Urban One Inc (UONEK) 2014 Q4 法說會逐字稿

Ladies and gentlemen, welcome to Radio One's 2014 year-end call.

I've been asked to begin this call with the following Safe Harbor statement. During this conference call, Radio One will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance.

Radio One cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs, 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 February 12, 2015.

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, which can be found on its website at www.radio-one.com.

A replay of the conference will be available from 12:00 PM Eastern Time February 12, 2015, until midnight February 14, 2015. Callers may access the replay by calling 1(800) 475-6701 in the US. International callers may dial direct 1(320) 365-3844. The replay access code is 350295.

Access to live audio and a replay of the conference call will also be available on Radio One's corporate website on www.radio-one.com. The replay will be made available on the website for seven days after the call. No other recordings or copies of this call are authorized or may be relied on.

Now I'll turn the call over to Alfred C. Liggins, Chief Executive Officer of Radio One, who is joined by Peter D. Thompson, Chief Financial Officer. Mr. Liggins?

Thank you very much operator, and welcome everybody to our fourth-quarter results conference call.

You have seen the press release. And we are going to turn it over to Peter so he can go into the numbers in detail, and then I'll add some color to it and then we will go into Q&A, and obviously the big headline is we finally came to an agreement with Comcast on the buyout of their interest in TV One and we will discuss that in more detail after Peter's comments.

Peter?

Thank you, Alfred.

So net revenue was approximately $109.7 million for the quarter ended December 31, 2014, a decrease of 1.7% year-to-year. The decrease is primarily a result of the lower advertising sales revenue from the radio division and lower direct advertising revenue for the internet division. We recognized approximately $39.9 million of net revenue from the cable television segment in the fourth quarter, an increase of 5.1% over fourth-quarter 2013.

TV One affiliate revenue was up 5.4% from prior year, while advertising revenue was up 8.5% from prior year. Net revenue for the internet division decreased by 23.2% year-to-year. Our Charlotte, Indianapolis, Detroit, Cincinatti, Dallas, Raleigh, St. Louis, and Philadelphia clusters showed revenue growth in the fourth quarter. However, these gains were offset by declines in our four biggest clusters: Houston, D.C., Atlanta and Baltimore.

For the fourth quarter, local radio revenue was down 10.5%. National was up 8.1%. Political revenue was approximately $2.6 million, versus approximately $600,000 prior year's quarter. Cable subscribers, as measured by Nielsen, finished the quarter at $56.6 million, compared to $57.1 million at the end of December last year. TV One currently has 50.3 million billable subscribers.

Operating expenses, excluding depreciation, amortization, impairments, and stock-based compensation, decreased to approximately $79.9 million in Q4 from approximately $84.9 million in 2013. The main areas of savings were marketing expenses at TV One and sales, commissions, and compensation in the radio division.

For the fourth quarter, consolidated station operating income was approximately $42.5 million, up 8.6% from last year. Adjusted consolidated EBITDA was $32.4 million, an increase of approximately 18.8% year-to-year.

Interest expense was approximately $19.3 million for the fourth quarter, down from approximately $22.4 million the same period last year. Decrease in interest expense is primarily due to the lower interest rate associated with the 9.25% senior subordinated note due 2020. The Company made cash interest payments of approximately $10.4 million in the quarter. Net loss was approximately $13.5 million or $0.28 per share, compared to a net loss of approximately $16.4 million for the same period in 2013.

For the fourth quarter, capital expenditures were approximately $1.3 million, compared to $2 million in the fourth-quarter 2013. Q4 cash taxes paid was approximately $15,000. Company received dividends from TV One in the amount of $7.8 million in the fourth quarter, and there were no share repurchases during the quarter.

The Company's cash and cash equivalence by segment are as follows: radio and internet; approximately $45 million, Reach Media; approximately $4.1 million, Cable Television; approximately $18.7 million. In addition to cash and cash equivalence, Cable Television segment also has short-term investments of approximately $2.1 million and long-term investments of approximately $817,000.

As of December 31, 2014, Radio One had total debt net of cash balances of approximately $752.5 million. The bank covenant purposes at total net debt was approximately $669.5 million. And our LTM bank EBITDA was approximately $95.4 million, resulting in a total leverage ratio of approximately 7.02 times and a senior leverage ratio of approximately 3.51 times.

