a 2 share on $400 million that's $8 million, assume a .8 power ratio which we should absolutely be able to achieve at some point, and then throw a 50 or 60 percent margin. We actually do north of 60 percent margins in the Atlanta market. And I think you can get to sort of a three to five-year potential for this station.

Sounds very helpful. Thank you.

Bill Myers, Lehman Brothers.

First off, just in terms of TV One, if you can just update us in terms of the sub count on digital versus analog; any new discussions with some other MSOs? That's number one. Number two, you mentioned you're interested in sort of getting bigger over the platform, mentioning sort of a better pipeline. What's your current debt leverage comfort levels and is it changing materially? And then lastly, just on the expense side, your second-quarter guidance for mid single digits, is that a good run rate for the year and essentially how much of that's fixed versus through the variable component?

I'll handle TV One. Sub count right now is probably 3.5 to 4 million subs; I don't know the exact number off the top of my head. Conversations with the MSOs are going well. The cable television business is the damnedest business I've ever, ever seen. It's the only business where getting a deal done in the year is the fast-track. I've never seen anything like it. But it's par for the course. I'm on the front end of all of the negotiations with the MSOs and so I'm highly confident that things will go well particularly with the two satellite operators, Time Warner, Cox. Obviously Adelphia just put itself up for sale and it's in bankruptcy so we're lucky we got the Cleveland deal done when we did so that's probably going to be on hold for a while. And Charter is going well. So I feel good about our TV One carriage prospects. It's just one of those things where it's a grinding process and that's the nature of the cable business; that's just how they operate.

I tried to change their attitudes, but they haven't been receptive. But they're going to carry TV One. So that's a good thing. Acquisitioning pipeline, that's continued to say that we're looking for acquisitions that will be fill ins in markets that we already operate in. We feel that that gives us the most upside, gives us the least risk. We're working on several things as we speak now that fit that criteria or that profile. We'll be announcing some deals this year. And the rest of the time we're just working on our existing assets that we have. We've always said that we've got a lot of upside in our existing asset portfolio. And I think that's proven to be true. Managing a radio station is more than a notion, so I'm actually secretly glad that the M&A environment, although it's improving, has been quiet. Because it's not like -- we don't have any ferocious desire to be in 100 different markets. We want to be in the right markets with the right clusters with huge margins and a manageable portfolio of assets. And you can take the expense.

Actually off of this you had a leverage question. We've said historically that our comfort zone is 4 to 6 times, that was back when we were levered at north of 6 times. We're down below 4 times now. I am perfectly comfortable continuing to deleverage the balance sheet because obviously that gets my overall cost down as well as it enhances the financial flexibility coming into an improving M&A environment. So I guess my comfort zone is now zero to 6 times and we're not going to do anything stupid with regard to diluting our shareholders inappropriately or otherwise doing anything that will jeopardize the long-term growth prospects of the enterprise just to delever the balance sheet.

But we're clearly going to be more focused on balance sheet matters over the next couple years because I think we'll have more deals to do and we also just have a number of things that we have to address over the course of the next couple of years. Our high yield bonds are callable in '06, our bank deal runs through '07, we have our convert out there which we continue to watch closely and think about and ultimately might pull the trigger on some things there. So less leverage is good in certain environments, more leverage is okay in other environment, it just all depends on sort of the overall context.

With regard to the expense side, we haven't specifically provided any guidance for the second half of the year, and so we're going to -- in our press release we're going to avoid doing so on this call. We would feel more comfortable just continuing to manage expectations and provide perspective on a quarter-by-quarter basis until there's a little more stability in the industry and we feel better about the intermediate term prospects as opposed to just the near-term prospects. Although generally we are feeling pretty good about this year and, for that matter, '05.

