Urban One Inc (UONEK) 2011 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the Radio One third quarter 2011 earnings conference call.

(Operator Instructions)

Following the formal remarks we will open the call for questions and answers. I have 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 10Ks, 10Q'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 September 30, 2011. Please note that Radio One disclaims any duty to update any forward-looking statements made in the presentation. In this call, Radio One may also discuss some non-GAAP financial measures in talking about its performance. These measures will be reconciled to GAAP either during the course of this call or in the Company's press release at which can be found on its website at www.radio-one.com.

A replay of the conference call will be available from 12 PM Eastern time and November 3, 2011 until 11.59 PM November 5, 2011. Callers may access the replay by calling 800-475-6701 and international callers may dial direct 320-365-3844. The replay access code is 222011. Access to live audio and a replay of the conference call will also be available on Radio One's corporate website at www.radio-one.com. The replay will be made available on the website for 7 days after the call. No other recordings or copies of this call are authorized or may be relied upon.

I will now turn the call over to Alfred C. Liggins, Chief Executive Officer of Radio One, who is joined by Peter D. Thompson, Chief Financial Officer. Please go ahead Mr. Liggins.

Thank you very much operator and welcome everyone to our third quarter results conference call. Also with us today is a Barry Mayo, our President of Radio. I am going to turn it over to Peter who is going to jump into the numbers, and then Barry will come after Peter with some detailed comment on our radio segment. And then we will open up the line for Q&A. Peter?

Thank you Alfred. Net revenue for the quarter was approximately $104.4 million, an increase of 40.3% from approximately $74.4 million for the same period in 2010. We began to consolidate results of TV One in the second quarter and recognized approximately $29.5 million of net revenue from the cable television segment in the third quarter. The radio division, excluding Reach Media, produced net revenues of $58.7 million, which is up 1.4% from the same period last year. The markets in which we operate grew 1.7% for the quarter.

Reach Media had net revenues of a $13.4 million in the quarter, which was down 4.7% year to year. The Interactive division had net revenues of $4.9 million, up 11.5% year to year. Our 4 largest clusters performed as follows, Atlanta was plus18.8%, Baltimore was plus 1.8%, Houston was minus 1.3%, and Washington DC was minus 3.9%. Along with Atlanta and Baltimore, 7 of our other radio clusters posted growth in the third quarter, with St. Louis, plus 27.7%, Cincinnati, plus 5.7%, Raleigh, plus 6.9%, and Charlotte, plus 4.7%. Along with Houston and DC, the clusters with the most notable year to year declines were Dallas, at minus 23.5% and Columbus, at minus 23%. Our average unit rate was flat while the number of spots in Q3 was up 2% compared to prior year. Sellout was down 1.8%.

Looking at my advertising category, food and beverage was our largest category at 16% of the total, and was up 23%. Retail was next and went down 9% year to year, followed by entertainment which was up 2% year to year. Financial was the fourth largest and was down 1% year to year, and government/public was fifth, and down 4%. Q3 core local revenue was plus 1% year over year. National was plus 1.7%, and digital was plus 25.4%.

Operating expenses, excluding depreciation, amortization, and stock based compensation, increased to approximately $79.1 million in Q3, of which $23.3 million related to the newly consolidated cable television segment. Excluding the cable television expenses, operating expenses were up 8.1%. Radio division operating expenses, including corporate expenses, increased by 13.1%, driven primarily by a non-cash charge of approximately $3.1 million for the CEO's future TV One award. Excluding the TV One award, the radio division's expenses were up 5.5%, mainly driven by increased compensation cost, higher Arbitron fees, and increased rent expense.

Reaches operating expenses decreased by 0.6%. The Internet segment's operating expenses decreased10.2%, driven primarily by savings in product development and programming costs. Excluding non-cash intercompany charges, Internet EBITDA for the quarter was positive $47,000, compared to a loss of $556,000 for the same period in 2010. For the third quarter consolidated station operating income was approximately $35.8 million, up 26.4% compared to the same period in 2010. Adjusted consolidated EBITDA was $25.4 million, an increase of 11.1%, including TV One. Attributable EBITDA, excluding the non-cash TV One award was up 1.9% for the quarter.