When thinking about the first quarter revenue pace since 2015, there are some timing differences that I want to point out. Both the Reach Media, Tom Joyner's Fantastic Voyage, and Radio One Raleigh's Women's Empowerment events have moved from the first quarter of 2014 into the second quarter in 2015. The revenues and expenses associated with each event in 2014 were approximately $6.6 million and $5.8 million for the Fantastic Voyage, and $1.5 million of revenue and $638,000 of expense for the Women's Empowerment event.

With that, I shall hand it back to Alfred.

Thank you, Peter.

As Peter mentioned, our radio business continues to sequentially improve. Houston has turned around with the launch of our Boom Classic Hip-Hop format. Houston's currently pacing flat for Q1, but pacing up double digits for the year.

Washington, D.C. is our next big focus to fix. It's the current drag on the radio business. We recently changed leadership there this week and we put in one of our regional vice presidents as the new market manager. And so, you know, we are hyper focused on that market now as we speak, as the next big, you know, fix and heavy lift.

I must point out that we expect significant EBITDA growth still in our core radio business this year, and dramatic EBITDA growth at our Reach Media syndication unit, fueled by substantial cost savings there and topline revenue growth. Our combined radio business is looking up and heading in the right direction. Interactive One continues to make strong progress with double-digit positive direct revenue pacings in Q1.

We also expect significant EBITDA growth there in 2015 in iONE. We recently purchased hip-hop mogul Russell Simmons' website GlobalGrind to anchor our millennial vertical strategy and iONE is a long-time project, as you know, but a necessary project, because advertisers are moving more and more into the digital arena. And our strategy, we believe, is the right one because we at iONE are selling display, video, and custom solutions, not audio, so it's not really trading ad dollars. This is all new money for the Company. The more conversations we have, we realize that digital is here to stay and will be part of the advertising ecosystem in a very significant way.

TV One finished 2014 right on budget with $53.2 million of EBITDA, up from $49.3 million. You might remember we budgeted some, you know, significant programming investments. We have historically had stronger EBITDA increases. But, you know, 2014 was planned to be less. But, you know, we hit our number as we said we would. And this is in the face of, you know, significant headwinds for a lot of other cable networks in terms of declining ratings.

But TV One faired-- even though our ratings declined somewhat in 2014, we declined significantly less than most of our competitors in closing the gap between us and them. In 2015, we're off to a great start with prime ratings currently up 26% in households and also in demo. We expect a very strong year of EBITDA growth in 2015 for TV One.

We are having excellent affiliate renewal conversations with the Comcast deal done and signed, the affiliate deal, done and signed. By the way, the affiliate deal is not connected to the buyout deal in terms of, you know, if some -- if for some reason the buyout does not get completed, that affiliate deal still stands. So, that's done and signed.

We are also very positive in detailed negotiations with our other distributors. Our other distributors include Verizon, AT&T, Cox, Charter. Obviously with the merger going on, you know, you're assuming that if Comcast ends up buying Time Warner, that takes care of that. And if AT&T ends up buying Direct TV, that takes care of that.

We expect to sign multi-year net positive to the network renewals with all of these distributors as well, in the coming months. Dish Network continues to be the only distributor not carrying TV One.

The Comcast buyout, finally agreed to, at what we think is a reasonable valuation. We have $550 million. We have until the end of Q2 to close this transaction. There's no penalty for failure if for some reason, you know, the transaction doesn't close. We believe that there are significant cost efficiencies from us owning 100% of TV One and combing it fully into the infrastructure of Radio One. The acquisition of the Comcast stake further diversifies Radio One into a multimedia company.

We expect, in the coming years, our cash flow will reach 50% radio and 50% digital and cable, which is a goal of ours. And we think that we're fulfilling, you know, on the promises we have made to investors and also to our advertising partners.

And this One Solution platform continues to play out as an attractive option for advertisers in a continually browning America, multicultural advertising continues to rate strong and move forward. And I think that we're, you know, right at the epicenter of it and we've got some more, you know, exciting announcements and initiatives in the coming months as it relates to really firming up and filling out this platform so it continues to be highly attractive to advertisers.