But to provide more specific information than that is something that we're just not prepared to do at this time. We've always said, with regard to your question about mixed versus variable expense, that approximately 20 to 30 percent of your expenses are variable. The way I'd sort of look at it is probably 20 percent is purely variable and then there's another 10 to 15 to maybe as high as 20 percent that's more fixed variable. So that in the short-term you probably have the ability to hold the line on certain costs but otherwise longer-term that incremental component because a cost that is truly a fixed cost then probably needs to be invested in and then the balance would be fixed cost.

Great. Thanks very much.

Drew Marcus, Deutsche Bank.

Can you talk about, number one, conceptually with May entering at a higher than usual sellout rate the strategy in trying to push price of the remaining inventory and if it becomes more of a seller's market how long can it sustain that seller's market going forward just conceptually? And then second, can you talk -- have people changed formats to go against you in some of your markets like we've seen in the past? I think it's been a little bit quieter lately, but can you talk about that?

I don't think anybody has changed formats recently. (indiscernible) we've gotten a break it looks like for a while here. I'm trying to think, Alfred, wasn't there somebody that just changed? Am I forgetting?

Just on the format thing, it's like people see our performance and they go oh, urban's hot. And let me tell you something -- and I've always said this -- urban's a great business provided it's not highly competitive. At the end of the day -- and you're going to find this in Hispanic as well -- these formats convert at lower power ratios than do general market formats. So if you're filling a niche and the market can support more urban stations then that's find, but to the point where it gets overcrowded, then you just have too many horses at the trough and in an under converting format. That's happening in Atlanta right now. Fortunately our station -- we got out in front, made the format switches, got a big ratings leap ahead of everybody else and we're still doing well there. But the top station change in format is an example. There are six urban radio stations in Atlanta. There is no more room -- there's probably too many stations there and everybody is not going to win.

At some point in time people have to look at the competitive dynamics of urban radio, not just that urban radio is great. And the other thing is that people flip these urban formats, they don't generally flip to urban adult, they flip to hip hop because it doesn't cost a lot of money to promote and they think that they can get big ratings fast, but there is a ceiling on that. I'd be willing to bet that a number of these companies that have flipped into urban formats are not seeing the revenue growth that they ultimately thought they were going to get, and they're also not converting their ratings to revenue like they thought they were. And so at the end of the day, Radio One is an urban operator. We are going to defend that hill come hell or high water. So these other companies that are just looking for a quick hit have got to ultimately make a decision as to whether or not they think that that's the most profitable use for their radio signal. So the answer to your question is I don't remember off the top of my head anybody else recently changing, but we're here to stay and it's more than a notion to come into the format and expect to walk away with big revenue gains.

And we're not moving. I mean, we're going to be in the format. So if somebody is going to change it's not going to be us. Drew, what was the second part of that question?

Switching power, what's the (indiscernible) become a seller's market?

We've really been monitoring that since January and May is tight but we're way ahead of it, so I think we'll be fine. It's a great time for this to be happening too because the entertainment business is going to start kicking in meaning movies where when they have to get on they have to get on and they'll pay whatever they need to. So I think we're in good shape for May.

Is the industry doing a better job on inventory control?

I don't know if the industry is. I think we are. The industry might be getting a little bit better, I hope it is.

And Drew, if you get everybody to show us their numbers and their rate and we'll tell you.

Jim Boyle, Wachovia.

Good morning. Your revenue guidance seems very conservative given you're back to the old curse of success here. You're just putting up growth levels that your peers would kill for. So could you describe how or where the upside is since you've already said that April finished in the high single digits and it looks like the industry may only finish at maybe 4 percent and yet May and June seem to be stronger than April?

Jim, you know, we can't be heroes every quarter I guess.

(multiple speakers) a lot of hot markets.

There are a lot of hot markets and thankfully we operate in a number of them. At the end of the day first-quarter is a significantly lower revenue quarter, and so frankly from our perspective it's just easier to grow, in relative terms, faster than it is in the second-quarter when the numbers are that much higher. We've got some pretty high thresholds to hit and, yes, April was a very good month for us but May and June are also two very big revenue months for the industry and for our company. There's always the chance that there's upside. Clearly we outperformed in Q1, but there's no way that this company can continue to run its business and operate at growth rates that are 600 to 700 basis point faster than the industry on a consistent basis.

