Alfred Liggins - CEO Peter Thompson - CFO.

Aaron Watts - Deutsche Bank David Farber - Credit Suisse Jason Bernstein - Odeon Capital.

Welcome to Radio One's Third Quarter Conference Call. I have been asked to begin the call with the following Safe Harbor statement. During this call, Radio One may share with you certain projections or forward-looking statements regarding future events or its future performance.

The Company cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs, and other reports periodically filed at the Securities and Exchange Commission could cause the Company's actual results to differ materially from those indicated by its projections or forward-looking statements.

This call will present information as of September 30, 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.

Its 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 call will also be available 12 PM Eastern time, 11/05/15 until 11:59 PM through November 7, 2015.

The callers may access the replay by calling USA 1-800-475-6701; international callers may dial direct 320-365-3844. The replay access code for both numbers are 371635. Access to live audio and a replay of the conference call will also be available on Radio One's corporate website at www.radio-one.com.

The replay will be made available on the website for seven days after the call. No other recordings or copies of this call are authorized or may be relied upon. I will now turn the call over to Alfred C. Liggins, Chief Executive Officer of Radio One, and who is joined by Peter D. Thompson, the Company's Chief Financial Officer..

Thank you very much, Operator. Welcome, everybody. As you can see from the earnings release, TV One and REACH Media continue to perform quite strongly. Our radio business continues to be challenging; however, we do see light at the end of the tunnel. We have been successfully improving our ratings over the quarter of up about 15%.

We expect that monetization to start to come through in Q1, so going into next year with significant ratings momentum. It hasn't quite taken effect. It takes -- there is a lag, so it hasn't quite taken effect in Q4 yet, but we are feeling good about the progress that we are making.

We also have made a leadership promotion that I think is going to position us to be more effective and operate more cost efficiently with the promotion of David Kantor as the CEO of the radio group and REACH Media. A number of our competitors are organized like that, with the network and the local radio business they are one.

A lot of the business is starting to converge, so it makes all the sense in the world. I think David is going to do a great job. I am going to turn it over to Peter, and then after Peter goes through the particulars, we will talk a little bit about TV One ratings, which continue to grow, and we will go to Q&A.

Peter?.

Thanks, Alfred. So net revenue was approximately $115.9 million for the quarter ended September 30, 2015, an increase of 3.3% year to year. The increase was mainly driven by advertising and affiliate revenue growth from our cable television segment, and a breakout of revenue by source can be found on page 5 of the press release.

Net revenue for the radio division was down 6.6%. Philadelphia, Dallas, and St. Louis clusters showed revenue growth in the third quarter. However, this was offset by declines in other clusters, most notably Houston, Washington DC, Atlanta, and Detroit.

For the third quarter, local revenues were down 9.9% and national revenue was down 3.8% for the radio stations. The radio markets in which we operate were down 2.2% for the quarter. Revenue was up 20% in the services category and up 3% in automotive, but then there was a bunch of categories where we were down.

The financial category was down 24%, food and beverage was down 19%, telecoms were down 12%, and retail was down 7%. Radio ratings increases are promising, as Alfred mentioned. We have seen double-digit audience share and ratings point increases in 11 of our 15 markets from July to September.

The remaining four markets are flat, so there are no declines, and our big four markets are up by an average of 15%, with Atlanta and Baltimore both up at least 20%. For Q4, our cable television advertising revenue is pacing up 23% and our core radio business is pacing down approximately 8%, excluding political.

Net revenue for REACH Media was relatively flat year to year and net revenue for our Internet business decreased 5.5% for the three months ended September 30, 2015, mainly due to decline in alliance revenue.

We recognized approximately $47.6 million of revenue from our cable television segment during the quarter, compared to approximately $39.5 million for the same period in 2014, which was an increase of 20.5%. The increase was due to higher advertising demand and an increase in affiliate subscriber rates.

