Urban One Inc (UONEK) 2012 Q3 法說會逐字稿

Ladies and gentleman, 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 refer to in the 10-Ks, 10-Qs and other reports that are periodically filed with the securities and exchanged commissions could cause the actual results to differ materially from those indicated by it's projections or forward-looking statements.

This call will present information as of September 30th, 2012. Please note that Radio One disclaims any duty to update any forward-looking statementsmade in the presentation. In this call, Radio One may also discuss some non-GAAP financial measures in talking about it's performance.

These measures will be reconciled to GAAP either during the course of the call or in the Company's press release, which can be found on its web-site at www. radio-one.com. A replay of the conference call will be available from 12.30 PM Eastern Time today until 11.59 PM on November 4th, 2012. Callers may access the replay by calling 1-800-475-6701 or international callers may dial direct 320-365-3844. The replay access code is 268-635.

Access to live audio and a replay of the conference call will also be available on Radio One's corporate web-site at www.radio-one.com. The replay will be made available on the web-site 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 conference over to Alfred C. Liggins, Chief Executive Officer of Radio One, who is joined by Peter D. Thompson, Chief Financial Officer. Mr. Liggins, please go ahead.

Thank you very much operator, and welcome to the third quarter results conference call, everyone. You've seen the release that's pretty consistent with what we've discussed with many of you in the past, Q3 numbers come in at mid-single digits. Q4 pacings, are strong, bolstered by political. Peter is going to go into the details of the numbers and then we will take questions and drill down on some of the areas that you would like to discussion.

Thanks Alfred, Our revenue was approximately $110 million for the quarter that ended September 30, 2012An increase of 5.4% from approximately $104.4 millionfor the same period in 2011. We recognize approximately $33.2 million of net revenuefrom the cable television segment in the third quarter 2012, an increase of 12.5% over Q3 2011. The Radio Division excluding REACH Media produced net revenues $61.8 million, up 5.3% from the same period last year.

REACH Media had net revenues of $11.9 millionin the quarter which is down 11. 3% year to year. While advertising revenue was up for the quarter a decline at REACH was due to the change in the affiliation agreements between REACH Media and Radio One, effective January 1, 2012. and a decline in events sponsorship revenue. The Interactive division had netrevenues of $4.5 millionwhich is down 8.9% year-to-year.

Our five largest radio (inaudible) performers as follows, Washington, D.C. net revenue is up 14.8%. Raleigh was up 12.8%. Baltimore was up 5.6% . Atlanta was up 1.9% and Houston was down 6. 9% year-over-year. Indianapolis, Detroit, Cleveland, Dallas, Cincinnati, Columbus, Richmond and Charlotte posted a cost revenue growth year-over-year , while our Philadelphia and (inaudible) posted with net revenue declines over the last year. Gross political revenue was $2.05 million in Q3and $3.2 million foryear to date.

Q4 political pacings are $4.5 million bringing the annual number to $7.8 million thru yesterday, which is the highest income in Company history. About half of that amount is issue related and the rest is split fairly even between Presidential and local races. The vast majority of political spending has been in. D.C.,Baltimore, Detroit, Raleigh and the Ohio markets.

Political orders continue to come in as we speak, which should push that three or four pacings to plus13%. Our top three advertisers categories, with food and beverage at 14% of the total which is down 9.9% year-to-year. Government and public at 13% of the total is up 43% year-to-year. And retail at going down on is 13% of the total that is up 43% year to year and retail is 13% of the total down 6% year-to-year. Aside from political spending, revenue growth was driven by telecoms, auto, financial, health and services.

Operating expenses excluding depreciation and amortization and stock base compensation decreased to approximately $78.7 million in Q3. Radio division expenses decreased 3.8% due to the change in affiliation agreement with REACH Media and reduced music royalty fees. Expenses at TV One increased by 7.2% due to marketing campaigns throughout three premier series, R&B Divas, RIckey Smiley and Unsung. Reach's operating expenses increased by 7.5%primarily as a result of the nearly executed management agreement between REACH Media and Radio One. The Internet segments operating expenses decreased by 3.5%. Corporate expenses decreased significantly due to one time non-cash charge of $3.1 million in Q3 2011as CEO's TV One Award

For the third quarter, consolidating station operating income was approximately $40.9 million, up %14.2 compared to the same period at 2011. Adjusted consolidate EBIDAT was $31.3 million and increase of approximately 23% year-over-year. Stock based compensation decreased approximately $37,000 for he quarter. Depreciation amortization expense decreased to approximately $9.7 million compared to approximately $11.5 millionlast year.

