Urban One Inc (UONEK) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Urban One's 2017 Year-end Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded. I've been asked to begin this conference call with this following safe harbor statement.

During this conference call, Urban One will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance. Urban One cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs and other reports periodically filed with the Securities and Exchange Commission, could cause the company's actual results to differ materially from those indicated via its projections or forward-looking statements.

This call will present information as of March 6, 2018. Please note that Urban One disclaims any duty to update any forward-looking statements made in the presentation. In this call, Urban 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.urban1.com.

A replay of this conference call will be available from 12 noon Eastern Time on March 6, 2018, until 11:59 p.m. on March 9, 2018. Callers may access the replay by dialing 1 (800) 475-6701 in the U.S. International callers may dial direct at (320) 365-3844. The replay access code is 444141. Access to live audio and the replay of the conference call will also be available on Urban One's corporate website at www.urban1.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'll now turn the conference call over to Alfred C. Liggins, Chief Executive Officer of Urban One, who is joined by Peter D. Thompson, Chief Financial Officer. Mr. Liggins?

Thank you very much, operator, and welcome, everybody, to our Year-end 2017 Results Conference Call. Also joining us today is Jody Drewer, who's the CFO of TV One, for any detailed questions about our cable television unit.

A year ago, at the top of 2017, we committed to growing the company's adjusted EBITDA even in the face of a nonpolitical year. And even though the year was challenging from an environmental standpoint, we were committed to that, and I'm happy to report that we were able to do that in the analysis.

We continue to remain very diligent in our cost containment, our diversification strategy, rationalization, our portfolio and our efforts to grow in verticals where we believe the future has upside including our investment or further investment in our digital business. And that, as I noted in the press release, we made a small acquisition in our digital vision that actually turned out to be very timely and has been helpful and a success today.

I'm going to let Peter walk you through the details of the numbers and then I'm going to come back with a little more color, and then we're going to go to questions.

Thanks, Alfred. Net revenue was down 4% for the quarter ended December 31, 2017, at approximately $109 million or up 0.3% excluding political revenues. Breakout revenue by source can be found on Page 5 of the press release and a breakout by segment can be found on Page 7.

The radio segment net revenue was down 7.5% in the fourth quarter and radio advertising revenue was up 0.6% excluding political. Dallas, Houston, Richmond and Washington, D.C. clusters posted net revenue growth for the quarter. Excluding political, Baltimore, Cleveland and Philadelphia also posted net growth for the quarter. Advertising sales were up in the entertainment, food and beverage and services sectors, while retail, telecom, government and public, health care, auto, financial and travel transportation sectors were all down.

For the first quarter, radio stations are currently pacing down slightly, down 0.7%, so less than 1%, and that's steadily been improving since the beginning of the year. January had a soft start and our markets were down 4.3%. But for February, we finished up 2% and March is pacing up mid-single digits.

Net revenue for Reach Media was down by 12.5% for the fourth quarter due to the lower unit rates driven by weaker demand in the multicultural network market. Net revenues for our digital segment increased 43.1% in Q4, driven by revenue from the newly acquired BOSSIP, HIP-HOP Wired and MADAME NOIRE brand. Excluding this acquisition, digital revenue was up approximately 3.8% year-over-year.

We recognized approximately $45.2 million of revenue from our cable television segment during the quarter compared to approximately $48 million for the same period in 2016, a decrease of 5.8%. Cable TV advertising revenue was down 18% driven by lower total day delivery in the P25-54 and P18-49 demographics. Cable TV affiliate sales were up 4% driven by contractual rate increases. Cable subscribers, as measured by Nielsen, finished Q4 2017 at 59.0 million, which is down from 59.8 million at the end of Q3.

We recorded approximately $1.6 million of cost method income for our investment in -- at the MGM National Harbor casino, equal to 1% of the net gaming revenue reported in the state of Maryland. Operating expenses excluding depreciation, amortization, impairments and stock-based compensation decreased by 9.7% to approximately $77.2 million in Q4.