With that, operator, I would like to turn it over to Q&A.

(Operator instructions)

Our first question is from Aaron Watts of Deutsche Bank. Your line is open.

Hi, guys. Congrats on the Comcast deal.

Thank you.

A lot to cover here. So let me ask a couple questions. I'll start with the radio business though. Alfred, can you maybe give us a sense for what happened between like a few weeks ago when you were going through the credit facility amendment and today in terms of pacings for the first quarter? What specifically was driving kind of the slowdown in January?

Yes. Look, I'm not sure. And by the way, when we give you guys pacings -- look, that was unnerving to me obviously, because we just did the amendment, but when we give you pacings, we just read right off the pacings sheet. So there's no interpretation, you know, of it. But having checked with other companies and channels, I think we have seen, a slowdown in January. I talked to a number of companies and they saw it as well. So I don't know what is driving it.

Ultimately, if you ask me to pontificate what I think is driving it, radio is a traditional medium. I do believe that there's ad share shift, which is why I've said that I thought radio, although still a good business with low CapEx, high margins, low cost of goods sold, we're sharing ad dollars with digital mediums whether it's Yelp or Google or what have you. So I think that you're going to continue to see a moderation of that growth. It doesn't make it a bad business.

I like to say that we -- it's not the TV -- excuse me, it's not the newspaper business by any stretch of the imagination. The newspaper business they print on paper. They deliver in vans and trucks, or they mail the newspaper. We deliver audio. Very simple. In fact, if you really dug into it, our audio delivery is free and it actually costs people to stream. I think at some point in time, those facts have to play into it.

But our audio delivery is not any less or any more inferior than Pandora's. And quite frankly, offering up different selections or commercial free or any of that, those kinds of strategies are fully within the radio industry's capabilities. However, I don't think commercial-free is going to be in anybody's ultimate business model. Certainly, the digital guys are starting to run many more commercials.

So, going back to answer your question, I can't pinpoint it specifically. I think the economy is generally healthy which is good for us. And I still feel confident in our ability to grow our radio cash flow in 2015, based on things that we're doing with our cost structure and in addition -- our Q2 right now is pacing up strongly. But I'm hesitant to go out on a limb and beat the drum on what the revenue number is going to be because it can change week to week.

What I am willing to beat the drum on, is our ability to grow the cash flow of the radio business. That's core radio. As I said before in my comments, Reach is going to be up dramatically. They are -- their revenue is pacing up quite nicely and they've got substantial cost savings. At the end of the day, my job, our job is to deliver you cash flow growth. We're going to moderate what we can do on our topline with what we need to do on our bottomline and make sure that we deliver that cash flow growth in the radio business.

That is helpful context. One other question around kind of the operating environment. Is it fair to say what you're seeing is that the big markets continue to be a little weaker for you than your smaller markets, or any specific categories that are ailing across the platform? Or is there --

Yes. I've never been a believer in categories. Radio has never had a concentration of categories that were big enough to drive it in one direction or the other. It's not like automotive to the TV sector. Peter may be able to give you more color on big markets versus small markets.

I'm just looking at the Miller Kaplan report for the fourth quarter. It's really kind of mixed. If you look at our four big markets, D.C. as a market, according to Miller Kaplan, was down 2.8. Houston as a market was down 3.6. Atlanta was down 3.4. Baltimore, down 2.1. Overall across all of our markets, the market was down 1.5. So that would suggest that the bigger markets are underindexing, if you want to call it that. We have seen D.C. down much higher than that.

And look, the big markets is probably where you're seeing more competition for digital dollars, whether it's where Pandora is putting their sales forces and where some of the local guys like Yelp and Groupon are focusing their sales force. I just read something in Inside Radio -- I think it was Inside Radio or one of the trades. Maybe it wasn't Inside Radio. But anyway, it said that Pandora was selling advertising in 37 markets and they had 111 local salespeople out there. When I looked at that, you know, that actually made me smile because that's not a lot of salespeople to cover 37 markets. We have 20 salespeople in Washington. And at the end of the day, I think that we've got a significant advantage with our local sales forces in these markets.

