Executives
Raúl Alarcón, Jr. - Chairman, President, and CEO
Joseph Garcia - CFO
Cynthia Hudson-Fernandez - Chief Creative Officer
Analysts
John Blackledge - JPMorgan
David Joyce - Miller Tabak & Co
Mike Marburg - Ramsey
Robert Birzie - Post Advisory
Adam Peck - Heartland Advisors
Spanish Broadcasting System Inc. (SBSA) Q4 2007 Earnings Call March 12, 2008 2:00 PM ET
Operator
Ladies and gentlemen, welcome to the Spanish Broadcasting Fourth Quarter and Full Year 2007 Teleconference. Hosting the call today from Spanish Broadcasting is Raúl Alarcon, Jr., Chairman, President, and Chief Executive Officer. (Operator Instructions). At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session later in the conference. (Operator Instructions). The conference is being recorded.
At this time, I'd like to turn the conference over to Mr. Alarcon. Sir you may begin your conference.
Raúl Alarcón, Jr.
Thank you, Operator. Good afternoon ladies and gentlemen, and welcome to our fourth quarter and full year 2007 earnings results conference call. Joining me on today's call are Joseph Garcia, our Chief Financial Officer; Marko Radlovic, our Chief Operating Officer; Pio Ferro, our National Program Director; and Cynthia Hudson-Fernandez, our Chief Creative Officer.
Before I begin, let me remind you that today's conference call may contain forward-looking statements that are subject to risks and uncertainties that could cause the actual results to differ. Please refer to our most recent prospectus for a list of those factors that could impact actual results.
This afternoon, I'm going to provide a brief review of our strategic and operating development since our last call in November and then Joe will review our fourth quarter and year-end financial results and comment on our for the first quarter expectations. We'll then be happy to take any questions that you may have.
Starting with our fourth quarter results, consolidated net revenue was $46.2 million, compared to $44.4 million in the year-ago period, an increase of 4%. We performed within our guidance and well ahead of the majority of our peers, despite facing a continued challenging advertising environment.
Once again, our top line result was primarily driven by revenue gains at Mega TV, our television network which is now broadcasting nationally through DIRECTV, in addition to all radio stations in Miami. During the quarter, Mega TV generated revenues of $3.5 million, an 84% gain over the fourth quarter of 2006, a significant consistent increase since launch.
As we have noted on previous calls, Mega TV's growth has been nothing short of exceptional. In less than two years, Mega TV has become the fastest growing television station in South Florida, achieving unprecedented recognition from viewers in record time. Now with our national distribution via DIRECTV, we have a very attractive opportunity to cross-promote our assets and expand our audience.
Our radio net revenues increased 1% in the fourth quarter, ahead of the overall industry, which was down approximately 4%. Further, our second half revenue trends improved over the first half, and we have outperformed the overall US radio market for both the third and fourth quarter.
We believe our out-performance is attributable to our ability to deliver consistently strong audience shares in the nation's largest Hispanic media markets. Finally, our online properties turned in a strong performance during the fourth quarter and full year from an audience standpoint, and we are pleased with how our web presence is growing. We continue to believe our multi-platform business strategy will allow us to maximize our relationship with our listeners and viewers, and our website LaMusica.com and Mega.tv which have evolved into major destinations in their own right are also hoping us to cross-promote our assets and better engage our audiences.
Through the depth and quality of our content, and the popularity of our diversified media brands, we believe we are building the foundation for our company’s future success. The US Hispanic market, which as you know, represents the foundation of our company’s strategic initiatives will continue to expand in terms of both population and consumer spending power.
We believe our diversified platform has tremendous long-term growth potential. We are delivering, attractive and growing audiences to our advertisers. Our combined asset base spanning TV, radio and the internet now reaches over 11 million Spanish speaking people across the nation. We have drawn our total audience by over 77% in the past two years, while our advertiser base has expanded by 50% during the same period. In the year ahead, we'll remain focused on further building our audience shares and better monetizing our reach.