Radio operating expenses were up 0.8%. The increase in the radio program and in technical expenses mainly due to the addition of GMR music licensing fees and also the tower leaseback expense. Radio SG&A expenses were down mainly due to the lower incentive compensation and reduced marketing spend. Reach expenses were down by $1.1 million driven by savings and commissions, bonuses and employee benefits.

Operating expenses in the digital segment were up 22.8%. Expenses from the newly acquired BOSSIP, HIP-HOP Wired and MADAME NOIRE brands totaled about $2.1 million in fourth quarter. And excluding this, digital segment expenses were down about $400,000. Cable TV expenses were down by $7.8 million year-over-year primarily in program and in technical, due to lower content amortization expenses.

Airing more original HD content versus acquired standard definition content has pushed content amortization expense further into the future and reduced the expense recognized in the present quarter. Corporate SG&A expenses were down by $2.6 million. The corporate bonus expense down by $4.4 million across the divisions. However, the noncash charge or the change in the value of the CEO's TV One award by up by $2.6 million.

For the fourth quarter, consolidated broadcast and Internet operating income was approximately $44.3 million, up 2.8% from $43.1 million in 2016. Consolidated adjusted EBITDA was $38.7 million, an increase of 25.6% year-to-year. Interest expense was approximately $19.3 million for the fourth quarter compared to approximately $20.1 million for the same period in 2016. The company made cash interest payments of approximately $18.9 million in the quarter.

The company repurchased $20 million phase of our 9.25% 2020 notes at a discount, which resulted in a gain on retirement of the debt in the amount of approximately $1.2 million. The company recorded a noncash benefit from income taxes of approximately $117.2 million in the quarter due to the impact of the 2017 Tax Cut and Jobs Act. This analysis is provisional as we continue to work through the impact of the new legislation with our tax advisers. The company received a net cash tax refund of approximately $89,000 in the quarter.

Net income was approximately $121.3 million or $2.63 per share compared to a net loss of approximately $3.4 million or $0.07 per share for the fourth quarter 2016. The fourth quarter capital expenditures were approximately $2.9 million including a building purchase of $1.5 million in our Raleigh market, compared to $1.1 million in capital expenditures in the fourth quarter of '16.

The company repurchased 312,409 shares of Class D common stock in the amount of approximately $597,000. The company also purchased 8,961 shares of Class D common stock in the amount of $19,000 to satisfy employee tax obligations in connection with the 2009 employee stock plan.

The company will be filing a $50 million S-3 stock registration. This is purely a shelf registration and there are no current plans to utilize any of those shares. For bank loan purposes, pro forma LTM bank EBITDA was approximately $129.5 million, and net senior leverage was 5.11x against the covenant of 5.85x. Net debt is approximately $947.2 million compared to $137.1 million of adjusted EBITDA for a total leverage ratio -- net leverage ratio, I should say, of 6.9x approximately.

And with that, I will hand back to Alfred.

Thank you, Peter. Yes, Q1 radio, obviously, radio is a huge part of our business and we went into the year very optimistic about radio and Reach's ability to grow their cash flow this year, given that it is a political year and we've had some of our competitive challenges attacks now stabilized. We continue to be optimistic about radio's ability to grow this year, even though we were really disappointed about January. January was an awful month, and I suspect it was an awful month for everybody across the board, but then February and March have steadily picked up.

Something that I'd like to note for us, in particular. Our Q1 pacings would be even better if it wasn't for one very large client, maybe actually our second largest client in the company, and that's McDonald's, which has historically been a stalwart advertiser in urban radio. They need to be caught out in particular because they switched agencies and strategy, and there was a significant cut in the local radio budget from a strategy standpoint, which affected everybody in the industry in Q1.

And it particularly hit us hard because they're a big radio urban advertiser. So it's a category and a particular client in that category, that we took really large shares out of. So if we had normalized for what McDonald's had normally spent in a Q1, I think we got like $1 million in Q1 across the company, just in radio last year, and it was a fraction of that this year, then we'd have an even better story for Q1.