And we're going to continue to fight that good fight. And we just have to make sure that they have got the right products to sell our local advertisers. And so it'll be a war of attrition. And I think the radio guys have a significant advantage. I think we've got a significant advantage. And look, we're all leveraged more than we should be for the most part. But we -- but we're all making money.

And I don't think that there's going to be anything on the horizon that is going to change the royalty backdrop for digital -- you know, for digital radio guys. So I don't see those companies becoming cash flow positive -- significant cash flow positive anytime soon. The question is how long are the investors going to feed those losses if you don't see light at the end of the tunnel.

All right. Let me just ask you two questions on the TV side of the business. You talked about the valuation that you achieved in this purchase. How should we think about that? If we want to think forward-looking, what does that valuation look like if we give you some credit for maybe this new distribution deal with Comcast, as well as any savings that you might benefit from owning 100% of it? Does it become a little bit more -- I'm thinking about leverage going forward.

Two things. One, without giving you guidance, I think -- I said we expect significant EBITDA growth at TV One. And yes, you're right, the new distribution deal is playing into that. I would say that you should think that it is a single-digit multiple to us on forward. And quite frankly, that's just on the existing business as is, without us really going in and figuring out what any cost efficiencies are from the combined operations. Believe it or not, we haven't actually done that exercise yet.

We figured out whether or not we could finance this thing just as the platforms are currently operating. And at the price that we're paying, Comcast is going to take a small note that will end up sitting pairy with our subnotes and everything fits inside the baskets and the leverage governors within our existing indentures. We spent a lot of time -- when we made this deal, we figured out how we were going to finance it before we made the deal. In fact, part of the negotiation was, OK, you can say you want X but I can only pay Y, and this is why. And so when it comes down to what that forward multiple going to be to us, it's going to be single digit.

Okay. A follow on what you were saying there, it sounds like the financing, you will have a note to Comcast. And that, you said, will fit kind of even with your bank debt or will that be even with your unsecured note?

Unsecured, I said pairy with our subnotes.

And the rest of the financing you think you can then do at the secured level? Is that right?

Up top, yes. There will probably be -- there will probably need some additional dollars that have to go at the subnote level but not a lot. The vast majority go up with the total global refi of our first lien debt.

Okay.

And just for clarification, we're going to -- the purchase agreement, we're going to file it within the next couple of days with an 8-K and you will see a bunch of numbers in there that will help bridge you from the 550 to the net price and then what the loan amount is. So, you will get a decent amount of detail on the numbers.

Can you give us the amount of the Comcast note now or you need to wait?

It's a whisker under $12 million.

Okay. Got it. Last question for me. As you think about your leverage going forward, this maybe moves the needle some. But what is a realistic target for you, maybe a year out or two years out that you'd like to get to and think you can get to? Thank you.

Look, we're going to -- obviously, in order to do this, you know, we have to do it all around our seven times leverage test. And I'd like to be -- I'd like to be below seven times by the end of the year.

What is our target? The whole reason that we wanted to buy the other half of TV One is because of the long-term, locked-in nature of the affiliate revenue stream, which I think gives us the ability to delever the Company significantly over time and not have a gun to our head to have it delever in the first 18 months. Because we've got these long-term deals. We can assure ourselves that we will have time to delever the Company. And look, where would we ultimately like to be? I just had my 50th birthday. I'd like to have no debt.

I think that we have to be very careful about the changing landscape of the entire media business. I'm not even just talking about the radio business now because some people have called, you know, into question the efficacy of the cable bundle, and where is that going, and over the top. And there are so many changing dynamics of the way content is distributed. But what I know is that TV One is getting a new set of runway that is going to be a significantly long period of runway. And we will be insulated from those changing dynamics for a significant period of time.

My goal is during that period when I know we're insulated, we're going to use our cash flows to delever and then figure out how and where is the best place to monetize content, and what the media business looks like in the future. And that's what we're going to do. We're going to focus on delevering. And you guys already know about our diversification strategy. We're going to make the MGM Casino investment, which we think is going to be a home run.