Now let me provide some details on operating performance in each of our divisions during the quarter beginning with television. In 2007 Mega TV continued to achieve outstanding audience traction. In the most recent sweep, clearly the station delivered the largest audience growth in the market among the coveted 18 to 49 and 25 to 54 demos, with a 99% increase and a 128% increase respectively in the November sweeps from the prior year.
In addition, WSBS-TV delivered a 10% share of voice in November '07, among the 18 plus audience in the 7:00 pm to 11:00 pm prime time period. We have been able to deliver rapid audience growth at Mega TV principally because our programming strategy is working. As we have outlined on past course, Mega TV. As we have outlined on past calls Mega TV, offers viewers a quality mix of informational entertainment content that contrasts with our Hispanic TV peers. Viewers like what they see and they're tuning to Mega TV because we are entertaining and informing them in a unique way.
In turn, we have moved aggressively to convert these viewership gains into revenues; consider that Mega TV's quarterly revenues have more than doubled since the station was launched in 2006. At the same time, we gradually reduced the expenses associated with the initial launch and build out of this franchise throughout 2007.
As a result of Mega TV's rapid success we moved to the next stage in the station development expanding our distribution footprint. We got off to a smooth start in the launch of our network on DIRECTV and last month Mega TV further expand its relationship with DIRECTV by entering the Puerto Rico market. Mega TV is now available in all US markets, and is also evaluating key affiliation options in other US cities.
Last October, the Palm Beach MTV press affiliate switched to become our first affiliate, WBWP Channel 57. With national Hispanic population exceeding 35 million, Mega TV is taking the necessary steps to expand distribution opportunities to further increase revenue. These are major steps in Mega TV's development and we are working with DIRECTV to fully capitalize on this mass distribution.
In the year ahead, we believe we have an outstanding opportunity to bolster viewership in each of our top ten markets, given the cross-promotional capabilities between Mega TV, our radio stations and our online brands. This is also an opportunity to truly leverage our three platforms to deliver audience growth and expand our brands outside of our core markets.
Now let me turn to the radio division, in 2007 our radio assets continued to deliver solid audiences across our top ten markets. As of the most recent rating experience we continue to own an operate four out of the top seven Spanish language stations in the nation.
In New York City for example our flagship station WSKQ continued to rank as the most listened to Hispanic radio station in the country. WSKQ-FM morning show "El Vacilón de la Mañana " ranked number one with ages 25 to 54 during the morning drive in New York City, the nation's largest overall market. Station also ranks first overall in New York City among the Hispanic listeners and sister station WPAT continues to rank among the most listened to Spanish AC stations in America attracting over one million listeners weekly.
In Los Angeles KXOL ranks number one in the market among Hispanics in the 12 to 34 demographic. And also in Los Angles KALX remains one of the America's most listened to Mexican regional formatted radio station with the ever popular "Cucuy De La Mañana" in morning drive. KLAX now ranks as the number three station overall in the 25 to 54 demo regardless of language or format in that market.
In Miami, our stations continue to post strong audience here as well WCMQ continues to rank as one of the top stations in the market, ranked number three among all radio listeners in Miami. At WXDJ we expect to have a strong 2008 and maintain our tropical music genre leadership including a re-vitalized Vacilon morning show specifically designed for our Miami radio audience.
January also saw the launch of the first ever Mexican regional station in South Florida, La Raza 106.3 including syndicated shows from our other regional formatted stations from around the country. La Raza is also off to a strong start.
In Puerto Rico we continue to post very strong audience shares across our station group. We recently added "El Circo" or "The Circus" morning show with veteran leading leaders Gangster and Funky Joe turning in an impressive number one ranking 25/54 in the month of January right out the gate. The company also recently debuted the islands first news talk format on FM Red 96, opening new doors to revenue opportunities from advertisers targeting the adult news oriented radio listener.
In the San Francisco, San Jose Bay area KRZZ continues to deliver consistently strong ratings in the fall book, maintaining its position as the third highest ranked station among 18 to 34 year olds, regardless of language or format.
In Chicago, WLEY posted audience gains as we've built out our Mexican regional format. In the fall book for example the station posted a 5.5 share among listener's ages 18 to 34, up from a 5.1 share in the summer book. And just recently, in February in Chicago we added the popular "El Chulo de la Mañana" morning show. We have every expectation that Joaquin will do a stellar for us in Chicago.