Depreciation and amortization expense increased to approximately $11.5 million compared to approximately $4.6 million last year. Approximately $7.8 million of additional depreciation and amortization expense was recorded for fixed and intangible assets of TV One. Interest expense increased to approximately $23 million for the third quarter, from approximately $12.1 million for the same period 2010, an increase of 90%. Increase in interest expense was due to the higher interest rates associated with the 2011 credit agreement, amended exchange offer, and the TV One notes. The increase in the overall effective rate of borrowing for the quarter was approximately 4%. Approximately $3 million of the increases interest expense relates to the debt recorded as part of the consolidation of TV One.

The benefit from income taxes for the quarter ended September 30, 2011, was approximately $2.3 million compared to a provision of approximately $4.8 million for the quarter ended September 30, 2010. Substantially all of the decrease in income taxes relates to the third tax liability for TV One. The consolidated effective tax rates for the 3 months ended September 30, 2011 and 2010, was 23.9% and 68.3% respectively. Net loss was approximately $9.9 million or $0.20 per share compared to net income of approximately $1 million, or $0.02 per share for the same period in 2010.

For the third quarter capital expenditures were approximately $1.8 million compared to $1.5 million in the third quarter of 2010. As of September 30, 2011, Radio One had consolidated total debt, net of cash balances, of approximately $770.5 million. The unrestricted cash balance as of September 30, was $12.9 million. Consolidated cash interest paid for the quarter was $15.2 million. Cash taxes paid were approximately $1.1 million. During the quarter, the Company repurchased approximately 706,000 shares of Class B stock at cost of approximately $965,000, and approximately 29,000 shares of Class A stock at a cost of approximately $41,000.

In order to assist with comparative data for TV One, Q3 2010, revenue was $26.3 million and EBITDA was $6.3 million. Cash program spend for Q3 2011, was $9.6 million, and $31.4 million for year-to-date. For Q3 2011, the ratio of advertising revenue to affiliate fees was 1 to 1. Currently our fourth quarter radio station revenue is pacing down approximately 10%. Just in for political we are pacing down approximately 7%. In addition to several format changes that we have recently made, in which Barry Mayo will speak to shortly, fourth quarter revenue comps have also been adversely impacted by approximately $1.5 million nonrecurring Radio One specific buys replaced in the fourth quarter 2010. Ex-political, our Q4 local business, is pacing down 1% and national is pacing down 17%. I now am going to hand over to Barry Mayo for some further color on the radio performance.

Thank you Peter. In the third quarter our radio divisions' markets in Miller Kaplan were up 1.7% and our stations were up 0.3%. So in the third quarter we narrowed that second quarter under performance from 500 basis points 140 basis points, and that gap was driven by 2 markets, Columbus and Dallas. If you recall, on the Q1 earnings call, I was asked when we would have Dallas fixed and I said it would be a Q4 fix. I also mentioned on the Q2 call that we had just changed the format of KSOC in Dallas to an old-school station. And I'm pleased to report that it has regained its former ratings position and currently has the highest audience share since September of 2009. Revenue will follow.

I also mentioned on the last call that Columbus was the last of our markets to go currency and PPM. Columbus is also one of the markets that has got 15% or less African-American population. You will recall that we found that these markets cannot support 2 or more urban formatted stations, as there are just not enough meters to support that listening. And what's going on there is we found that in these situations that the growth of 1 station often comes with a ratings a loss at another of our stations. So our strategy has been to turn 1 of those urban stations into a format that relies more heavily on the general market audience. Our first foray into this strategy was in Cincinnati last December, as a result of changing Mojo back to Jammin' Oldies format, our remaining mainstream urban station has been number 1, 18 to 34 and number 5, 25 to 54 for the past 3 months, and it is the reason for Cincinnati's plus 5.7 % third quarter performance.

On September 16, in Columbus, we changed our inspirational formatted station to the Jack format. Now, while we have just external marketing on October 10, and have no ratings results yet on Jack, the switch has made an immediate impact on our mainstream urban station, which has gone from number 4 to number 2 amongst 18 to 34 listeners and from number 11 to being tied for number 5 amongst 25 to 54 adults. So, we believe that we have fixed the programming problems that have led to Dallas's is minus 23.5% and minus 23% Q3 performance that Peter mentioned. Ex- Dallas and Columbus, our third quarter performance was much more promising. In total revenue, our markets were up 2.2% and our stations were up 3.2%. In local revenue, ex-Dallas and Columbus, our markets were up 0.9%. Locally our markets were up 0.9% and our stations were up 2.3%. And finally, ex-Dallas and Columbus, our markets were up nationally 1.4% and our stations were up 4.8% in the third quarter.