This is a long-winded way of saying that we continue to be opportunistic about radio. I think that the underlying health of the industry and the business is even better than sort of our current pacings, our showing. So we think we'll finish about flat in Q1, but we should have been up handsomely if McDonald's had been there.

TV One continues as the industry is continuing to have ratings challenges, whether or not you feel that it's measurement or cutting -- cord cutting, excuse me. The industry now is still under pressure. So the game there is to continue to manage our programming expenses. Look to -- for program strategies, lower cost programming strategies to help mitigate those losses in audience and stabilize. Even with that, again, we've got strong affiliate contracts.

We still feel comfortable with our ability to grow TV One's EBITDA, again, in 2018. We feel that the network would do EBITDA in the mid-80s in 2018. We also are feeling optimistic about our interactive division, particularly as I noted earlier at the top of the call, with our acquisition of one of our smaller competitors. But that acquisition has given us just about the right scale at the tipping point of, call it, 20-ish million unique visitors such that we're starting to see some really significant revenue growth in our direct sales line. And I think we got a good stable management team in there, so we expect that we're going to see positive EBITDA upticks there.

So with that, we are, again, as we said a year ago about 2017, very comfortable with our ability to grow our adjusted EBITDA across the enterprise on 2018. And we're really focused on delevering as you can see from our continuing bond repurchases. I think we're down on the face value of our 9.25% notes from 330...

375 to 275.

275. Our goal and our plan is to continue to use our free cash flow to delever. I wouldn't rule out more open market purchases and bonds. We've got refinance in many ways. And so we know that, so we're focused on that. Even if you -- good to see recorded bank leverage below 7x at year-end. Even if we have flat EBITDA, which we don't believe that we will in 2018 and if we use our free cash flow to continue to delever as we have been, I think you're going to see leverage start to come down around the mid-6s. And that's absent any sort of strategic kind of effort or solutions, whether it's any kind of cost saving JV or disposition of any assets. We feel leverage can get down to the mid-6s just by keeping cash flow flat and using the free cash flow to delever. And so that's our game plan and we continue to be focused and diligent.

And operator, with that, I'd like to open it up for questions from the lines.

(Operator Instructions) Our first question will come from the line of Ben Briggs with GMP Securities.

I just wanted to touch on radio pricing pressure a little bit. You'd mentioned in previous calls that you felt a lot of pricing pressure sometimes from larger competitors. I just wanted to try to get a sense of how that's currently impacting you guys? And how you feel that may impact you in the future? And then after that, I have one follow-up.

Yes. No, look, radio is a mature business and it's a mature business -- it's a good business. I mean, it's interesting. You see the reports in the financial news about Liberty Media being interested in iHeart. And I read a quote from Maffei, the CEO, he talked about the strong free cash flow characteristics of the radio business. So John Malone and Liberty think that radio is a decent business. It's just got a problem with this balance sheet. And so we've been living with pricing pressure in this business for quite some time. The Internet came along and now there is another ad vertical that gets billions of dollars that got to come from somewhere, so traditional medium like radio is going to suffer, radio has suffered less. And then you have the added situation of the structure in the industry: one, big player, iHeart; now you got 2 big players with Entercom's CBS, and they're going to pressure the smaller guys. But that environment has been what it is and that's the reason that radio can't, as an industry, get a lift, if you will, from industry revenues because we are still drastically underpriced compared to other mediums. With that said, I do believe that -- for sure, this is David Field of CBS' mantra, we're underpriced, we need to get better pricing. So now that he controls more assets, hopefully, that helps with the pricing pressure. Just out of their pure scale, they're going to take more share but they need to grow as well. If iHeart gets restructured and they can be more thoughtful in terms of how they view what long-term rate floors are in the industry, that could be helpful. Cumulus gets restructured, and when you don't have balance sheet pressures, you can act more rationally and take more chances. When you're highly levered, you can't afford to take chances, you've got to get as much cash as you can at any cost. So we've been in this pricing-pressure game and I think that it ultimately mitigates, particularly as the industry starts to sort itself out. Again, I continue to be really pleasantly surprised at the resilience that broadcast radio has had. And again, I think the Liberty Media interest and the commentary around their interest and their offer underscores that there are some really smart people out there who think the same way.