We've always said that our goal is to be a couple to several hundred (indiscernible) basis points faster than the industry and I really would much prefer that people sort of assume that that's the case and hopefully sometime we'll provide a little bit more upside than that. But to try to sort of reach a conclusion that we're going to grow at 500, 600, 700, 800 basis points faster than the industry quarter after quarter is just something that we're not at all comfortable with. We're human just like every other operator, we have good markets, we have okay markets, we have bad markets. Market mix does matter. We had a bunch of markets that were doing real well in Q1 and it's a little too early in Q2 to get overly I guess jubilant about the potential for the business.

By the same token it is our job to try to find opportunities whether it's managing our existing asset portfolio, buying new stuff, get new (indiscernible) business, define ways to deliver outsized growth. The question is how outsized is the growth? We don't know, we just say -- we've always just maintained that we believe that our business model is more robust than other radio operators, and I've told investors on the road, I think we've got the best story in the radio business given our acquisition strategy, our operational strategy, our demographic and what we can do with the platform like getting into the cable business or at some point in time --one of the initiative that we also have going right now that we haven't put into play but we're going to do some -- we're going to make an Internet play. And it's not going to be a bucket load of money, but people are making money on the Internet now. People are selling ads, they're selling dating, they're doing all kinds of stuff, and we haven't had any Web strategy whatsoever. So we feel comfortable that we can go into that area now and, bare minimum, breakeven, maybe make some money. So we just try to find the right opportunities at the right time and execute on them. It's quiet but it works.

Curious, obviously you outperformed the industry by quite a bit in Q1 and apparently now into April, but how did you do versus your markets?

Our markets for Q1 were up about 5.5 percent. So I guess about 100 basis points faster than the industry, right? Roughly, I think the industry was up 4.5.

It was set to be 4 but probably 4+.

Well, ours were up 5.5 and it looks like for April we haven't gotten -- we only have pacings for half of our markets, but it looks like April is going to end up in the mid single digits.

Okay. Mary Catherine, one final question. You were one of the first to bring up the rate cut in problems. As you so kindly put it last year, diving for dollars. Has it gotten any better since then? What do you think the growth differential is in a market where three or four of the clusters are well behaved versus a market where there's rate cut in?

We have focused on that a little bit more and that's a question that I'm getting often more and more. I think it varies by market and who the manager is in that market for a big cluster, whether it's Infinity or Clear Channel or Cox or whoever. Some people have a lot of great integrity and some people have none. There are some markets that we have right now -- I think we might have talked about this at the NAB -- that we're starting to see a lot of rate integrity which is great and it's helping us. One market that's really booming is Baltimore and we're very thankful for that and all the operators in that market that are becoming rate leaders. I wish that was the case all over but it's not. So it just varies.

I think -- I've got two items to add to that. I think that that's also testimony to the change in the competitive dynamic in that market. When you've got a market that's 20 plus percent African-American but only has 10 radio stations and you've two companies going after each other on the urban front, it doesn't allow for rate leadership. That market is booming now and I think a lot of it has to do with the competitive landscape -- is now rational and everybody can be a rate leader as opposed to somebody undercutting. Competition in urban radio is bad for rates and it's bad for rates for an entire market. Because if there's nobody -- if it's a country station it gets a high rate, and the urban station is getting a high rate, AC's got to get bought and rock's going to get bought and that pushes the market up. And if there's somebody that's squabbling like the two urban guys or even the Hispanic guys, then there's going to be a format grouping that's going to come in under the cost per point and then the buyer is going to be able to go to the country guy and go, well, I'm bringing in the market 20 percent under the $150 customer points, you've got to come down too. It's messy.