We will focus on deleveraging, any potential acquisitions that we might make will also be delevering acquisitions. I'm just talking philosophically. There's nothing on the horizon right this second. If we were able to buy our competitor in Dallas in the radio business, we know that would be significantly delevering because we create a bunch of cash flow by combining our operations there. But the way we would look at that acquisition and the price that we would be willing to pay, does it delever us quickly. And that's the strategy.

It's a sleep at night strategy. I think our platform is plenty big. We've got a great story. We're multimedia. Quite frankly, we're spending a lot of our energy right now building ideation and agency capabilities in-house so we can develop more compelling ideas for our clients, because we've got enough impressions to sell them, and they can buy impressions anywhere. What they really want are more ideas. We have a big enough platform that we can have conversations with CMOs and CEOs. We reach 82% of black America.

So, you know -- so because we're big enough, we have a good story. We're now going to own 100% of TV One. Job number one is to delever the platform.

Alright. Thanks. Appreciate all the color.

Yep. Absolutely.

Our next question comes from David Farber of Credit Suisse. Please go ahead.

Hi, guys. Good morning.

Good morning. How are you?

Good. Thank you. A number of my questions have been discussed, obviously. I just wanted to touch base on a couple things real quick. First, Alfred, you guys obviously sound quite encouraged with 2015 and you have talked a little bit about the cost savings opportunity and the topline and how to sort of manage that. I'm just curious to the extent you would, just talk about quantitatively what you think is available for the Company on the cost savings side and just bucketed, what they are, if it's one thing or the other and then a couple follow-ups. Thanks.

Yes. I can't do that yet. We're just on the front end of it. We've spent most of our time working on getting this deal done and being able to finance it given our existing operations, kind of. The cost savings stuff that we're going to do, I bucketed it in, that's the -- okay, we're going to be able to finance this thing. Let's say after we finance it, we're going to have a billion dollars of debt. So now the cost savings are what's going to go into the -- hey, we need to get our leverage down below seven times as fast as possible.

We're saving that exercise for after this conference call and getting folks on that. We will have those -- we will have that data and that plan by the time we come to market to finance this. But we don't have those details just yet. But we know that there's significant cost saving there.

Okay. Look forward to that. Finally, any numbers that you could share with us away from the high single multiple on what sort of impact you would have on the affiliate deal or the renewals or anything like that? Or ways for us to think about sort of the LTM and what you think it looks like on a go-forward?

Nothing that we can give you on this conference call. A couple things. One, our affiliate deals, we're bound by confidentiality agreements of what we can and cannot say in a public forum.

However, what I can tell you is that you will be able to reverse engineer and extrapolate from any financing documents that we will have that hit the street. We're obviously going to have to disclose a certain level of financial information in order to get the deal done. And you guys are smart, you'll be able to figure it out. And we will disclose as much as we can.

But we've said it. We said that we have multiyear. We've got net positive progress in our rates. We're talking to every distributor about net positive rates on a continuous basis. More subs and multiyear. That's the conversation that we're having with every single distributor.

Very good. Okay. And the rest of my questions have already been answered. So, thanks again.

Thank you.

Our next question is from Lance Vitanza of CRT Capital. Your line is open.

It's actually Brad in for Lance. Congrats again on the Comcast deal.

Thank you.

I just had a couple quick follow-ups on that transaction. The first being -- I know you just mentioned briefly a global refinancing as part of the capital raise for the transaction. That would include a refinancing of the 10% TV One notes.

Yes.

Okay. And the other question is, more broadly, now that you're going to own 100% of TV One, does that change at all how you think of programming, in terms of investment in original content and how you operate the TV station going forward?

No. Well, it would change how we operate the TV station going forward because we don't have to have double infrastructures, if you will. But that's more -- that's more back -- actually, I don't want to say it's just back office stuff.

Look, we cross-promote TV One, but we cross-promote TV One from the perspective that we own 51% -- there are things that we would do for TV One that now we can really fully do, open up the entire, you know, war chest to help it. And also when we go out and we're selling advertising, there's certain arm's length things that you have to do. It's all under one roof. You can make more creative deals because it's all the same money inside the house. You can do more on cost sharing when you're creating programming that might end up going across multi-platforms.