Ad sales were up 13.3% and affiliate sales were up 27.9% year over year. Cable subscribers, as measured by Nielsen, finished the quarter at 56.1 million, compared to 56.4 million at the end of June.

Operating expenses, excluding depreciation, amortization, impairments, and stock-based compensation, increased to approximately $85 million in Q3 from approximately $83.4 million in 2014, which is an increase of 1.9%. REACH and radio expenses were down $3.4 million year over year, or 7.4%.

This is a combination of lower contractual talent costs at REACH, which is $2 million; lower variable expenses on reduced revenue, which was $800,000; and cost cuts affected in the divisions, which was $1.6 million.

These savings were partially offset by higher event costs, which was $0.5 million, and contractual increases in ratings, services, and music royalties, which was an adverse of $400,000. Operating expenses at Interactive One were flat year over year.

TV One expenses were up 18% or $5 million year over year and there are a bunch of items there to talk about. The biggest one was our advertising expense increased by $1.9 million. That was really driven by $2.5 million that we spent on a marketing campaign for a new series, Born Again Virgin. Salaries and bonus expenses were up $1.5 million.

$1 million of that was an accrual for the management LTIP, so there is an element of true-up there, so it was an unusual -- an unusually large hit on the management LTIP of $1 million.

$200,000 was for one-time affiliate deal bonuses, and also there's a couple hundred thousand adverse variance because the CEO position was open last year and is obviously now filled. So that was $200,000.

Content amortization was up by $800,000 and there was timing difference on some employee medical benefits, which caused an increase of $300,000, and there is also $300,000 of severance in there. And finally on TV One, research and royalties costs were up by $200,000.

So that really explains the bulk of the increases there, and as you can tell, a bunch of those were really one-time only. Corporate expenses were up by $300,000 year over year and really that was really $340,000 of increase in the CEO TV One award, which is non-cash.

$630,000 of severance was booked in corporate for the company-wide reorganization that we just went through, and there were about $700,000 in cost savings in the quarter, mainly from reduced T&E not hosting annual management offsite and some staff reductions that we did.

So for the third quarter, consolidated-station operating income was approximately $42.2 million, up 9.2% from last year, and adjusted consolidated EBITDA was $31.9 million, an increase of approximately 8.7% year to year.

Interest expense was approximately $20.4 million for the third quarter, up from approximately $19.4 million from the same period last year. The Company made cash interest payments of approximately $23.8 million in the quarter.

Net loss was approximately $18.1 million or $0.38 per share, compared to a net loss of approximately $13.2 million or $0.28 per share for the same period in 2014. For Q3, capital expenditures were approximately $1.5 million, compared to $1.3 million in Q3 of 2014. Third-quarter cash taxes paid were approximately $3,000.

There were no dividends received from TV One during the quarter and $4 million of dividends received from REACH Media. There were no stock repurchases during the quarter. As of September 30, 2015, Radio One had total debt, net of cash balances, OID, and issuance costs, of approximately $964.8 million.

For bank covenant purposes, pro forma LTM bank EBITDA was approximately $136.4 million and net debt was approximately $988.3 million, for a total leverage ratio of 7.24 times and a net senior leverage ratio of 4.70 times. And with that, I will hand back to Alfred..

Hollywood, Hollywood Divas, also the new sitcom that Peter mentioned, Born Again Virgin, a new true crime show called For My Man and three original movies. The future continues to look strong for TV One. We have layered in, with our extension renewals of our affiliate deals, future sub growth.

Right now, contracted looks like there is approximately 7 point -- total potential of 7.6 million subs to come online. There is some flex in there, depending on whether or not some of the operators decide to avail themselves of incentives. So, we believe those incentives are strong enough that people will take them.

That will give us the opportunity to get to about -- close to 8 million additional subs. Some of those are not paid. Many of those are paid. We have talked about our deal with Comcast essentially is going to roll them out with three to four nonpaying subs, but the others have a mix of paid and nonpaying.

But net, it will be a positive affiliate revenue increase of about $5 million in the near term, and then we have got another opportunity about three years out for another bump in affiliate fees there as well.