It almost sounds like in a rational landscape market with good rate behavior it's not 200 to 300 bips faster growth, it could be 500, 1,000 bips or faster growth than the market that doesn't have that.

A lot of it has to do with the economy. When there's not enough money in the market everybody dies because everybody is benchmarking against good times. But a rational market allows you either not to die that fast because then the buyer has to make a decision, am I going to buy radio or not buy radio, not who am I going to buy. There are some people that -- or some clients that do like the medium and want to be in it and it's not just necessarily a secondary choice or an add on to television.

Thank you.

(indiscernible)

One question is on the acquisition in Atlanta, can you just remind me of why that station was brought in now? You've been elimating it since August of 2001? And I have one follow-up.

At the end of the day this was a station that we -- I mean, ultimately we want to own all of our stations and so there have been stations that we've elimated for periods of time and either there's a contractual obligation to buy it by a certain point or you just wait for the right environment. I think at the end of the day, like we've always said in this business, sellers don't sell until they're ready and then buyers have to buy when they're in a position to do so. I think we had some alignment in terms of -- and this was a pretty complicated deal, it goes back a long time and there were a bunch of other people with interest and I think that ultimately had to get worked and then ultimately it was a pretty clean deal between buyer and seller.

Let me clarify because I obviously was -- there was a radio station that I owned and I was on the opposite end of this from the Company and the special committee and everything. But at the end of the day, before we went public -- I think back in 1995 was when I actually pursued this station and essentially tied up the rights to buy it. It was a construction permit issued by the SEC and a bunch of people applied for it. And so I merged them all into one company, gave them interest, paid off all the expenses and got the right to buy people out over time. Those rights didn't come up until the last year, year and a half. So what I did -- the reason that Radio One didn't own it was because I didn't own it.

And what I did over the last year and a half is I bought each of those people out and once I had acquired all of the interest and controlling interest of it then I was in the position to make a deal with the Company to bring it in. That's why it took so long. Otherwise -- the reality is I owned all of our Atlanta -- actually most of our Atlanta radio station -- I owned actually two of them, and this was the third one. And before -- like six months before we went public I merged them into Radio One because I owned those outright. This is the one that I didn't own and I only had options to acquire it. So once that got cleaned up then we were able to bring it into the Company.

Great, thanks. And then a follow-up. Alfred, in terms of your timing, how are you allocating -- that is, are you -- with the TV One asset now are you getting into more conversations with large advertisers and being able now to complete a potential cable buy as well as your radio platform? How are you allocating your time?

It's interesting. It's a lot of fun because at the end of the day I view myself as a salesman. That's how I started, that's what -- really what I enjoy doing is meeting with clients and convincing them to spend ad dollars. And on the cable front meeting with cable operators and convincing them to carry TV One because they pay a licensee. And I'm able to do all that. Yesterday I was in Atlanta and in the morning I went to the radio station and sat with our people there and I sent to see Cox Cable. And the last time I was there our guys went to see Home Depot. And so TV One is allowing us more face time with more advertisers and bigger advertisers.

A week ago I was in Chicago and I was the keynote speaker for StarCom, which is a huge advertising (indiscernible) buying service there with tons of clients, for their African-American media day. And it was largely about TV One, but I got to tell the Radio One story too. So I do think it's going to be synergistic and beneficial to our radio assets.

And then finally, do you have a sense of when maybe that conversion or -- are you benefiting from it now in your growth or do think it's (multiple speakers) to come still?

I don't know. Are we benefiting now? We see some things, yes? How much? I don't know. And we're probably never going to -- until it's really significant to us -- two things, it has to be ultimately significant to us and it has to be consistent before we would actually throw it out there for you to sort of factor it into your calculus of how you look at our company.

thanks.

Tim Wallace, UBS.