Interest expense decreased to approximately $22.2 million for the third quarter. The Company made cash interest payments $ 21 million in the quarter. The provision income taxes for the quarter ended September 30th 2012 was approximately $9.1 millioncompared to a benefit from income taxes of $2.3 millionfor the quarter ending September 30, 2011. This is a result of adjusting the year-to-date income tax provision based on the actual effective tax rate as of September 30, 2012.

Net loss was approximately $13.1 millionor $0.26 cents per share. Compared to a net loss of approximately $9.9 million or $0.20 per sharefor the same period in 2011. For the third quarter capitol expenditures were approximately $2.8 million compared to $1.8 million in the third quarter of 2011, approximately $677,000 of CapEx relates to Company's corporate office moved to Silver Spring. And approximately $305,000 relates to Company's Philadelphia office move.

The Company received dividends from TV One in the amount of approximately $2 million in the third quarter. As of September 30th, 2012 Radio One had total debt net of cash balances of approximately $770.7 million. For bank covenant purposes our total net debt is approximately $682.9 million and our LTM bank EBIDAT was approximately $86.1 million, giving a total average ratio of 7.93 times at a senior leverage ratio of 4.12times.

As we did in the second quarter, we elected to take less than the maximum possible dividend from TV One for the third quarter, as we're focused on maintaining compliance throughout 2013, covenant step downs. We are likely to defer some dividend receipts into 2013. We're confidant that we will remain in compliance with our bank covenants through 2013.

As of September 30th, 2012 the Company's cash and cash equivalence by segment are as follows. Radio and Internet approximately $24.6 million,REACH Media approximately $1.9 million,and Cable Television approximately $22.2 million. In addition to cash and cash equivalence the Cable Television segment also short term investments of $165,000 and long term investments of approximately $2.4 million.

And with that I will hand it back to Alfred.

As I quoted in the press release, I wanted to talk about TV One up front. Many of you have asked in the past about more detail on the TV One. TV One had a very solid up front cycle with CPMs and volume up in the mid-single digits. A number of you have also asked about TV One ratings and the new shows that we had coming in the back half of the year.

We have completed our third quarter and happy to report that two of our shows R&B Divas and The Rickey Smiley Show, actually created new records for TV One premiers in terms of total viewership. R&B Divas did 1.09 household rating and Rickey Smiley did a 1.29 household rating. What's this all mean for the quarter?

Well, for Q3, 2012 for Monday through Sunday sales primetime TV One ended up Q3 2012 up 6% in households and up 9% in persons 25-54 delivery, compared to Q3, 2011. We were happy with that trajectory. We will continue to see how the shows perform going in to Q4. We had a significant marketing effort as Peter outline in Q3 to launch these shows, so expect them tail off a bit. We're in the process of completing budgets for Radio One and TV One for 2013.

All of our TV One shows for Q1, Q2 have been green lit. Budgets are almost complete and going through that process, we're feeling very bullish on our ability to continue to grow our cash flow,bring our leverage down and manage our covenant step downs for 2013. So, with that operator, I would like to turn it over to Q&A.

Ladies and gentlemen, if you wish to ask a question (Operator Instructions). Our first question is from the line of Michael Kass with BlueMountain Capital InvestmentsPlease go ahead.

Hi thanks for taking my question, just on TV One, I was wondering if you can update us on the number of subscribers were that are covered and also where you see the opportunities in that.

Yes, the only operator, we just actually signed a new small operator Cable One will end up giving us about 50,000 subs between now and the end of the year. The only operator we don't currently have is Dish Network and we've got to figure out a strategy for that. At the end of the day, I think it's really about cost.

When it comes to our issue with Dish and it's not just about going in and telling what great programming we have and so we don't have a solid plan for how to rope them in as of yet but in my new role as the CEO at TV One, it's going to be my job to develop that. In terms of subs, here we go, we have, according to Nielsen in September we had 57 million subs. Our internal subscribers are about 50.5 million.