One of the caveats, we ended up locking in our Charter deal; however, our Charter deal could change, depending on the Time Warner/Charter merger happening or not happening. If it doesn't happen, we're likely back at the table with Charter. They have been great to work with, good partners.

I suspect that even if that doesn't happen, we will continue to work things out, as we always have, but that could change the landscape a bit. But all indications are that there is a high likelihood that the merger does happen, even if there are some conditions put on it.

Radio, which has been the big drag this year and has been our top priority and focus, is seeing, as Peter said, improved ratings. We have made a number of strategic moves, including a new big air personality, Donnie Simpson, in Washington. That is paying dividends. Ratings in Washington are up about 14%.

That market seems to -- even though it is negative for Q4, it is less negative than it has been in the past and it looks like it is stabilizing. We have made some strategic moves in our Charlotte market where we had a simulcast, one format on two different stations. We split that simulcast and launched a new hip-hop station there.

We believe that is going to increase our ratings significantly there and also give us some more inventory to sell. We made the moves with David Kantor and we're working on additional strategic alignments to be more cost efficient.

So people ask when do we expect the radio business to return to growth, and it is -- given what we think today, we think that is going to happen in Q1 of next year.

The only caveat is I can't really predict what happens with the radio market as a whole, but we think 2016, with our ratings growth, the changes that we’re making in programming, also it being a political year, we think that we're going to see a significant political lift in 2016, given that when you have the first black president and he gets the African-American vote just by nature that he is the first black president, we think that there is going to be significant competition for the African-American vote in 2016 and that will bode well for us.

So, our Q1 of this year was minus 8, I think it was, so we think that's actually going to be the first opportunity for us to, as we lap that, start to show positive growth again in the radio business. I think, lastly, the MGM project continues to build. You can start to see it rising above the skyline now.

It is starting to get taller and they're talking about it opening in Q4 of next year. We continue to believe that is going to be a great deal for us.

That will inject some significant cash flow into the Company, but also give us an asset where we have created value that will reduce ultimately our leverage and make shareholders and bondholders better off in the now not-too-distant future. So, Operator, I would like to go to the line for Q&A now..

[Operator Instructions] And our first question comes from the line of Aaron Watts with Deutsche Bank. Please go ahead..

Thanks for taking my questions.

Alfred, the radio performance you're guiding to for fourth quarter versus what it was in the third quarter, is that Radio One specific issues that is slowing down the pace or did the overall or kind of underlying ad environment weaken up?.

So we met with Katz, the national rep firm, two weeks ago and it is not just us, at least nationally, because that's what they were speaking to. Two weeks ago, their estimate that Q4 was going to shape up to be the weakest quarter of the year. So, I think --.

Now, again, that's what they said nationally, looking at all their -- all of their station groups. In there, there are going to be sort of outliers. Some are going to do worse; some are going to do better. iHeart this year has been doing better than everybody else, and unfortunately for us, we've been doing worse than everybody else.

But their general statement at that time was Q4 is going to be the weakest quarter of the year. And again, we have got some things in place that we believe are going to have us buck that trend, because historically we have actually outperformed the market and I think the things we're doing are going to position us to do that again..

Okay, and you -- maybe I can ask something you touched on in a different way.

Not asking you to predict the market going forward, but as we think about the changes you made, the lag time that is always inherent between your ratings and recognizing revenue off those ratings, do you think kind of starting in the first quarter is when you will at least see Radio One performance squeeze back closer to where the market is performing at least, whether it is growing or not, but you versus the market?.

Yes, I do believe that. Again, we were minus 8 in Q1.

Houston, we feel like we got stabilized, but the market is also negative now because of the crash in oil prices, but our EBITDA, at least last forecast I looked at, looked like it was going to be positive, even with negative -- growth, positive growth, even with negative revenue trends, and so I do believe that Q1 will be the first opportunity for us to get back to where the market is.