Okay. That's very helpful. I appreciate that. Do you think that industry consolidation is a possibility? And if so would you be...

Yes. No, no, I know it is. I don't -- I think you're already seeing -- Entercom has started to pick up a few things. I think they acquired stations in St. Louis. From Emmis -- so Emmis left St. Louis, and Entercom and Hubbard got bigger. In particular, Cumulus is subscale in a lot of the larger markets that they're in. Once they get their balance sheet restructured, I think they're going to be in a position to do some accretive M&A transactions. And there's 2 sides of an accretive M&A transaction, right? The seller and the buyer. So yes, I think people need to look at markets where they're not doing great and they either need to get bigger in those markets or they need to get out of those markets. We all have to rationalize our radio portfolios. In a rationalized market, a good business can turn into a great business and then, ultimately, create sort of pricing stabilization. It's got -- radio has got amazing reach and people recognize it. Otherwise, it would be falling considerably faster than it has been. And actually, I don't even know if it's falling, I think it's just been treading water.

Okay, all right. That's some -- again, I really appreciate that. I'll make this the last one. Just regarding the MGM investment that you guys -- yes, I know that's basically performing right in-line with where you guys projected that it would. Are you -- is monetization of that asset possible...

So look, that's interesting that you asked that question because in uncertain environment, which is what I would classify the entire media business as right now, it's good to have options and levers. And certainly, that investment for us is doing quite well. And I -- we're open to exploring what opportunities there are to monetize that investment. Literally, the only for sure way to monetize it is we have a put to MGM at the end of the Year 3, so that's 2 years away. You certainly could have a conversation with them early about that. We have not at this point in time. The very first thing we wanted to do lately as it related to MGM was to make sure that their new Reach structure didn't impact the future value of the investment. And we were able to get that successfully resolved from a contractual standpoint, but certainly a conversation with them about options on early monetization is something that we should explore. They may or may not be interested, right? And usually, if people are interested, they're interested at a discount. And we may or may not like the discount. Something that's come up from other investors is could we somehow securitize the cash flow streams and it is an unrestricted sub. Right now, we're bringing that cash all into the parent company. I think our initial view is that securitization in the traditional institutional sense would be difficult for this single asset, single stream asset, but that doesn't mean that we couldn't find some investor that would give us some larger lump-sum of money against pledging this cash flow stream. And if we could make that arbitrage work, meaning that cash flow comes out of our EBITDA, but we get a big enough lump-sum payment because the investor is happy with the return that they're getting on that, that it helps us in our refi, we would consider that. And that's one of the things that, I think, that we'll look at now that we're starting to get closer to having to do that refi. I think in the past we've proven that all things are on the table at this company in order to achieve our goals and to get to the finish line on what the immediate task at hand happens to be. And delevering and a successful refi at a reasonable rate is the immediate goal.

Okay. Great. Do you think that refi happens in 2018?

Yes, I do. I mean -- I think, technically, we'd have somewhere into first quarter -- technically, we have to get it done by the end of first quarter 2019 so we don't have to have any sort of conversation with auditors about debt coming current. And so we'll be looking to pick our spot in '18 as the right time to get that done.

We'll go next to the line of Lance Vitanza with Cowen.

I'm sorry to hear about the McDonald's loss. Just to clarify, did you say that that was -- the $1 million of revenues last year, was that for the first quarter or was that for January? I couldn't quite catch that.

That was for Q1.

Okay. I figured as much. Are you -- I suppose you'd never would imagine this, but are you aware of any other of your larger clients that may have announced that they're planning agency changes and that we should then think of as being potentially a risk?