We continue to be challenged in the third quarter in Huston, our largest market. Houston's biggest challenge this quarter continued to be in the national space, where we under performed the market by 17%. As Peter mentioned, we made the strategic decision on November 14, that we will change our inspirational formatted station, KROI, to News 92 FM, making it Houston's only all news station on AM or FM. We have hired an all-star cast of television and radio news veterans, and our morning drive will be anchored by J.P. Pritchard and Lana Hughes, who have been the premier news morning duo in Houston for 27 years. Combined, there are 450 years of news experience on the staff of News 92. We definitely believe that moving to this format will provide the long-term growth engine for our largest market.

As part of our strategy to improve our overall position in Philly, we recently swapped frequencies with our main stream urban and adult urban stations, putting the better performing adult urban station on our bigger signal. Long-term, we expect positive results from this move and are currently aggressively marketing this frequency switch. Just this past week we announced a local marketing agreement with WGPR in Detroit. GPR is the station with one of the best signals in the market, and we have moved our mainstream urban formatted station to WGPR's frequency, giving us the opportunity to create a new inspirational formatted station, WPZR, on our 102.7 frequency. Past research that we've done in the Detroit market has shown that there is a healthy appetite for this format, but we have not had a third FM station to effectuate that strategy. We are looking for increased performance in Detroit in 2012, as a result of this strategy.

Peter mentioned this, but I would like, again, to highlight the continued strong performance from some of our other markets. Atlanta has been one of our best-performing markets this year and continues to do so in the third quarter growing an impressive 18.8%. I mentioned on the last call that our Baltimore market was improving, and that I expected better performance in the third quarter. And I am happy to mention that the third quarter has shown year over year revenue growth for the first time this year. Baltimore grew 1.8%. And our best growth market in the Company, in the third quarter, was St. Louis, which grew 27.7%.

Finally, our stations performance in the digital space continues to be good against all markets. Our markets were up 19.2% in the digital space, and our stations were up 25.4%. That's it.

Thank you Barry. We are going to go to Q&A in a second, but I just wanted to highlight a couple of things before we get to that point. First of all, TV One continues to perform, as we have outlined. The diversification strategy to rely more on the dual revenue stream model, the cable network, is working as we have planned, and it was the right thing to do for the Company. We are excited about that. And we believe that the growth prospects for that industry and for that asset continue to be strong.

The other thing I would like to point out is Interactive One actually has turned a corner. They turned a profit, a small profit, but a prophet nonetheless, in Q3, and they are on schedule for another breakeven or better quarter for Q4, and we believe that, that property is poised to be cash flow positive for 2012. It is an asset and a business endeavor that we essentially launched right into the teeth of the severe economic downturn, so an awful time to launch a new business, but something that was critical for us as a Company, to establish a digital strategy that would be a growth engine for the future. The difference between Interactive One and many of the other radio companies' strategies, in my opinion, is that the Interactive One is not just about having great radio websites, it's about the collection of digital assets targeted to African-Americans, that create the largest African-American target platform online, compared to anybody else, whether it is AR -- our competitor AOL or BET. And it allows us to compete for real interactive dollars along with Yahoo and MSN, and that display market industry continues to grow at a double-digit clip. We do believe that, yes, it is part of the future, continued shift in ad dollars away from traditional medium -- mediums to digital mediums, and we have got a good place in that space at this point in time. So, we think we're doing all the right things to diversify ourselves.

We are now very focused, as Barry outlined to you, on our radio business, and we have made some significant strategic changes to position ourselves for growth in the future. For an urban media company to actually switch into general market format is probably, something on the face, that people would look at as a bit of a shock, but it actually was a necessity. We are not changing the focus of Radio One. We are still an urban media company. We believe that there's tremendous upside and growth in niche markets, but in an environment where you have assets that no longer make sense in terms of the way that Arbitron counts audience count and measures audience, you've got 1 or 2 choices. You can either dispose of those assets or you can reorient those assets.

This is not a not an environment where you can dispose of assets very easily. We have disposed of non-strategic assets in the past, but this is not an environment where that is easily doable. So we reoriented those formats, and as Barry pointed out, it is working in Cincinnati, it's early in Columbus, but it is starting to work there, and in Houston, Houston is probably our most ambitious effort there.

We looked around and we saw that this movement in the industry of spoken word formats to the FM dial, and I believe that makes complete and absolute total sense, given that close to 90% of all of the radio listening is done on FM, and most of these big news talk stations are still on AM. So you are seeing success of stations moving to the FM dial like WTOP, here in Washington DC, WSB, in Atlanta. You've seen what Randy Michaels is doing with Merlin Media, trying to create a beachhead on the FM.