We are expecting revenue growth and cash flow growth in radio for 2016, and we are not just relying on the market. Again, we have got specific things that we've done to improve our ratings. Number one, we have already positioned ourselves for significant cost savings that will actually be able to flow through clean, if you will, starting next year.

There is still some other opportunities to go. We got a project going now where we’re looking at the ability to make our back office more efficiently.

All of the key stakeholders from the different divisions have been working on it for a few months now and that looks promising as well, meaning they have come back to me with a plan that shows a way for us to save money. So, yes, I do believe Q1 again is that opportunity for us to lap that and start to show market results again..

Okay, that's helpful. iHeart has been talking a bit more about their programmatic efforts and trying to sell more advertising off that platform. Industry's had pricing pressures for years, on and off, to varying degrees.

How do you view a more pronounced presence of programmatic selling for the industry? Is that going to be a good thing or race to the bottom?.

I don't know. If you believe iHeart, they look at it as the ability for an advertiser to trigger advertising related to real-time weather patterns, and you know what? Advertisers will pay a premium for that. There are some advertisers who will use programmatic because they just want -- it will be like network radio.

I just want tonnage, rating points, and not a lot of hassle, and that will be about price as network advertising is now. So, here is what I can tell you, that today there is no programmatic demand that I have seen for radio, no significant programmatic demand.

Advertising agencies would love to go to programmatic for the simple fact they want to do their job with as little people as possible because their margins are getting squeezed, and so the less media -- the more media they can buy with the fewer people, the better off that they are. So, it will come.

On the converse side, that means we don't have to pay a seller to do that as well, so we should save on an ad commission. I don't know how it is ultimately going to affect pricing. Look, the iHeart guys, Bob Pittman, they are smart people, and by the way, they own the ad rep firm.

So, it is not in their best interest to set up a programmatic structure at Katz or even for themselves that is not a net positive to their bottom line. So even if you end up giving an advertiser some bit of a price break, if you can save money on how you have sold that in another way and ultimately build margin into it, then it's worth doing..

All right, that's helpful. And then one question on the TV side, you have obviously been adding a lot of subscribers with new deals.

If I try to think about a same-store basis for you and the pressures that are being talked about in the industry with cord cutting or some of the smaller bundles that are being put out there, how are your sub numbers holding up on that basis and what do you expect?.

So our new subscribers haven't really -- a few Comcast subs have trickled in. I think 700,000 Comcast subs have trickled in since April when we did the deal. So, Peter gave you our sub numbers, 56.4 million in Q3 of 2014 and 56.1 million.

So, I think that's close to apples to apples, and so we have gone backwards, too, not as much, and a lot of that is DIRECTV. DIRECTV has been bleeding subs and DIRECTV has been our largest distributor essentially for almost the whole life of the network, and they have been hurting.

I don't know if that is going to -- I'm hopeful that reverses, right? AT&T bought them for a reason and they have got their marketing plans out there now and they're bundling stuff, and hopefully their strategy will stop the bleeding at DIRECTV and get them to grow again.

If that happens, that is going to be good for us because they are a big part of our business and we have been -- AT&T is a good partner with us. We have a new 11-year deal with them. But same store, we have got some -- we got some of the same issues.

Not quite as big as somebody that is fully distributed, right, because any change in the ecosystem when you are fully distributed is just negative. At least we are picking up subs to mitigate that. But who is -- I was watching -- the bundle is going to fray.

There will be skinny bundles, reconfigured bundles, but TV will ultimately still, in my view, largely be sold in some bundle. And the trick for us is to always be positioned with the consumer and then position with the operator is having value to be in that bundle, and I think that we have done a good job of that.

So far, we have gotten through the renewals And then ultimately it is way clear to me that we have to figure out a way to have some sort of direct-to-consumer relationship for content that we create to mitigate that because there are going to be some people who don't care about a linear curated network and just want content on demand.