No. I mean, agency changes and reviews happen all the time. But oddly enough, whenever there's an agency change it's rare that the strategy changes so dramatically. And who knows how long McDonald's is going to stick with this, right? They -- urban -- black people have been the core of that consumer-base for a very, very long time and they've been very committed to this -- to this audience. And so -- and I don't they're less committed to the audience, they've just become less committed to local radio. And it's kind of intricate and political because they went down from -- I forgot how many, but like 10s of different agencies that all handle different local co-ops and they consolidated down to a single-digit number. But in the McDonald's system, a lot -- the owner/operators have had a lot of say in those co-ops. So they work with local radio and on different things. So it's a huge change for them; who knows if it will ultimately reverses, but new agency, new strategy, radio gets hit and it just happens to be a big black radio spender. I think it's an anomaly. If you had said to me what's the last account that you're going to have an issue with in urban radio, I would have told you it was McDonald's because I've been in this business 30-something years and they've been strong in local radio my entire career.

Do you see any opportunity -- I mean, I'm presuming that the money is going from radio into social media, maybe that's the wrong assumption. But is there an opportunity for you to recapture some of that revenue in your digital platform?

I mean, it's a good thing that you -- I'm glad you brought it up. Yes, I mean, we were doing better at TV One and doing better at digital with McDonald's. But unfortunately, the up in TV and digital doesn't offset the down in radio.

Understood. So then how would you best explain the improvement? I mean, it's substantial improvement throughout the quarter. I mean it's not as though -- well, was it just that the McDonald's spending was heavily lumped into the first month of the year last year? I mean I'm assuming that that's not coming back...

No, no, no. I can't explain why January is down like high-single digits, and then all of a sudden February is up low-single digits and then March is up mid-single digits. I -- yes, McDonald's is in there, but that doesn't tell me why January was still -- even if you laid McDonald's across, January still would have been a disproportionately bad month in the quarter. And I don't know why that is. I'm just happy that the trend is getting better. And so...

Let me turn to the TV side. You mentioned the lower content amortization expense, Peter, in Q4. That's noncash, right? So normally, I would look to add back -- when I'm thinking about EBITDA, I would look to add back the noncash amortization and then subtract whatever capitalized cash programming expenses you had for both periods and then kind of compare what you might call more of a cash EBITDA basis. But is there, in your opinion, is there any reason that we should not be doing that here? Or if we should be doing it here, can you break out for us how much you actually spent on content in fourth quarter of '17 versus fourth quarter of '16?

It's a great question. So I don't have the fourth quarter to fourth quarter comps from a cash standpoint. Jody may have it, and we can speak to that. I know for the full year that the cash programming spend was approximately $9 million higher than the amort; so there is a delta, to answer your question. And I think that normalizes as we get through '18, albeit that we are going to lay down some programming for '19 as well. So cash is...

Yes. And there was, in fourth quarter, if you look at -- we had like $19 million cash for the fourth quarter. But that it -- because we signed up long-term contracts with 2 of to our production companies in order to get economies of scale for programming that's going to take us out through '19 and some even into '20. So...

Got it. Okay. So it's really -- it seems like it's got some timing and some lumpiness. Whether you look at it cash versus accrual isn't going to really help us that much.

Yes. I think as we think about '18 and what's the kind of right run rate for programming, the numbers we're looking at are probably on an amort basis $3 million to $4 million higher right now. So a modest increase. But I think that's a lever that we can flex a little up and down depending on how our ratings perform and how revenues perform throughout the course of the year. But right now, we're looking at probably $4 million more in programming and amort year-to-year.

Okay. Just if I can get maybe 1 or 2 more in here. On the balance sheet, the -- you did $20 million of bond repurchases, I think, in each of the last 2 quarters. I don't recall you having done any in the first half of '17. So as we think about '18, was that coincidental that they just happen to be in the back half or was that due to seasonality of cash flows? Q4, obviously, and so forth, being a lot stronger than Q1. And basically, what I'm trying to get at as we think about 2018, should we expect sort of a similar seasonal pattern with greater amount of debt repayment in the back half versus the first half of the year?

So I think we've got enough cash on the balance sheet that we could take down some more of those notes if we want to. And I think we find the pricing attractive right now. So I would think we're going to do that sooner than later.

I mean, look, the reality is that we have to refinance those bonds, right? So we're just going to start our refinancing process by purchasing them in the open market before -- and I'm talking off-the-cuff right now, Peter is like looking out the side of his eye.