Well, we looked at all those things, got us thinking about it, and so we looked around our asset mix, and it really never dawned upon us, but we did not realize that in Houston, Texas, which is the number 6 market in the entire country, there was not 1 all news radio station on AM or FM. And most of the news talk, if not all of the news talk, is right-winging, talk show, host-positioned for the region. And we believe that straight-ahead, all-news approach, a newsreel from 6 AM to midnight, was a down-the-middle opportunity to create a place where people who just want news, no opinion, to come, in Houston, Texas, and do it on FM.

The other good thing that all news station allows you to do, is it gives you a considerable amount of inventory in which to monetize the audience that you get. And in that market, one of our challenges was, because we only had 3 radio stations versus many of the other guys that have bigger clusters, they have much more inventory of which to price it -- their properties against us, which put us at a disadvantage, because our 2 urban stations there are market leaders and price leaders. We think that we are making the right strategic decisions, some of them very hard. It will impact our performance in fourth quarter, but this is about setting ourselves up to have a growth year in 2012.

And then lastly, WGPR in Detroit, is not an initiative where we are moving out of our format wheelhouse. We are actually leasing, excuse me, the inventory in the station from 1 of our competitors. They are direct competitors; there are 3 urban HD's, in that market WGPR was one of them, and so we eliminated the station, taking a competitor out of direct format, creating a new, less competitive inspirational format. So we think that is going to bode well for us in another challenging market. With that, I'd like to open it up for Q&A, operator.

(Operator Instructions).

Bishop Cheen, Wells Fargo.

Hello Alfred, Peter, everyone. Thanks for the detailed recap. Lot of numbers. Moving forth, let me go to some pro forma basics. When I look at this on an LTM pro forma basis, as if TV One had been in there since October 1, 2010, what is my LTM EBITDA? Because I can tell you what I got, but I want to hear you --

Tell us what you got, Bishop.

I am getting $102.8, and if I squint and add back the $3.1 million non-cash charge to corporate overhead in TV One, I can see my way to $105.9, but, Kiam sabes? I'm not sure.

Okay. It's going to take me a minute to get you that number Bishop.

Right. And again, I was trying to do it on an additive basis, and not taking the latest quarter annualized for TV One.

Is it something we can work on and give to you off-line?

Yes. You certainly could. And I would be looking for the revenue too, because that's the way we're going to get to the covenant leverage and everything else. And so, the second question --

Bishop, by the way, I mean, I have obviously LTM covenant numbers, but that's not what you're asking --

Yes, I mean, I would go for that, too. I will take whatever numbers that make sense right now.

Okay. Let's go at it this way. Why don't I just give you the ratios at the end of -- start by giving you the ratios at the end of Q3 --

Right.

-- which is total leverage ratio of 8.37.

8.37. I am pretty close. Well, 8.37, and that's using the debt that is really 6-- I'm rounding. 685 of debt we are carving out to be 1.19.

Yes. Yes, that's right.

Okay. So --

And obviously we are only counting the dividends received from TV One. Which is why we are looking at it on an LTM basis. We don't look at it the way you asked me to look at it, because we only get to count the dividends.

Right. Right. Okay. It sounds like it's a more involved off-line. But while you have that, could you give me the companion secured debt ratio?

4.59.

Okay. I am very close. I know there some carve-outs in and some carve-outs out.

We are happy to talk to you off-line. It is, again, more detailed than that, because we only get to count cash flow that comes in. So, dividend -- so, it takes a bit of the deciphering. It's not that straightforward.

Right. No, I am aware, it is not simple. So, let's go to something bigger picture. You are doing some heavy lifting. You are changing format. You are fixing Columbus. You are fixing Dallas, or you've already fixed Dallas.

You have got great expectations out of Houston, etcetera, etcetera. The glaring number is that Q4 pacings, you're going to be doing 10%, ex-political, minus 7%, and I can't remember, you have under-performed your markets. Are you going to be closing that gap in Q1 as you go forward? And if so, how?

The reason that we did all of this stuff now, is so that we can actually improve our performance for Q1. We decided to sacrifice Q4 performance, and take some revenue hits, spend some marketing money, increase our expenses in some places, in order to set ourselves up for a better next year, particularly as we know that we got covenant step downs coming.