As I mentioned, further growing and monetizing these audiences remains our primary focus. In the current quarter we are continuing to operate in a difficult advertising environment and we are cautiously watching consumer and advertiser trends.
Turning to Interactive; our online properties continue to demonstrate impressive gains, both in unique users and in page views reaching a monthly base of unique users of over one million and average monthly page views of more than seven million.
We installed our online audio streaming for all of our major markets and recently launched a video/audio version of our newest Puerto Rico morning show, "El Circo" which is now on live everyday, online.
We reorganized our interactive ad sales department, and are now tapping into the bundle revenue from clients who are buying radio, TV and internet. The local sales efforts for radio, internet advertisers have increased quarter-by-quarter and we have hired a new director of advertising for interactive that we hope will consolidate our interactive efforts.
Despite our progress in closing the revenue gap between Hispanic and traditional media, there remains swap for advertisers who have not yet entered the Hispanic market. For a perspective, during the past year we signed over 18 advertisers who are targeting Hispanic consumers for the first time. In TV, we increased the quality and quantity of new advertisers including Blue Cross Blue Shield, Nissan, Verizon, T-Mobile and Mazda.
Finally, in addition to continuing to focus on further building our audiences and expanding our share of advertising dollars, we continue to review potential strategic options that we maybe presented with. We believe the growth potential of our platform over the long-term is outstanding. Mega TV has only been on the air for two years, and has just begun its national distribution through DIRECTV as I mentioned. Our audiences are growing and our organization is focused on building on our success. We are only beginning to see the benefits of cross-promotion and cross-selling across our diversified platforms.
To conclude the past year was both a challenging and rewarding period for the Spanish Broadcasting System, as we worked our way through a difficult industry-wide advertising environment, while making substantial progress in implementing our business plan. Revenue trends improved in the second half and we ended the year with fourth quarter results that were well ahead of the majority of our peers. While the overall media and entertainment market place continues to evolve, the core driver of our company has remained constant. Now more than ever we are intensely focused on harnessing the rapid growth of the nation’s Hispanic population.
So to recap, new radio shows, new radio formats, unique television programming, increasing television distribution and innovative online applications. I am very proud of the company's development, and I believe it's imperative for us to be constantly evolving and adjusting to changes in the market place, changes among listeners, viewers, visitors and consumers, and changes in the economy and in shifting revenue flows, in a constant effort to create sustained competitive viability and long-term value for our audience, our advertisers and our share holders.
We have a great many talented and dedicated people at SBS, and one of my primary objectives is to foster an environment of creativity and productivity, in order to guarantee a continued leadership position for the company in the evolving Hispanic media landscape.
Now before I turn the call over to Joe, I want to briefly comment on the letter addressed to the SBS Board of Directors from investor Discovery Group, who has suggested several strategic alternatives for our company. As with all shareholder increase recommendations and suggestions, the Board will properly consider this matter in due course. And it would be inappropriate for me to comment further at this time, except to thank the Discovery Group for their attention and interest in the future of SBS.
And with that, I will turn the call over to our Chief Financial Officer, Joseph Garcia, Joe?
Joseph Garcia
Thank you Raúl and good afternoon. I will begin today with a detailed financial overview of our operating results for the fourth quarter and full year. We will also provide commentary on our balance sheet at year-end and our guidance for the first quarter of 2008.
Turning to our operating results for the fourth quarter, we reported consolidated net revenues of $46.2 million, compared to $44.4 million for the same period a year ago. This represents an increase of 4%. The increase was primarily due to growth at Mega Television. Mega Television reported total net revenues of $3 million, which translates to an 80% increase over the prior year period. Fourth quarter radio net revenue also increased as it grew 1% to $43.2 million.
During the quarter National and barter sales growth was offset by a decrease in local sales growth. Radio net revenue growth in national sales occurred in New York, Miami and Puerto Rico, while there was increase in local sales in Los Angeles, New York, Chicago and San Francisco.