Sorry, I could barely hear the operator. One question on the first-quarter either Scott or Alfred. In terms of the growth that you received on the revenue side, can you give us the mix between ratings, your pricing and I guess the amount of inventory you sold this year versus last? And then in terms of the Mableton station, can you tell us what -- I know it's not a full market signal, but the markets that it does reach, or the zip codes that it reaches, are they the zip codes you want to each and is there any chance of an upgrade of that signal in the future? Thanks.

Mableton covers 80 percent of the African-American population in Atlanta. Is there a chance of an upgrade? There is, it's complicated and it will cost money. And it won't cost a couple million dollars; it'll cost a fair amount of money. But there is chance out there, we just have to decide whether or not we want to pursue it or not. But it covers about 80 percent of the African-American population now. What was the prior question?

The revenue growth, it's always difficult to answer that question in aggregate. Our ratings are up year-over-year about 5 percent. What is that -- how do you translate that into revenue growth? I don't know, I'll leave that for you guys to figure out. I've never been able to because there's a lag time obviously associated with revenue changes relative to ratings changes. Inventory sellout is always lower in the first-quarter because it's the first-quarter. And pricing is always lower in the first-quarter because it's the first-quarter and there's not as much activity. We've talked about how pricing dynamics have improved and sellout certainly is much, much higher in Q2 than it was in Q1. But in terms of the individual specific metrics, we don't really look very closely at that data on an aggregate basis; we can only talk anecdotally about it.

Okay, and then just a point of clarification. You had said -- I think you said two things about April. At one point I thought you said you were high single digits in April and then I thought you just said recently that you were mid single digits. I'm confused.

The markets in which we get forward pay things are mid single digits. What I said in my remarks, and I just want to make sure that I say the exact same thing now, is April for us appears we'll end up in the high single digits.

I think you also said that May and June -- did you say they look stronger than April or as strong?

What I said is May is pacing strong.

Okay. Is there an 'er' at the end of that word?

No.

Okay. I thought I heard you say --.

I'm not confirming or denying that there is or there isn't, okay?

Okay, very good. Very good results, thanks.

Paul Sweeney, CSFB.

Just a couple of questions. First, on Philadelphia, it looks like there was a little bit of a competitor format change there in the rhythmic CHR and it looks like it's impacted your CHI (ph) stations in the winter book. And just wondering how you see that competitive situation developing and how maybe your current FM that you just acquired, how that might help --?

That's a Beasley (ph) station. MC, how long as that been on the air? Hasn't it been on the air for like six or nine months?

No, they've been on the air for like four or five months. And you know what? You're right, it's a rhythmic station. It's much more of a -- maybe CHR focused than our station which is urban. But they did impact us a little bit and they impacted the other CHR station a little bit as well. You're right about that, that is a competitor, it's not a direct format competitor, but it's in the same genre.

Is there any kind of competitive response that you have or is it -- maybe as your third FM that you just acquired, does that help you deal with this situation?

I think it definitely is going to help us deal with just the whole market situation. It's always good to have another station in that market. Hopefully we'll be able to build out that platform like we have in a number of other markets which has worked really well for us -- when we're covering all the demos because right now we only cover 12 to 34 -- the younger end of that demographic.

Alfred, just one question on TV One as you negotiate with all the MSOs, are you getting a sense that they're sitting back, waiting just to see how perhaps some of the ratings come in or just how the network does? What is your sense as to --?

First of all, we won't be rated until we get to 20 million households and so that's going to be call it 2 to 3 years. So no, we're not sitting back for ratings. What these guys go off of is sort of momentum, buzz, those kinds of things. If they see one of the big MSOs carrying it and that (indiscernible) way with the other MSOs, if a lot of the customers are calling about it and they keep hearing about it that has a way of getting a lot of ink in the press that has sway. If some hot programming idea comes onto it -- so it's more about buzz movement. And also one of the things that will help is if there's broad support with political constituencies. Cable is a regulated business so if it's something that politicians and community leaders find appealing then that has sway.