And that's why we did it. So, we would not have done these things if we didn't think that it would improve our Q1 performance, but obviously, ratings have got to come through, and things have got to execute, and we have got to see what happens.

We have got certain expectations for what is going to happen in Houston, but it hasn't even launched yet. Yes? Same thing with the Detroit, LMA, and we haven't even gotten a new number for Columbus on the Jack format.

We've gotten increases on the urban station already, but we haven't seen anything really tangible for the new general market format. So, we are very hopeful. And we think that all of the things that we have done made sense.

Philadelphia, our best-performing radio station, was our urban adult station and it was on 10 -- it wasn't on our best signal. We put it on our best signal, and we hope it's going to do better. Right now, it's doing about the same as it was, but we think that it should do better than that as we continue to market it. So, that's why we are doing it.

Okay. And then 2 quickies, and then I promise I will move on. More color on how much capacity you have left on stock buybacks? Can you tell us the total authorized plan, and how much you have used? And then more color on the Reach put coming up? And any kind of cash outlay your thinking, again, that might be needed to --

Yes. There's about $6 million left in our restricted payments basket that we have been using to buy stock back. We have not bought back much stock as you can see, recently, because the stock hardly ever trades. And our volume has been getting smaller and smaller every quarter. So, I don't know how that ultimately works out, or what it -- we're able to do, over what time frame, with that.

The Reach put is, at this point in time, a non-issue. And when I say it is a non-issue, they have the put, but it is not likely that they are going to put it -- they will put it to -- and Peter corrected it -- the put is to Reach, not to Radio One. Okay? So, that is number one.

But we are in constant dialogue with David Cantor and Tom at Reach, about a collaborative effort about how to resolve that. I mean, we're partners in every sense of the word. So, when I say it is a non-issue, there won't be some unplanned negative event resulting from that, that would adversely impact the Company.

In fact, the most likely scenario is, it could go the opposite direction, where we strike a deal, a collaborative favorable deal, that essentially gives the Company a potential deleveraging opportunity. But that's not for certain that we're going to do either, because there's all kinds of puts and takes in there about valuation, about us contributing the syndicated shows that we own, and to Reach etcetera.

But we have mapped out a deal, and we are talking about it, and nothing negative is going to happen there. Nothing may happen at all, but if anything is likely to happen, it's probably going to be an event that will shave -- will improve our leverage ratios. That's how we're thinking about it.

All right. Thank you for all the color. I appreciate it.

Michael Kass, Blue Mountain capital.

Hello guys. Thanks for taking the question. First, on the Q4 pacings; the negative 10%. Can you give any sort of indication of what that is, without the markets that you are reformatting right now? Like if you just isolate the markets that are basically status quo?

Peter, can you easily do that? Or should that be something that we do drop off?

Yes, I have at. Just give me one --

Keep going Michael. You have another question while Peter --

Well, I just -- I guess -- before you can talk to it quantitatively, is that the reason for the negative 10%? You must have an intuitive view of --

Yes. The intuitive view is that you have got political that is in there, obviously. That is a big reason for it. There is also some Radio One specific -- Radio One only business that we got. Most notably was, I think, almost $1.3 million of Comcast buy, that was related to their merger, where they highlighted minority-owned businesses that they were doing -- that they had been working with, and we got all of that money.

And in addition to that, there was actually an unusual --

-- Kodak --

-- and I say unusual, because you don't normally see the rep firm develop new business per se, but there was a $903,000 piece of business from Kodak, that was targeted to ethnic markets, and we got about 100% share in many of our markets, just Hispanic and Black.

So, if you look at our national Miller Kaplan performance last year, we killed the fourth quarter.

We outperformed the markets by, I think, 700 basis points.

Yes. So, then when you take into account the fact that we blew up a format, we are blowing up a format, in Houston, for Q4. We did the same thing in Columbus. We are spending marketing in the Columbus. We are spending marketing in the Philadelphia.

I mean, we planned out when to do these things, and we picked Q4 as probably the best time to do it, to set us up going into next year. And we felt that our near -- nearest near-term covenant challenge was going to be in Q2 of next year. So, let's get all of these things done and out of the way now, so we put ourselves in a position not to have any issues in Q2 of next year.

On those covenants, do you guys get any sort of prospective pro forma? Are you able to -- things improved between -- going into Q1, Q2. Do you get to annualize any of that? Or, I guess, directly to the point that you're raising, are you -- the hits that you are going to take in Q4, aren't those going to be, on an LTM basis, factoring into this covenant calcs?