Operating income before loss or gain on the sale of assets, net, a non-GAAP measure, totaled $5.8 million compared to $5.9 million for the same prior year period. This resulted in a decrease of $100,000 or 2%. Operating income before depreciation and amortization, and loss or gain on the sale of assets, net, a non-GAAP measure, totaled $7.1 million for the current period and prior year period respectively.
For the fourth quarter, capital expenditures totaled $3.8 million, as the company began its improvements and construction of its new broadcasting facility in Miami. Depreciation and amortization for the fourth quarter was approximately $1.3 million. For the full year, consolidated net revenues increased 2% to $179.7 million, compared to a $176.9 million for the same period one year ago.
For the full year, radio net revenue totaled $169.6 million compared to $172.1 million, resulting in a 1% drop, primarily attributable to the weakness in local advertising revenue in Los Angeles, Miami, Chicago and Puerto Rico; offset by an increase in our San Francisco and New York markets. For the full year MEGA television reported total net revenues of $10.2 million up 110% from 2006 primarily from local revenues.
For the year operating income from continuing operations before depreciation and amortization and gain on the sale of assets net which is a non-GAAP measure was $39.5 million compared to $37.4 million for the same period a year ago, representing a 6% increase. This increase was primarily attributable to a significant decrease in our television operating losses. For the full year, capital expenditures totaled $10.5 million, depreciation and amortization was approximately $4.7 million.
Now taking a look at our balance sheet as of December 31st 2007, we had $61.1 million cash on hand. As of December 31st 2007, our net debt was $280 million, and our net debt to trailing 12 months EBITDA ratio was 6.8 times.
Looking ahead to the 2008 first quarter and taking into consideration the challenging advertising environments and the economy, we expect our consolidated net revenue to decrease in the mid single digit range over the comparable prior year period. This will conclude my formal remarks and I would like to turn the call over to the operator for any questions and answers. Operator, please?
Question-and-Answer Session
Operator
(Operator instructions). Our first question comes from John Blackledge of JPMorgan.
John Blackledge - JPMorgan
On the cost side just wondering what drew the radio costs up in the fourth quarter and TV OpEx was a little bit higher than we thought. So just wondering, I know TV OpEx was down on a year-over-year basis. But it was a little bit higher, just wondering, what's going on there and then for the mid single digit revenue decline in the first quarter, just wondering what radio is pacing out and what TV is pacing out? Thanks.
Joseph Garcia
I would like to address the agenda, I would like to address your fourth quarter operating expenses overall approximately 3% up, they were basically related to marketing to our brands in New York and our new morning show in Puerto Rico. And an increasing compensation to the new morning show in Puerto Rico, so related to programming initiatives that we had made regarding the sales.
Raúl Alarcón, Jr.
Regarding the first quarter revenue decline John, I could safely say that we see a softening in all of our markets, I think with the possible exception of Puerto Rico, it's just that the radio environment out there is soft and that's why we want to be conservative in projecting this mid single digit lowering of revenue for the quarter.
John Blackledge - JPMorgan
So that mid single digit pacing down is that -- that's just radio, what's TV pacing?
Raúl Alarcón, Jr.
No, that's consolidated.
John Blackledge - JPMorgan
That's total, okay.
Raúl Alarcón, Jr.
That's a consolidated; we're giving you consolidated guidance.
John Blackledge - JPMorgan
Is radio worse than I guess; is radio down like more than mid single?
Raúl Alarcón, Jr.
Radio is down a little worse than that and of course television although it's a smaller division for us, is up significantly.
John Blackledge - JPMorgan
Okay.
Raúl Alarcón, Jr.
Okay.
John Blackledge - JPMorgan
That's great. Just wondering what CapEx expectation in '08 is?
Joseph Garcia
CapEx expectation for the first quarter of '08 is in the range of approximately $5 million to $6 million.
John Blackledge - JPMorgan
Thank you.
Raúl Alarcón, Jr.
Thank you, sir.
Operator
Our next question comes from David Joyce of Miller Tabak Company.