Just think, in general, it's just going to be so much better not to have to worry about the fact that you have a 47.5% partner and is this arm's length, et cetera. The other thing that most of you guys don't know, we're in the same building. I'm sitting here on the 14th floor of 1010 Wayne Avenue in Silver Spring and TV One is on 9 and 10. And our radio stations are across the street. It's set up to work quite synergistically. It's been working for Univision.

Quite frankly, I think one of the things -- we're an independent network, right, not with a gigantic programming budget vis-a-vis our competitors like the Viacom Networks, BET, VH1, Discoveries, or Oprah network. But we hold our own from a ratings standpoint and punch above our weight. I think one of the reasons is, we've got this cross-promotional platform.

The fact of the matter is that we're going to be able to promote our shows, let people know about TV One on a -- continuing on a daily basis, an hourly basis. And that keeps us top of mind with the black consumer and viewer. And I think if you pour all of your energy and resources into growing a brand and not dissipate your efforts, then that brand is going to flourish. I think that's what's going to happen.

Great. Thanks for the color, guys.

Our next question is from David Hebert of Wells Fargo Securities.

Good morning.

How are you guys?

Good.

I just wanted to confirm a couple of things that I've heard. It sounds like TV One is going to be part of the restricted groups. So the credit group would essentially have full reliance on this asset and the cash flow stream there, just wanted to confirm that.

Obviously, that is a strong consideration. We're not committing to anything. The game plan is to go to market like that.

We're going to come to market with this financing with the package of collateral that's going to get us the absolute best pricing execution. We have been led to believe if we bring TV One as a guarantor and a restricted subsidiary, that will happen. Right? But we haven't gotten into the details of whether or not it will actually unfold like that. But we believe that it will. That's our game plan.

You know, obviously we could finance it in a number of ways. But -- look, it would be very disappointing if, you know, we go to market and we bring TV One as a guarantor in and the restricted sub, and people say that, well, your rate is the same. We believe that this substantially improves the credit of the Company and the collateral package. And we've talked to a number of our largest lenders who also say that they believe that our rate should be better.

We're hopeful to get a better rate. If we can get a better rate, we're absolutely moving in that direction. Because that helps the delevering profile.

You mentioned getting this done around the seven times and currents test, I believe. Are there any covenants that we should be aware of that would limit this ability or would you potentially need to get a consent from bond holders? Anything to be aware of there?

We don't think we need any consents. So we don't really -- two hurdles, we have a four and a half times lien test. So essentially, we can do up to a four and a half times first lien secured. And that will be proforma for the affiliation agreement and any cost synergies. And then seven times overall leverage.

Aside from that, we just have two $20 million debts in currents baskets. So in theory, they can go on top of the seven times in currents, so you could have your seven times plus up to $40 million of other baskets that you can fill. And those other baskets would sit pairy with the 9.25. So the roughly $12 million Comcast note will fit through one of those $220 million baskets. Aside from that, I don't think there are any other guide rail -- those are the guide rails we will be operating within.

Okay. Got it. That's great. And then on the 8-K filing preamendment, you mentioned in your deal with Comcast that there was a pass to increase subscriber levels. Can you remind us what percentage of Comcast subs have TV One and what are the triggers for that pathway to higher sub levels.

We currently have 13.4 million Comcast subs. They've got 22. We're not at liberty to tell you what the triggers are for the higher subs. But, you know -- but we're more than happy with our deal.

And by the way, you know, there are some scenarios under which we may want to take less subs than more subs because everything plays into a net effective rate and what you have to give to other people. So, quite frankly, we negotiated to have flexibility. Having more subs isn't always the best thing. It's having more subs at the right rate that you don't necessarily -- that doesn't trigger any other MFN issues. So it's fairly complicated. But we've got a path. And we're very happy where we sit.

Okay. And you mentioned a lot of the renewals that you have coming up. So is the Comcast rate -- I know you're probably not at liberty to say what it is -- but is it comparable to other carriage deals that you have currently or do you believe this sets a new market rate for your renewals?

Nope. Nope. Nope. Everybody in the industry now is on the same TV One rate card, subject to people get volume discounts based on the size that they have and number of subs they give us. But everybody is in on the rate card and then bigger guys get bigger discounts. Smaller guys not so much. But there's a bandwidth there that is fairly tight.