Sorry, we don't get to annualize unless it's an out-and-out restructuring. I don't think we would probably get away with that under the bank agreement. To answer your previous question, if we just look at Dallas and Columbus, which are our 2 biggest under performers, take those out, and take out political, then we are down -- we are pacing down 4% in fourth quarter. All of which is national. Local, it would be, actually, head.

And what's your sense of what the markets are -- that your competitors in the markets are doing? Is that --

I mean, Intercom did their call, was it yesterday or day before? And they said that their Q4 was pacing down negative 5%. I don't have any color from anybody else, other than them right now.

Okay, thanks. And then, real briefly on TV One, can you guys just break down what -- wholly -- kind of pro forma OpEx was for TV One, and just bridge what, I guess, a significant increase in programming cost, what that was due to, year-over-year?

Yes. Program and content year-over-year. Program and content rise, up for the third quarter this year was 11.4% versus 10.2% in the previous year.

And we had invested -- what has essentially been happening is that we have an interregnum. We had a CEO who was leaving the business and a new CEO coming in. And so, during that period, we did not want to commit to new programming which would not fit in with the new CEO's ideas on programming. So, we had a lack of spend, and then a ramp-up, a recent ramp-up in spend. That's one thing that has happened.

And the second thing that's happened is, that we had higher costs per hour on program in Police Array and Ultimate Merger, which are 2 of the series that we've been running there. And that's just attractive to higher amortization costs year-over-year in the third quarter.

It's about $1.1 million of additional amort in the third quarter. Total expense is, just to bridge you, Q3 operating expense is $23.3 million, which I referenced earlier. Third quarter of 2010, $20.0 million.

And is the majority of that delta, the -- is the non-cash expense in that segment or in the radio segment?

No, the non-cash expense is not in that segment. That is in corporate radio, corporate consolidated.

Okay.

So, the other -- aside from the $1.1 million of programming content increase, the other piece is in sales and marketing, which is about $1.5 million over. Third quarter this year, $4.8 million, third quarter last year $3.3 million. And that was higher visibility marketing campaigns around Life After and Ultimate Merger.

Okay. And then, just on TV One, just to round it out, what was your Reach at the end of the quarter, and is there any sort of ratings information you can provide?

Reach? You mean in terms of subscribers?

Exactly.

Do you have the exact number?

The number that I have got is from about a week ago, and it was 56 --

56 million?

On Nielson, yes.

We got the Cablevision launch, which happened at the beginning of September, so we are about 56 million on Nielsen, and that's probably high 40s in terms of paid subscribers. And ratings have been soft at TV One, but that's primarily because we had a CEO transition. The new CEO started, what was the date? Beginning of August.

So consequently we didn't spend -- we didn't make a lot of new programming this year. We saved those dollars up, so our programming cash spend was a lot less. The new CEO has got a new programming strategy, which is going to work within the existing budget, but it's going to increase our original programming dramatically in terms of the number of hours, doubling it essentially, but doing it at a lower cost per hour.

And so, add revenue has been strong there. We have had to make up some misses on ratings estimates with ADU, but we are going to be coming in on target with our EBITDA plan.

Thanks a lot.

We will go next to Mark Kaufman with Rafferty Capital Markets. He just took himself out of queue, so we have a follow-up from Bishop Cheen.

Hello. Going back to TV One, can you give us any color if you are seeing any impact from Bounce at this point? Or from any other competition, be it broadcast, web, whatever, -- over [multiple speakers] or under the ground, competition?

Nothing at this time. Bounce is getting a lot of press, but the fact of the matter is, Bounce is not really a competitor for subscribers, because their business model is to get affiliation deals with broadcasters to use their digital side channels.

And our distribution model is to go to cable operators and satellite operators, and get paid for our subscribers. And we have seen little -- I don't want to say any, because I think we have gotten some money -- but we have seen little impact on our business from an advertiser standpoint. The fact of the matter is, they've got to get some programming on there, they've got to get ratings, all of that stuff is a challenge.

And are they spending what one needs to spend? To be able to get all the key ratings? The -- I guess Nielson --

I can't tell you for sure, because I don't know. I am not intimately familiar with the specifics of their business model, but here's what I can tell you, is that launching a cable television network is very expensive. We raised $130 million. I think we went through like $105 million of that -- we lost $105 million before we started to make money.