Be careful what you say.

Be careful what I say. But before we were buying bonds when they were opportunistically priced, right? So is it 93 or is it 96? I think now, just practically, I mean, they've got to come out right? You know what I mean? So I think we just buy them and it's the same thing. So as opposed to waiting, particularly if that's what we're committed to, and it is.

Peter, do you happen to have the run rate interest expense for where you are today given the most recent bond repurchases?

It's around 75. But let me -- Lance, let me get the exact...

That's close enough. I mean, I don't need a -- I'm not looking for a pinpoint. But just -- so okay, so 135 to 140 of EBITDA, $75 million of cash interest expense, I don't know, $5 million to $10 million of CapEx. So as we think about free cash flow, that's probably -- now cash taxes, I guess, and this is my last question I promise. The language in the press release suggests some uncertainty as you think about the limitation on interest deductibility versus the lower statutory rate, how should we be thinking about the tax line in 2018 and cash taxes in particular?

Yes. And just to be specific around that language, we've gone into debt with our auditors on this. I think their national office is not quite signed up on it, so it's really just a time. We put that in as a precaution because they're still reviewing. I think we're comfortable with our position. And then to answer question, we still got over $700 million of NOLs brought forward. So what we think the way the new laws are going to impact us, we're going to start to burn through those faster because of the interest deduction limitation. And then we will have unused interest that we can carry forward to future years. So we don't anticipate it having any kind of material cash pay tax impact on us in the near or medium term, so we shouldn't be paying cash taxes.

We'll now go to the line of [Juliano Troy] with Descartes.

And I've seen see some good cost control on your business. Do you think that you'd able to maintain this or do you think that you come back with the bonus this year? And also, if you could discuss a bit of content. Do you see your competitors also cutting costs on content? Or do you think that you have been cutting more than the other -- the competitors?

The first half of the question?

Well, I'll deal with the first half. So obviously, we would like to on our bonuses this year. I think everybody would, including all of the staff. And we will do that by growing our cash flows, as Alfred said at the top of the call. So what Alfred said, we're committed to driving our adjusted EBITDA for the year. That would include whatever reasonable bonus provisions we think need to be made. So we have to -- we have an internal budget that we've agreed with our board to grow by. And then providing we can hit that, then that is inclusive of any bonus accrual. So I hope that answers the first part of the question. Then would you mind just repeating the second part on the content?

Yes. It looks like the content cost this year have been reducing. How does that compare with your competitors?

So look, we're in a different situation than our competitors. Our competitors are -- well, we have some smaller competitors which, essentially, don't really -- most of them have very small programming budgets compared to ours and very little original programming. And then our competitors flipped to the big giant media companies. So BET is our direct competitor. They're owned by Viacom. So they're actually spending more money on content at BET, but their programming budget is already 6x what ours is probably. And then you have the OWN network owned by Discovery, Oprah's network. VH1 also owned by Viacom. So I think our competitors are largely spending more money on content but -- and those guys are levered at 3x and 4x. We've got a different leverage profile. We've got a different size. So our strategy has to be different in order for us to be successful. So our strategy in 2017 we ended up lowering our content cost because we felt like we could and we wanted to commit to EBITDA growth. We've increased our content budget for 2018, but it's always a lever that we move up and down to try to manage for the result. When we get -- so the type of content that we have to create is got to be high-volume, lower-cost content that gets a number that allows us to differentiate the network and to continue to be a value to advertisers. We don't really have the luxury of throwing a bunch of money into the programming budget and taking creative shots to get a big gigantic hit. And by the way, a lot of times that's a crapshoot anyway. I mean WGN America, which was a Tribune, that was their strategy, high cost, original and they successfully -- the old management there run that cash flow down. I don't know exactly what it was, I heard it was about 100 to 0. Now they've switched the strategy back to lower cost, high volume. And my understanding, Tribune just reported some pretty good numbers and a lot of -- a big part of that is WGN rebound. So our world is our world. And so it really -- yes, it's challenging that we compete against bigger guys who are spending more money on content and they're going after this, but I -- there's still a place for us in this ecosystem. We got a unique strategy and that we've got multimedia platforms all targeted against the same audience. And we've always competed against the larger guys and they've always had bigger programming budgets than we have. And once we get our leverage down to a level that is reasonable, then we can rethink our content investments as well. And we will do that and we continue to look for different partnerships that might help us ramp-up our content offering faster and more economically efficient, but it's a slow and steady grind. Leverage has come way down from 5 years ago. I forgot where we were at our zenith, but we were -- we continue to be focused on that. And our strategy has to fit -- our operation strategy, at this point in time, has to fit what our leverage goals are at this point in time.