But as I said earlier, it's the damnedest business I've ever seen. They just go slow. That's their MO. They grind out the process. That's just the way it is. I've gotten nothing but positive feedback from these guys and, again, I'm in there -- we're in there pitching. The issue for us is the analog versus digital, it's not really whether or not we're going to get carried. And to be honest with you, I haven't even gotten a whole heck of a lot of pushback on the license fees we ask for. I'm not even going to tell you what it is but it's a fair license fee, we're not asking for an abnormally high license fee, but we're also not giving the service away free which a number of cable channels have done just to get carriage. And operators understand that because if we give it away free we can not build a business. And we're doing this to build a business. And they believe and they understand that there needs to be a second channel -- a second viable channel that serves this demographic.

Okay. Thanks very much.

Kit Spring, Stifel Nicolaus.

Other than Baltimore, could you just go over some of your strong versus weak markets as far as pacings go? And then secondly, wondering why you guys didn't buy those Indianapolis stations that InterCon (ph) just bought? Thanks.

Indianapolis, first of all they weren't urban stations. We've got the young and urban, we've got the urban AC, we've got the jazz station, we've got a gospel a.m. in the market, and the market is only 14 percent African-American. So we've got the market covered off. If somebody were to launch a competitor in Indianapolis, that competitor would not make -- they wouldn't make any money. We used to compete with Emmis there and we engineered sort of some format swaps and everybody now is doing better. So we would have had to make a decision, we just wanted to be bigger in that market and in other formats. And I'm not necessarily philosophically opposed to filling out a cluster with nonurban format, but it's going to be in a big market, it's not going to be in Indianapolis. It would be in Philadelphia, Washington, Houston and L.A. That's where I think we'd look first to do that kind of deal.

In terms of market strength, certainly Baltimore, Washington has been doing very well. Dallas has been doing very well for us, Detroit is doing well. I guess there's some inconsistency month-to-month, but Atlanta is actually doing well. And that's part of the top five in terms of growth leverage (ph).

Thanks.

Mark Nabi, Merrill Lynch.

Maybe you can talk a little bit about NTR and want it if -- what affect it had in the first-quarter? Mary Catherine, you had talked a lot about last year and just wanted to see what's in store for the next couple of quarters on that front. Scott, you didn't say anything about Los Angeles market, maybe you can touch a little upon what's going on there. And also, you had mentioned before how strong -- (indiscernible) the numbers of how strong the first-quarter was and you had a very high number in the first-quarter of 2003. Although if you look in the second-quarter of 2003 you had actually underperformed in the market. So I guess that was the thing we were talking about before is maybe some of the outperformance you should get from the underperformance from a year ago. So you should see even more strength particularly with April being up in the high single digits. I just wanted to get a little better understanding on NTR and some of the other questions I had asked.

NTR did well in the first-quarter. We do have a lot of NTR projects in the first-quarter but they're smaller projects. Second-quarter is when all the really big ones kick in. A lot of the summer events with concerts and expos and things like that. I think I've indicated before that we're really monitoring those and so far so good. Second-quarter looks great. There are a couple of big events coming up in Los Angeles and also Atlanta. And those are probably two of the biggest ones we have all year and they both are on track to do very well. We're pleased with NTR and how it's starting to shake out for us.

What percent of your revenue will it be for the second-quarter versus the first-quarter?

We can't provide that level of detail.

We've not historically and I don't think it would be appropriate.

It's more second-quarter. First-quarter there are a lot of smaller events mostly built around Dr. King's birthday and Black History Month. The second-quarter is really when the majority of the big ones kick in.

What we've said historically in our K is that advertising represents about 97 percent of our revenue and everything else is the balance. It's pretty small. In terms of L.A. in April, it's pacing in line with the industry and the industry is growing in the low singles. Although in May the industry is growing in the high single -- we're going pretty well in L.A. We're doing pretty well. That's one of the markets that's highly variable both from an industry perspective and from a Radio One performance perspective. And you know what, in terms of second-quarter our guidance is what our guidance is, I don't know what else I can say. That's all I have to say on that.