And we have got to figure out what our offering is in that area, but that's sort of the next step for us because we are in a -- we're kind of midway down the -- we're midway through the innings in terms of our lifecycle and somebody like HBO is at the 12th inning and needs to start a new game..

Sure, all right. That's all really helpful. Thanks for the time..

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

A lot of my questions have been answered, but I had a couple follow-ups. I wanted to touch base on the radio segment for just a minute. The pacing data obviously seems a bit challenging. You spoke to that.

I guess I was just curious how you see the radio segment in 2016, given the political environment? You touched on that briefly, but what are your broad expectations there? And if you could remind us what sort of political impact was in 2012, that would be very helpful, and then I had a couple follow-ups. Thanks..

Yes. Peter..

Hi, David. Yes, in 2012 we did $9.1 million of political, and then in 2008 we did $6 million. And I think our expectations are somewhere in between for next year, so call it $7.5 million of political. We're budgeting in the number in that kind of ZIP Code..

Got it, okay. And I guess that sort of underpins why, I think, you are hoping to see improvement in the business from a year-over-year perspective.

Is that right?.

I think there is that and then the ratings growth that we are seeing. We have done some stuff which is significantly kicking up ratings, so I think -- I am hopeful that we will have both effects. We will have stronger demand from political and those dollars layered in and we will have higher ratings points. So, hopefully, a double whammy..

Very good. Cable, obviously, was encouraging. I guess maybe, Alfred, if you can -- how do you continue the momentum? Are there any areas that you think can move EBITDA lower, because it seems like most things are pretty accretive at these levels? I am just curious.

Anything that is making you lose sleep on the cable business? And then, I had one last question after that. Thanks..

No, there is nothing that makes me lose sleep on the cable business today. Actually, look, the good thing about -- well, I'm not -- mergers have been good for us.

Even when they didn't happen, they have been good for us, because there is a -- there was a process that went on and everybody starts to talk about diversity and being good corporate citizens and we are able to make a number of good deals. Although Verizon is not merging with anybody and we made a good deal with them.

We really want the Time Warner/Charter merger to happen, think it should happen. We are happy with the [indiscernible] deal. We did a letter of -- we did a short-form deal and then we just negotiated the [indiscernible] deal, and we want that to happen. If it doesn't, we're back at the table negotiating. I wouldn't look forward to that.

I don't suspect that there is going to be risk to us there, but some of the benefits to us of -- we have to figure out a new path to that, and then we would -- then ultimately have to make a deal with Time Warner, which we haven't really engaged with at all. Essentially, we just extended their existing deal through when we thought the Charter merger.

So, I would say that I worry about that, but it doesn't keep me up. I think what -- so I feel really good about TV One today. The risk there is that we are continuing to invest in new programming and you want that programming to pay off, right? But that's the art of making great television shows, and most of the time, you are wrong.

The hit ratio is pretty low. But the kind of stuff that we are making, we're really kind of -- our strategy is not necessarily big hits, but increasing successful genres of programming, genres of programming that our audience wants, more original movies like we are doing one a month now.

Our true crime is really working, so we're doubling and tripling down on that. Provided these shows perform like past shows that we have done have, then we're going to be good and our ratings will grow. If we happen to get a big hit out of this new investment, that will be gravy, but I don't worry much -- I don't worry much there.

You guys do know that I worry about the radio business because right now the radio business is offsetting the growth that we’re getting in the TV business, and I have got to fix that. And we're making progress. And I actually don't necessarily think that just growing your ratings and selling more advertising is the only way to fix it.

My view on radio is there is probably another round of potential consolidation and I think that consolidation -- it's not for everybody because a lot of the guys are -- the big guys are at the caps.

They can't buy -- iHeart can't buy anymore, but smaller guys, midsized guys like us that aren't full, we do have opportunities, and those opportunities in this kind of environment are likely to come at really significantly lower prices or come in the form of stock opportunities, mergers where nobody is going to go out and take a bunch of financial risk, but we look at a configuration where together we are more stable and stronger.