We will now go to the line of [Roland Williams], a private investor.

Okay. My first question is this, I've heard you made some cord cutting, agency changes and consolidation. With all that said, what do you see is the company's biggest vulnerability and how do you plan to address that vulnerability?

Our biggest vulnerability is size, right? Or 2 things, leverage and size, but that's the commentary that I just gave. And I think that in everything that we do, every sphere that we operate in, we got to figure out how do we become more efficient. So I think in our radio business, when I said that people got to look at either getting bigger in markets or getting out, we've got do that same analysis and not be wedded to a particular asset. We need to be wedded to success. We need to look at that in the digital business. We bought one of our competitors. We need to look at that in our cable business. There, we could get bigger and get more efficient and more profitable or we could do some sort of -- we've talked about doing JVs with different people and stuff. So we got to find the right opportunity that makes the most amount of sense for shareholders. So there's -- there are few things that are on the table now that we -- it's not appropriate to talk about at this time, but just rest assured that we know what all of the options are and we're exploring every last one of them because the ultimate job is to be successful and to reach our goal. So that's pretty much the extent of what I think makes sense to say on this call at this time.

All right. The second question is, what have you learned in the last year that is going to inform the company this year?

I think that the #1 thing is that the media marketplace is changing, less so on radio. Radio doesn't -- the technology in radio is what it is. It's pretty simple. We're largely delivering music, which is largely other people's content. So that -- I think that's just from a structural standpoint it just needs to play itself out on the radio side. On the television side, I do believe we need to figure out a way and partnerships to be able to invest more in programming. If he had more platforms, another platform, another network, another 2 networks, if we -- then you would invest more in programming. And you can -- and the more you can invest in that content and leverage it and amortize it over multiple platforms, the better off you are. Rupert Murdoch, who is arguably one of the greatest media minds of this century, made a decision that his assets need to be part of a larger scale situation. We've got to figure out -- and I'm not suggesting that we're going to sell today, but we certainly are having conversations about partnering with folks on different things in order to gain that scale. We're having conversations about partnering with other networks and launching other networks, and we've looked at buying other networks. Anything that you can do to get more efficient is kind of the priority. And so what I think I've learned over the last year is that this changing landscape is here for real and to stay, and we need to figure out a way to create more programming that could be monetized and amortized over more platforms.

And with that said about the monetization of programming, with cord cutting increasing, what is the possibility of launching a TV One subscription base at something like a Hulu or Netflix?

I mean, that -- first of all, you got to have a lot of programming to do that. We don't have those kind of programming assets. I mean, that's kind of what the Disney-Fox deal is about. I think, for us, the first step -- that would be a long-term project, not an immediate solution. I think the first step for us is to figure out how to find more platforms to monetize content that we can invest in today and then monetize it over those platforms immediately as opposed to having to build out another OTT business, run a bunch of losses for a significant period of time. So I think we need more immediate solutions, the subscription service. And I'm also not bullish that everybody in America is going to want to pay $4.99 for whatever their favorite genre of television is a month. I believe TV is going to still continue to be bought largely in bundles, some skinnier bundles going forward, but I don't believe the $4.99 app is an answer for us right now.

Awesome. This is my last question. I want to ask you since you guys -- how do you, from a content standpoint, how do you attract the top talent while reducing cost? I know you mentioned partnership, but that's still at some kind of cost, right?

Repeat that question one more time, please?