We had 2 revenue streams, because we had a respectable license fee, and we had the 2 biggest distributors in America as our partner, Comcast and DIRECTV. And we had a radio division that could cross-promote, the television network from the time that we launched it, that reached millions of people on a weekly basis. And so, that's how we did it; and it was successful.

I'm sure you could go do what they are doing, get a digital side channel, put up some really, really cheap programming that doesn't cost much, or hardly anything, and see if it gets some ratings. See if people just find it all on their own, without marketing, etcetera, and then see if you could sell that to somebody -- (laughter) -- an advertiser. I think it's a hard way to go.

At a minimum, what it's going to necessitate, is that your business model, from a programming standpoint, doesn't look like TV One's, so you programming is not going to be as good. Even the reruns, the sitcom reruns you see on RAR, Different World, Martin, Sanford and Son, those are owned by Sony and Time Warner, and they are expensive to buy. It is not cheap programming. Everybody wants to be in the TV business; it's not an easy business -- to do it.

One example is, it's my understanding that Alliance Gate and a venture capital partner bought the TV Guide Channel, and I keep hearing rumors that it's going to be back on the market, and the fact of the matter is, Lionsgate is a great content producer. Not only do they produce a lot of great movies, they produce a lot of great television shows.

I think they do Madman, they do Weeds, and in a very crowded space, if after a couple of years, they are deciding that are going to do something else, and this is what they do for a living, it just shows you how challenging the TV business really is.

And in this environment, how long can somebody lose money? How much can you support a new venture like a Bounce, before you've got to put it on life support? Meaning that just in order to run it, you keep expenses to a bare minimum, and let it exist. As opposed to continuing to invest in it, and feed it, until such time as it turns the corner. So, that's my perspective of it, but that is from a guy from the outside looking in, who also happens to be a competitor.

Okay. (laughter) Fair enough, and very helpful. Thank you.

Bishop?

Yes?

Just a couple of things on your earlier question that will be helpful to you. The LTM dividend receipts from TV One into Radio One, $8.7 million. And that will help you bridge your EBITDA number. And you --

-- that is the dividends before it was consolidated?

No. That -- we still receive dividends. The reason I couldn't answer your question easily or quickly, when you asked for the pro forma LTM EBITDA, is, we take radio EBITDA, LTM, and then we do our add backs and so on, and we then we are allowed to count the dividend flow form TV One and Reach Media. And that's how we get to our bank covenants and our ratios.

Got it.

Okay? So, $8.7 million is the -- forget about TV One EBITDA, start with the Radio, and then essentially you will add in dividends from Reach and TV One, and the 2 numbers that you need for that are, TV One, $8.7 LTM and Reach Media at $5.0 LTM dividend flow. Okay?

And then the second -- the other question you had asked is, how much did we spend on stock buybacks and ALP? It was correct; we have $6 million left, but just to be clear, that is starting from an RP basket of $15 million, so we spent approximately $9 million year-to-date.

Right. $9 million spent, $6 million left, and you are being very opportunistic, as you can be, apparently.

Yes.

Okay. And I will follow-up with you, Peter, on this, so we can do the new math.

Thank you very much.

Michael Kass, Blue Mountain capital.

Hello guys. Thanks again. Was just wondering, of the cash balance? How much of that is at TV One versus the Corporate?

The Corporate is $12.9 million and the balance is, almost all of it, is at TV One. There's very little at Reach, by the end of the quarter.

Okay, great, thanks a lot.

[Evangelos], Scotia Capital.

Good morning guys. Could you let me know where you stand on your EBITDA -to-interest covenant for the quarter?

Yes, it's a -- 1.71 -- hang on -- I don't want to misquote. 1.71.

Andy [Scheffler] with [Onex] Credit Partners

Hi. Given that you just signed up Cablevision, should we expect that we would see sequential and a quarter-over-quarter growth at TV One? For the fourth quarter?

It won't impact that fast. There is free period on it, so we won't see any sub fees, and we can't monetize the audience that fast. What you should expect for TV One for Q4 is essentially the guidance that we have had -- the full year guidance that we've had on the street.

Okay, and the $2.6 million of, sort of, one-time costs for the quarter that you outlined, those are done with? And going forward we should not expect to see any of those recur?

Sorry, you broke up. Was that the $3.0 -- the TV One award? The non-cash piece?

The TV One -- doesn't it -- an added $1.1 million of programming and $1.5 million of extra marketing?

That should normalize. The reason I am hesitant, is because we are investing more heavily in programming quarter-by-quarter sequentially as we build up. There is a shift away from acquired programming, to owned programming, and in the short-term, that probably means that we will be spending more cash programming.