There's always a disconnect Nielsen, it's a larger universe, a struggle to articulate why that is. I think it has something to do with people who watch television in other places that are not subscribers like, airports and things of that nature. they probably take into account some factor for people who get cable television or satellite but, are not paying for it but we're at about 50 million internal, 50.5 million internal subscribers and about 49.7 million paying subscribers. So pretty healthy subscriber base.

If you look at the difference between that and kind of the full amount of cable or households out there. It looks like it's about depending on the number 20 million or 30 million, I guess of cable operators where you are on a non-basic tier. What are the opportunities there?

Look, that's a tougher pot. When we first launched TV One, essentially, cable operatorswere, at least saying they were not adding anything to their analog tier and they were adding everything to digital. We were able to get a descent amount of analog carriage when nobody thought that was really possible.

So, the problem is worsened now because the cable operators don't really see additional margin opportunity in their video products and satellite guide. Like one more channel doesn't really make or break their network unless it's a big sports rights issue. Now a group of channels like Viacom can make or break.

So, a long story short, the opportunities for us to get more subs from our existing partners probably Comcast is where we're, I would say the most logically under penetrated, given that their our partner, but there are some challenges there at this point in time because of the litigation that they have with the FCC and the Tennis Channel have no idea where that is going to shake out but essentially, these independent networks led by the Tennis Channel l said that they favor networks that they own pieces of.

I don't believe that's true because we've gotten significant carriage from other people at higher penetration levels than Comcasts has given us. In fact a number of operators including the TELCOs both have penetrations than Comast does. There's clearly upside there if that litigation gets ultimately resolved.

I would say that , so getting dish, potentially figuring out a way to get more subs at Comcast. The issue also for everybody is cost, right? So the more subs mean that people have to pay more but there's also probably ways to mitigate that for some of these operators who have us at digital penetration and we would like them to melt us because the extra eyeballs make it an opportunity for us to monetize. I don't want to give anybody the impression that there's a lot of future potential sub dramatic sub growth as has been in the past.

I think that there's some but it will be hard fought so right now for us, it's got to be about getting our ratings up, getting our CPMs up, getting more premiums for the advertising that we are selling, and our renewals are going to come up and in a couple of years. We need to see how that plays out. But, all many all, it's still -- if you're in the media business, it's the best part of media business to be in,even though I just articulated a number of challenges. I'm glad that we're discussing these challenges and not discussing other ones.

Got you. Just briefly on the under performing radio markets, any kind of update on that in terms of how their remediation efforts are doing?

Yes, actually, the number one market, the -- we had two markets that we were losing money in, break even or losing money in. Charlotte, we were losing money in and we announced a few months ago that were LMAing a new station for market signal in Charlotte.

We had two, weaker signals, class "A's" that we bought when we entered the market and Arbitron ended up expanding the size of the market. We then didn't cover half of the African-Americans that were there and that's really hammered our ratings,made them go down when that happened.

We bought a new signal. We LMA it currently,we don't have to close on it. it until the end of 2013. We bought it for $7.5 million or $7. 75 millionWe launched a new format, an old school format and in one month it went from nothing to a five share 25/54 and 4.5 share 12 plus so dramatic out the box, ratings.

The addition of that signal allowed us to actually simocast our gospel format, Praise on the remaining two signals and its ratings have increased there as well. We will go from losing $500,000 in Charlotte, this year to making money next year. So, is a -- that is a pretty positive.

Philadelphia, last year we did not make any money or made just a little bit of money, we should do close to $2.0 million cash load this year. Saint Louis, is having a tough year, but we use not make money in Saint Louis and now we do. Our cash flow might be down like from $1.8 million to $1.5 million, they are having a very strong Q4. So I feel like that is turning around. There is probably some additional things we can do in that market to enhance our ratings position. We are buying Charlotte, we sold one of our problem stations out of Columbus,we just announced to Salem.

There are too many urban radio stations in Columbus, so we flipped one to a general market in Jack format and Jack wasn't doing Jack. In terms of ratings, and as opposed as to putting more resources behind it and taking up brain power we decided to sell. That pays for a good portion of the investment we are making in Charlotte. The new station in Houston continues to be about an one share but we are seeing slow, steady improvement in the revenue.