How do you -- from a content standpoint, how do you attract the top talent while still reducing cost?

That's not the game that we're in. I mean, we're not -- we get good talent and we get -- we've got some great talented people who work for us like D.L. Hughley and Rickey Smiley. But if you classify top talent as Denzel Washington and Chadwick Boseman and Kevin Hart, we're not -- we don't have the ad budgets to go out and do a show with Kevin Hart like BET did a few years ago. So we don't play that arena. Will we get to a point we can, then we'll have those conversations. But -- now by the way, the talent that's on the network is a lot better than the talent that we had 7 years ago or 5 years ago. It continues to improve. But as Clint Eastwood starring as Dirty Harry said in one of his movies, "A man has got to know his limitations". And I think a business also has to know what its limitations are in that particular moment in time. If you don't deal with reality, you can't actually react appropriate to the marketplace.

(Operator Instructions) Meanwhile, we'll go to the line of Michael Kupinski with Noble Financial.

I know that at least one other TV broadcaster also mentioned McDonald's as being a problem in their quarter. And so the question is more -- goes back to the earlier question, do you think that it's a shift more towards data-driven media buys? And to what extent can radio, and I'm -- specifically radio, what can they do to embrace data-driven analytics? I know that some of the other larger broadcasters are looking to invest in that area. Is there something that you can do that can kind of counteract some of the movements and shifts that we're seeing in the advertising?

Look, we're a smaller player in the radio business and so we're going to end up having to attach ourselves to whatever industry, larger industry-wide data solution ultimately arises. Jeff Smulyan at Emmis' got NextRadio and he believes that it is a very good data solution for the radio industry, everybody that's not iHeart, because iHeart has got their own data platform. I don't know what David Field is going to do. But at the end of the day, Urban One is not going to create their own data platform. We have -- because we also don't -- we're not big in audio streaming. We've got data as it relates to our digital platform. That's a different story. But I think from a radio standpoint, the industry needs to figure out what's going to be the independent data platform, and we'll be part of that. I think that -- I think you're going to see a lot of stuff evolve now that there's 2 big players, right? And then ultimately, there probably should be 3 big players. And who knows, maybe all 3 of the big players have their own individual data platforms and then smaller companies like us can choose which one of those we wanted to sign up.

And Alfred, and just going back to the previous question. Some of the recent developments in the industry has been in the urban subscription OTT space with AMC potentially buying RLJ, for instance. Is there any interest in moving into this space possibly partnering with other companies like E.W. Scripps, with (inaudible) or even their OTT African-American service or RLJ?

Yes. I mean, look, we could talk about it. But I believe that RLJ -- the AMC-RLJ acquisition really was largely about Acorn, which is a British service that got the Agatha Christie library, and they've got 700,000 subscribers. I know from having conversations with folks in the industry kind of like the -- I don't want to call it nirvana but critical mass for an OTT services like 1 million subscribers. But conversely, urban movie channel that's part of RLJ. My understanding from the data that I've seen out there is they got like 50,000 subs, which is not the reason AMC bought that. Now they may have hope for the future of what it could be. And yes, maybe we talk to folks about partnering and something like that. We've talked about some other people about partnering. But it's largely folks sticking a stake in the ground. Urban movie channel is not a business today. And I mean -- I hope, that I've been clear and focused with my message about what our priorities are. And our priorities are getting down from 6.9 to 6.5 to 6. I've got to resolve that path first, so I can then start to look at where we put stakes in the ground and things like that. I've got more immediate goals. So anything that I do, we do, needs to have a near-term impact. And yes, sacrificing the future right this second for short term, but if you don't take care of the short-term needs, sometimes you don't get an opportunity to play in the long-term game.

Exactly. And -- but just a quick question. The agreements with TV One, with the cable operators, that doesn't prohibit you from getting into the OTT subscription services business?

Not at all. Not at all.

Operator, it is 11:00.

We have no further questions in queue at this time.

All right. Great. Thank you, folks. As usual, we're available off-line. Thank you.

And ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T executive teleconference services. You may now disconnect.