Alfred, with respect to TV One, you talked about the MSOs -- the satellite guys, DirecTV and EchoStar are obviously two very large platforms. Any further negotiations with those guys?

Yes, we're talking to both of them and, again, you just don't go and have a meeting and they go, okay, we're going to put you on with a switch. But we feel very good about the feedback and the progress there.

Have you seen new advertisers from the original ones you announced in January, larger ones come to the table more recently?

Yes, the funny thing about this whole venture is that the advertising demand is huge. I mean it was in the Wall Street Journal I think, BET (ph) purviewed (ph) 300 million of ad revenue this year, probably 370 next year, I think they're first-quarter is up 16 percent. If we can get the distribution that the ad support is just a no brainer. It's the distribution that's ultimately the issue. And unfortunately rational -- the rational view of hey, let's just serve the market. What's missing, what percent of the country is African-American or Hispanic and let's have something in the genre that fits each demographic -- that's not how cable distribution works because with retransmission constraints, with -- if I owned ESPN then I could force ESPN II on you and all that kind of stuff -- a lot of the cable satellite guys have been forced to take programming services that they just don't necessarily want because a Viacom or somebody has a lot of clout.

So you come up with bandwidth issues. And then you have pricing issues. We want to be on basic in some places. Well, that's not where cable operators were getting their revenue and their cash flow growth from. They're getting it from the ancillary services like digital and high-speed and telephony. So there are a lot of agenda items that go into deciding how a channel gets carried and at what level of service it gets carried on. And that's one of the reasons it also takes a while.

Also, Scott, one question related to the income tax provision, it was about 36.5 percent. Is that what it should be on a going forward basis? Obviously the TV One equity loss and affiliate looks like it was done before doing your income taxes. I want to get a better understanding on what your ratio is going to be.

I think statutory on a long-term basis should still be 38 -- 38 to 38.5. You've got minor credits and debits that happen on a quarterly basis, particularly in the first year relative to after you close out a prior fiscal year. But for guidance purposes I'm comfortable with 38 to 38.5.

Perfect. Thank you very much.

Jonathan Jacoby, Banc of America Securities.

Just two questions here. The first is the non-cash comp, can you give us a little more color, sort of who you hired and where? And will that drop back to normalized rate for the rest of the year? Second question is what are you seeing different as local versus national in terms of business?

I think for non-cash comp, we said what we said, and so if you want me to repeat it, I will. The only other item of note was an increase in non-cash compensation primarily associated with agreements with two key Radio One on-air personalities whose deals included modest (indiscernible). Locking down these two individuals and aligning their interest with the rest of our shareholders we felt was in the best interest of the enterprise. The way this non-cash comp thing works is, you know, it is not a onetime thing. I mean, you basically every quarter have to take it into account, especially if you have vesting or other components of the deal that are longer-term. So that is the way you should think about that. I'm sorry, your second question.

Just if you could give some color local versus national.

What I'd say was local and national grew at the same rate in Q1. In Q2, it looks like national is growing a little faster than local.

Okay, thank you.

Jason Helfstein with CIBC World Markets.

I just want to make sure, Philly doesn't go on the air until the third quarter for you guys, correct?

Yes, it does not go on the air in the second quarter, so it is not included in our second-quarter guidance.

Okay. Then the other question, and I think Mark was trying to get at this, and I understand you don't want to give specific numbers, but just generally speaking do you feel like NTR grew faster than the Com sales growth in the first quarter? In other words, did NTR help drive your growth rate in the (indiscernible)?

No, remember NTR went backwards last year, and we talked about how we were going to strip out some of the lower-performing, lower-margin NTR events. Special events revenue non-spot grew in the low single digits.

So, basically, in the second quarter same thing, that (indiscernible) is the (indiscernible) sales the way you're thinking about guidance for the most part.