We started to talk to some people about things like that. There might be some cost-sharing opportunities. It's a lot of what the cable guys did when they clustered their entities, maybe what the newspaper guys did when markets went from three newspapers down to two newspapers down to one newspaper.

And I do think there is a round of that coming, because the fact of the matter is in a shrinking environment, economies of scale help you out. And I think we are exceptionally well positioned as a radio company to be a player in that, for a host of reasons..

That's all very helpful. And then, just finally with the cable acquisition that has passed you at this point and you went through -- I think it was the heavy coupon quarter, I know you've stated in the past the desire to deleverage, even touched upon that in your prepared remarks. I was just curious.

Do you see that deleveraging coming from EBITDA higher or, in fact, voluntary debt repayments? Just update us on your thoughts there and then that's it for me, thanks..

Look, mantra is here to grow our EBITDA. I have got a personal target to figure out a way to get our EBITDA to $150 million in the next couple of years. That's my personal target. Hopefully, we get there and I am plotting that path, so I want to add some real growth to it.

As far as deleveraging is concerned, we don't actually have the ability to pay down much debt right now because of call premiums, et cetera, not some non-call provisions. I think we got a small Comcast note that we could pay off that's 10%-plus, but I think -- we want to delever.

We are focused on it, but I think the near-term way to that is to stockpile as much cash as possible to put ourselves in a position to either refi for sure the near-term maturity that is going to come up with our term loan that is up at the end of 2018.

I want to make sure we got enough cash on -- that that's not even considered an issue, and as we think through that, if for whatever reason there is some opportunity where our debt is trading such that it makes sense for us to go in and support it and buy it and that becomes delevering, we would look at that, too.

A number of our debt investors have mentioned that to us, and, look, that's interesting, but to us the more prudent approach is to just stockpile as much cash as possible to make sure that there is never any issue with the capital structure in refinancing. And by the way, this MGM opportunity when it goes online, it will create value.

It will also create some sort of ability to get up a form of liquidity that could also help us refi or support bonds or something like that. So we are thinking ahead that that is -- that's an asset. That's a weapon in managing our balance sheet.

And I think that's all, am I miss anything on that?.

No, I think that's right. It's always a combination of growing EBITDA and reducing net debt. At the moment, we are poor cash on the balance sheet. We don't have -- that's what we want to do and we will figure the rest out. So, lower net debt and higher EBITDA. .

Very good. Thanks, guys..

[Operator Instructions] And next we have Jason Bernstein from Odeon Capital..

Thanks for taking the question.

Peter, what's the right way to think about TV One margins going forward? I know you mentioned that one-time cost, $2.5 million, but if you're going to be promoting shows in the future, what's the typical investment around that? Is that -- was the Born Again Virgin investment on the high end of what a typical promotion would be?.

Yes, that's the most we have ever spent on launching a new series, so that was somewhat anomalous.

Look, I think we have given guidance on EBITDA for this year in the high $60 million range and that's going to be off of a revenue base in the -- between $180 million and $190 million revenue, and so those margins, mid-30% is probably not bad on a normalized basis..

You already answered my next question because I think I put you on the spot last time on the cable EBITDA guidance.

Is there any sort of range you are targeting for next year on radio?.

On radio, I think that's a little premature. We talked about what we think the growth drivers on revenue are going to be, which is improved ratings and political.

But with the appointment of David Kantor and trying to more closely integrate all of our radio assets across the platform, we are kind of going through a process right now which is going to get us to, I think, a really positive answer, but I think it's premature to guide to that..

Okay, and just one more question.

On the cash side, what do you have left that you owe on the MGM?.

$35 million, which contractually is due in July of next year..

Is it end of July or beginning of July?.

I can't remember, to be honest, Al..

Okay, great, thank you..

We have no further questions in queue. Please continue..

As always, I repeat it, we are available off-line. We appreciate your support and we look forward to seeing some of you soon, I think. We've got some investor meetings and we will talk to you next quarter. Thank you, Operator..

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