David Joyce - Miller Tabak & Co
I was wondering if you could comment on any political ad spending in the first quarter with some of the primaries, you had that in Florida and what the outlook could be later in the year with respect to that as well?
Raúl Alarcón, Jr.
Well, political advertising was minimal, I would say for the fourth quarter that's probably less than $200,000. Regarding political, looking forward, obviously in our markets if there is a recount or a redo or whatever you want to call it of the democratic primary in Florida, that is going to be a considerable, I believe a considerable bump for us, in terms of political advertising in South Florida for the democrats. Other than that, I expect that in the November election we are going to be receiving quite a bit of advertising in terms of general Presidential election and of course Senatorial and Congressional elections. We don’t have a figure to give you, David, as to what that number could be in political, I can give you the figure for the last bill around which was 2004, of course which was in excess of $2 million. But that's just a barometer.
David Joyce - Miller Tabak & Co
Alright. And the spending on TV in the fourth quarter, was there any new program acquisitions or new productions that you started in the quarter?
Joseph Garcia
Yes, in the fourth quarter and Cynthia, you're welcome to let in the regarding this. We introduced two new programs in the fourth quarter [spannocchia] tonight? Can you comment on that?
Cynthia Hudson-Fernandez
Sure, we actually have the pre-production for a new show that actually they viewed in first quarter of this year, just they viewed January 28, but the actual start-up of that production was in the fourth quarter. So that was the main change in regards to the production.
David Joyce - Miller Tabak & Co
And any plans this year for ramping or should we expect the spending roughly around the same level as last year?
Raúl Alarcón, Jr.
Other than the cost associated with introducing these two programs which does involved David some promotional activity and marketing, I would say that other than that we are normalized in terms of expenses.
David Joyce - Miller Tabak & Co
Okay. Thank you.
Raúl Alarcón, Jr.
Thank you Sir.
Operator
(Operator Instructions). Our next question comes from Mike Marburg of Ramsey.
Mike Marburg - Ramsey
Just a follow-up on one of the first question. So just doing the math on the radio, I guess it's going to high single-digit decline in the radio. If that environment continues for another couple of quarters, I mean, are you looking at doing some cost cutting initiatives. Obviously radio expenses and SG&A were both higher than I expected so?
Raúl Alarcón, Jr.
If that trend continues Mike and I am sorry that I interrupted you. Is that your question?
Mike Marburg - Ramsey
Yes, that was it.
Raúl Alarcón, Jr.
If that trend continues yeah, we are going to be looking at some cost cutting. We've already looked at some cost cutting, obviously it's a balancing act for us because at the same time that we are costing, we are cutting what we feel are non-core, non-strategic unimportant expenses. We are still, as I just mentioned in my remarks, we are still debuting new stations, debuting new programming, and that's very important. The evolving nature of radio and programming and content continues to be our primary focus. But yes, in terms of general overhead, if these trends continue, which is your question, yeah, and we already are taking a hard pencil to some of these expenses and cost and trying to streamline to the extent possible.
Mike Marburg - Ramsey
And just a couple of real nitty type of questions. How much of the debt is variable rate there?
Joseph Garcia
How much of the debt
Raúl Alarcón, Jr.
Is variable right.
Joseph Garcia
None.
Raúl Alarcón, Jr.
None of it, none.
Mike Marburg - Ramsey
Okay. So we should expect interest expenses to be about the same moving forward?
Raúl Alarcón, Jr.
That is correct.
Joseph Garcia
That's correct.
Mike Marburg - Ramsey
And then in terms of just roughly the radio expenses you've given a couple of other reasons for why they are up about $1.5 million year-over-year. Just in terms of thinking about that in the first quarter, it sound alike some of those things you mentioned were promotional or I guess variable and won't be around. Is there any sense you can give us on what happens to radio operating expenses on a year-over-year basis?
Raúl Alarcón, Jr.
I think excluding the extraordinary aspects of a launch and/or marketing tide to a launch of a new talent to our new program on radio, I would expect expenses to be normalized as I mentioned before. And again we'll be taking a look at very closely trying to streamline expenses going forward. So I don't think - do you want to add to any color to that?