Our business -- yes. There are certainly other revenue that we generate as a company, as you know, Tower (ph) income. We've got a little bit from XM, a little bit from TV One, but the vast majority of our revenue and hence the vast majority of our growth comes from our time sales. I do believe that special events revenue, non-spot special events revenue, will actually grow faster in the second quarter per Mary Catherine's comment, and it's a bigger number. But again, I wouldn't get overly focused on it because it is on the margin as opposed to part of the core of our revenue base.

But I guess -- so should we be surprised when you report the second quarter if NTR added 100 basis points to your growth rate in the quarter, or it would probably be something less than that? I know you don't want to get into numbers. We just want to know like --

I don't know what your threshold for surprise is. I would say that it probably doesn't have -- could NTR push revenue one way or another more than 100 basis point? Probably not.

That is all I wanted. Thanks a lot.

Mr. James Marsh with SG Cowen.

Two quick questions. One, wondered if you could give us a quick update on the winter book. We see some of the 12 pluses and they look largely flattish, I think, as you look at most of the markets that have been released. I was wondering if you could us some of the key demo numbers? Then secondly, other than (indiscernible), are there any other movements or signal upgrades that could be meaningful? Thanks.

The winter book is still rolling out. I think Dallas came out yesterday and Atlanta comes out today, so we don't have all of the information in.

Atlanta just came a little while ago. It was really, really good for us. It's phenomenal for us.

Was my dream correct?

Your dream looks like it was correct.

I had a crazy dream that we had a phenomenal book in Atlanta, and I was in Atlanta yesterday and I went in and I told everybody that I dreamed it. So we have this bet as to whether I am clairvoyant. We're still rolling out, so it's too early to tell. And Arbitron is Arbitron. So we could have a good book in Atlanta and tomorrow in Richmond or the next day we could lose like half of our audience. You just never know.

Well, DC was good, Baltimore was good, Dallas was good. We would have liked Los Angeles to have been a little bit better, but it was okay. I think that is all that has come back. Philly could have been a little bit better. I think those are the only markets that our back so far.

Detroit was back too, wasn't it?

Detroit was good.

But anyway, we've still got a fair number of markets to roll out. Our Ohio market, Raleigh; Houston is back.

Oh, Houston was good too. Sorry.

There is a few signal upgrades. I don't think that we have anything in any big markets that are going to make a gigantic difference that I know of.

Actually, that's not true. We've got one. We've got one which we're not going to -- we've got one signal upgrade in the works that if it gets done, when it gets done I think it's a high likelihood it will have a material impact I think on our results. And the acquisitions, the signal upgrade there, the stuff that we have in the pipeline right now, Philly coming on board, a couple of the other acquisitions that we're working that we haven't announced give me extraordinary comfort in our ability to really continue to do well this year and, quite honestly, do exceptionally well next year as well.

Excellent. Thank you very much.

Operator, we're going to take one more question.

Alissa Goldwasser, William Blair.

Thank you for coming to Chicago. Actually my question is on TV One. I was wondering how much the TV One entity spent on the Radio One radio stations and advertising in Q1?

Say that one more time.

How much TV One spent on the radio stations?

All we can say is that -- because I believe this is an our 10-K -- the deal with TV One is form them to spend $11 million over a five-year time frame. We basically -- we are getting an -- we got an additional equity interest for that commitment and that will get rolled out as TV One sees necessary.

For some reason I'm thinking $3 million in 2004?

Hang on one second, Alyssa.

Alissa, we can't answer specific questions on that because it just would be inappropriate.

Okay. And then just quick, the sellout level for June?

Sellout level for June -- looks like we are at mid-50s right now.

Great, thanks.

Which is a pretty good place to be.

Okay. Thanks a lot.

Everybody we appreciate you tuning in and --.

Operator, can you close us out?

Yes, and as usually we're always available off-line for any questions you might have. Thank you.

Operator?

Thank you, sir. That concludes today's conference. Thank you for your participation. You may disconnect at this time.