And then just to confuse you, we then amortize based on how we run the programming. On a cash basis, we will see, probably, sequential increases in programming. On an amort basis it should normalize. So you shouldn't see --

I guess another way of asking it, do you expect EBITDA margins at TV One to return to more normal levels, because this quarter it was down significantly versus --

Yes. Yes, is the answer to that.

Okay, and then -- you made a comment about, you still expect to hit your target EBITDA for TV One. Is this the guidance that you guys gave in October of 2010? Is that what you're referring to?

Yes. Operator, one last question.

William Matthews with Post Advisory Group.

Hello guys. Can you walk through the increase in the corporate overhead from $5.5 million last year to $10.4 million this year?

Yes, the biggest single piece is the non-cash TV One award which was $3.3 million. Sorry, $3.1 million, pardon me.

3.1. And that's some kind of equity component of TV One that is awarded to Alfred?

Yes, it's a future revenue stream, essentially. Once Radio One has got back everything that it has ever invested in TV One, the next dollar that comes in, 8% of that is paid out to Alfred.

And the ratio you mentioned in the previous question, 1.7 to 1. What EBITDA are you using for that?

Ah (laughter) 81.1.

81.1. Okay. And then how do you look at the IRR, using the RP basket to purchase bonds back, versus purchasing equity, in terms of, if the bonds were trading in the mid 80s? How do you compare the IRR to purchasing stock?

That's a good question. We have done math on the stock price that we feel is fair value for the shares. Now, our math and our view on what fair value is, has nothing to do with how the market is going to value it. But ultimately, I think, and when we look at fair value for the stock, we try to be conservative.

We pick what we think market multiples are for cash flow. We actually, when we did that analysis, we didn't even look at any sort of really stick value, did we Peter? So, no stick value, just multiple on our cash flow, value for TV One that has already been set. You know, third-party arm's length transaction.

And we zero out our Internet losses, because we could always just shut down Interactive One, and not lose any money. But we are going to break even, and we are going to make money, and we don't really give ourselves much, if any, future value for it.

And we felt that the stock's fair value, when we were buying it back at $2.70, was something in the mid $3.00, and then, that when the stock came even further down, we still think that the fair value is significantly higher at where it is. So, the impact that we could make by buying back shares at this level, versus how much debt we could buy even at 80% or 85%, I think you end up with a significantly higher return by buying the equity.

Okay, and I guess you could look at it from a lot of different angles, but I would suggest you take a look at what kind of impact, addressing the capital structure, getting that debt, trading closer to par, would have on the equity price. I think it would be substantial.

But with a $15 million restrictive payments basket, which is what we -- all we had? There is -- what impact could we make? Even if we used all $15 million to buy -- to reduce our debt from -- our subdebt from $330 million to $285 million, buying it at $80 million, it wasn't going to have an impact on it.

Sure. From using that lever. But, I am saying, a more comprehensive pathway for bondholders to understand how you are going to refinance this capital structure, will go a long way to improving your equity price.

Look, we have been focused on how we are going to do it, what we're going to do, but at the end of the day, a significant amount of that is out of our control, right? Where our bonds are trading today, yes, I don't know why they are trading there. I don't know why a 15% coupon is trading at $85 or whatever. And my understanding is, it is not really trading. There's hardly any liquidity there.

These bonds -- once, when we originally did the deal, these bonds shot up and started trading at par. They started trading at $105, and then, the market continued to get worse, the economy continued to get worse -- double dip, and then all the sudden, from nothing that we did, the bonds are trading in the $80s, some yield of 20%. So, we go from trading at $105 to having -- yielding 20%. How -- what do we do about that?

I would love to have a longer conversation about it. Clearly, there are external factors that are going to affect your bond price, but there's clearly things that you can do that will also affect your bond price. There is definitely stuff that you can do to make investors feel comfortable that we are not going to be the equity holders when this thing comes to maturity. So, there's absolutely things that you can do to help that bond price, and that will tremendously help your equity price.

Well, we are happy to talk to you about it, because at the end of the day, it does not do the Company any good to have our bonds are trading at $85, because we would like to ultimately refinance that debt. Right? And we can't even talk about refinancing it, where the bonds are trading now.

Right. Okay. We will definitely follow-up.

All right. Thank you very much. As I said to that gentleman, we are available for off-line conversations about anything that anybody has missed on the conference call. Thank you, and we will talk to you next quarter.

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