Okay. Helpful. Thank you. And just a couple on the radio side. Encouraging pacings out of Houston, it seems like a format that has taken hold across the country. Do you expect any competitive response?

We've had it. We launched this format and then, you know, everybody else followed us and started launching it. And launched some places that we took competitors with us, so we took a competitor in Indianapolis. We had a competitor already in St. Louis, but they switched to this format.

What I say about this format, this format takes off like a rocket and then the ratings come down to earth. That's what's happened with every last one of our stations. The question is, are you better off than what you had before, right? So far for us that has been true in the vast majority of cases. So we're happy with it.

But it's -- I do not believe that it's a format that will maintain the level of initial audience and excitement that it gets. But for us, it works because in most places, we're operating multiple stations. So in most places we have a hip hop station. So the idea that you have one mainstream contemporary hip hop station and a classic hip hop station is a great compliment and a book end. That's very different than somebody who just launches a classic hip hop station as a stand alone without -- without other urban stations to support it. It's a nice compliment in a cluster strategy for us. So I would see us continuing to really nurture this format.

Look, a lot of people in the radio business are just struggling for new ideas so they all jump on the bandwagon of the new idea. And we launched this new idea because we already had a hip hop station and we were -- you know, we needed to fend off a competitor in Houston. But I would like to see the guys in the radio business maybe try to figure out -- as opposed to just going to the next new format, try to figure out how to do a more competitive job where they're at in already competitive format battles. So the stations that flip are stations that are generally losing to another competitor.

What I've found is that provided your signals are equal, it's possible to battle to a draw, even with the incumbent entrenched player that's been there a long time. If you put the resources and the brain power and the time into it. So -- but, you know, people like to go for the next new shiny thing.

Again, we're an urban radio operator. So classic hip hop is a new format for us that will be in our arsenal of many different urban formats. And I think that we've got the ability to utilize it in the most efficient way. I think for some of these folks that are just jumping on it, it'll go up, it'll come down and they will be stuck with this classic hip hop station that'll be kind of orphan in a cluster, and what do they do with it? That's my thought.

Okay. That's great color. Last one for me and I'll jump off. Reach Media in the 8-K, you detailed $8 million of contractual cost savings. Just wondering if you could give any color on that. And then you mentioned you could see, I guess, some reduction in revenue. Maybe just a comment on the network radio environment right now.

Reduction in revenue? I don't -- the $8 million of cost savings is contractual. That's basically compensation, salary, stuff like that. Most of it related to the new Joinder agreement. I don't know what we said about revenue reduction. Reach is forecasting to increase their topline in 2015.

Okay. Helpful. Thank you.

(Operator Instructions)

Our next question is from Nick Brown with [Dezard Associates]. Your line is open.

Hi. Just a couple quick questions on the bank refinancing. Do you have a time frame for when you plan to come to market or have you already started that process?

Nick, we haven't really started. We want to get our 10-K out, which we're planning on doing next week so we have some fresh numbers on the street, and then we will start to figure it out. I think the two things that are on our mind in terms of time, we have a couple of core premiums.

We have a core premium at 2.5% on the TV One nodes that rolls off, I think, March 16. That's one date that we have in mind. Then we have a one on one call premium on the existing Radio One first lien that rolls off April 1. So it's somewhere in that late March -- we'd like to be closing in that late March time frame ideally, subject to market conditions.

Okay. Thank you very much. Just one other question also related to that. When you talk about the seven times total leverage of that will include whatever debt is used to refinance the TV One notes, is that correct?

Yes. So the thinking there is to refinance that out essentially with a bigger Radio One first lien. All being well, the structure that we're thinking about is that $119 million goes away at TV One and is refinanced at the first lien level at Radio One.

Okay. Thank you very much.

Okay.

There are no further questions in queue at this time.

Great. Thank you, operator. And thank you, investor community. You guys have been supportive of the Company. Really appreciate it.

I know this TV One deal has been a long time coming. And we're not home yet. Obviously, we have to finance it. But I think that, you know, we're executing on what we have told you that we would do, and we appreciate your continued support. And as always, we're available offline. Thank you, operator.

Ladies and gentlemen, that does conclude our conference for today. We would like to thank for participating and using AT&T teleconference. You may now disconnect.