Next year I think the revenue jumps in the new station significantly, even if the ratings don't improve that much but we're still hopeful that the ratings will continue to rise. We've got a lot of good things in the hopper for next year.

We have a lot of levelers that wear able to pull on the expense side on the inventory reconfiguration side, meaning that we have inventory that's been tied up in places outside the Company's control that we are going to be bringing back in and giving our guys more inventory to sell next year at higher rates and so that's one of the reasons we're so bullish on our ability to maintain any sort of covenant compliances. We feel like wear we're going to grow our radio again next year. I said at the outset that 2011 we lost, call it $10 million radio cash flow. I said in the outset this year is our goal to claw that back and you know what? We're going to get that back.

We got another goal for next year to grow our radio cash flow again significantly and we were assuming that the market doesn't grow. Now some might argue with me and say while this is a political year and we have done a lot of political that the market could to backwards, well, the economy could also improve. I am not Nostradamus. So if I can't predict for sure that the market is going to go down or up, we will just call it, we will call it flat. We are feeling pretty good about things. Did I answer your questions about the turn around market?

Yes, thank you very much.

As a reminder, (Operator Instruction).

We to have a question from the line of Michael Guarnieri of Nomura Please go ahead.

Thanks. Hi, everybody. Peter, Alfred how are you guys doing today? Peter, can you go over the covenant numbers again, I'm sorry I just wasn't writing quick enough during your remarks. It's part one of my question .

And part two is, as you said, very outwardly that you are holding back the amount of dividends you pay out of TV One. Can you give us a little bit of a sense for what the dividend capacity might be for 2013 and kind of related, expenses went up which I think was tied to programming at TV One. Will that normalize into next year? So, again, tying back to the most important thing which is the dividend capacity. Does that help your dividend capacity for 2013?

Let's deal with that first then I will circle back to the covenant numbers. I think we have not given guidance for next years EBIDAT Q1, we have said that it is going to grow. We' ve given guidance and we got to do about $40 million this year and we are going to grow off of that. Obviously you got to deduct the interest expense and then you arrive and then you can distribute up.

I would say having stored up some dividends, I guess we could have taken another the $5 million and taken another $10 million of dividends out this quarter roughly which would have equated to about $5 million to us. I think for next year we are looking at the dividend number somewhere in the in the range of $15 to $20 million ballpark. That's if we continue to manage the business the same way as we are now,that's based on a lot of variables. That's the rough guiding line of what I think we are able to take out next year should we need it and want to. In terms of the expenses. The marketing expenses were high this third quarter.

I think it's probably normalize down a little bit. Having said that, there were some offsetting items in this third quarter year-over-year because in 2011, they had some one time credits relating to some severance and some Nielsen savings, about $460,000. I think that run rate on expenses outside of market and it's about right and probably was a heavy marketing quarter. And obviously, Michael, it depends on how you will run the new in house program and how that is going to amortize against it.

That will vary by quarter depending on what programming schedule looks like. In terms of coming to numbers let me run you through them again? The pro former LTM covenant EBIDAT for banks is $86.1 million, and in order to get to that number, I think you would need to know we had about $1 million of non- cash add backs for this quarter.

Aside from that, the net debt, so see in debt is $379.3 millionand you deduct from that $24.2 millionof cash the radio division has and arrive at a net debt number, senior debt $355.1 millionand then you add in the notes. We've got $327 million of the %12.5and $700,000 roughly at the %6.375.

You end up with a total net debt number of 6 to 82.9 against 86.1 and that gets you the ratios I mentioned earlier which was, senior is 4.1 two times againstcovered under 4.5 and total leverage is 7.93 comes to a total maximum of 8.5. so 7.93 versus 8.5 and that interest coverage I did not mention we're about close to 1.5 times, 1.49 timesagainst the minimum interest cover of 1.25 times.

Thank you very much. Appreciate it.

You're welcome.

And once again for questions (Operator Instructions). Sir, at this time, there are no other questions.

Thank you very much everybody and as usual we are available off-line for any additional questions.

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