Unidentified Company Representative
Yes of course.
Joseph Garcia
Our core operating expenses excluding any marketing or initiatives that we have to do for programming purposes is running on a normalized rate of 1% to 2% a year.
Mike Marburg - Ramsey
1% to 2%, yeah. And then have there been any new big launches this quarter?
Joseph Garcia
Well we indicated that we have the launch of a morning show in Puerto Rico.
Raúl Alarcón, Jr.
We had a morning show in Puerto Rico. We had a morning show in Chicago. We had
Mike Marburg - Ramsey
Was that in fourth quarter of last year or was that first quarter of this year?
Raúl Alarcón, Jr.
First quarter of this year. We had a radio station launch in a new format first quarter of this year. We had a radio station launch in Puerto Rico. The News Talker on FM first quarter of this year.
Mike Marburg - Ramsey
Okay. Thank you, guys.
Raúl Alarcón, Jr.
Okay. Thank you.
Operator
Our next question comes from [Robert Birzie of Post Advisory].
Robert Birzie - Post Advisory
Hello and good afternoon. Raúl could you share with us your longer term vision for your television group, what kind of expectations do you have several years out as to how your group should be performing and what kind of returns do you expect there?
Raúl Alarcón, Jr.
Okay Robert, I am going to give it my best shot. Obviously with the success that we've experienced with Mega TV since its launch, I am very pleased with the progress of the television division. And since we have, of course, invested in our own proprietary content, which I think distinguishes us from the other players, and I want to make a point about that. Because we are not beholding to any program supplier, particularly for prime time, and obviously for large parts of other day parts on the television station, we're producing our own content, and we've made that one of our strategic priorities in terms of television.
Based on the success of that original production and the ratings that we've had, and the revenue progression that we've experienced as a television station, our strategy now is to see how we can increase the distribution of our content expeditiously and efficiently. I think the deal with - the transaction and the relationship with DIRECTV is a primary example of what we're trying to do. It’s a good relationship that works for both parties, and it gets us national distribution via satellite of our signal. Now we are starting to see that the signal and the programming is being accepted in other parts outside of Miami. So we are going to prudently look and see how we can increase distribution of our television property, again, prudently, conservatively and expeditiously.
Now, with regards to the actual financial performance of the television division, I'm very heartened by its financial performance in the first two years. Remember, we've only been on the year, two years and I'm very, very pleased with the progress. And many people have asked and I myself have talked to industry people of television that say there are start-up with its own proprietary confidence, own programming, start-up television station can be expected to breakeven for five or seven years. I have said publicly that I'm in disagreement with that timeframe and that we're putting all efforts into obtaining breakeven much prior to five years of operation.
And so, again, this is a balancing act that we're going to undertake. How do we increase distribution with minimal cost increases, because we've already factored the cost into our programming, and very prudently increase our television footprint. We, of course, will be keeping you abreast of developments in terms of television as they happen. But I must say, we're very excited and I think that even though we have been criticized for television, I must say that I think that sitting here as I said you today, I think it was absolutely the right decision at the right time, the revenues and the ratings have proven that and it's seem coming upon us, of course, of any start-up to make the goal, to make it profitable venture and that's exactly what we're focused on.
So I see only good things in the future for our television progression. And again, I want to stretch that we're going to be doing whatever expansion, we're going to be doing in television it will be done very prudently and very conservatively. But I think that there is a future there for us.
Robert Birzie - Post Advisory
You mention that you're anticipating breakeven cash flow before the five to seven timeframe is up. Do you have any other parameters that you can share with us in terms of how much money you're willing to expend in terms of negative EBITDA before you reach breakeven cash flow?
Raúl Alarcón, Jr.
No. I don't have any other numbers to share with you. I believe that we have minimized losses at television over the preceding two years significantly. I believe we're going to do it again this year significantly. And this would be the third year of operation. Actually…
Cynthia Hudson-Fernandez
No even.
Raúl Alarcón, Jr.
Not even. So I would say that we are bent on profitability on television as soon as possible. And it will be way in advance of the fifth year. I can tell you that for a fact.
Robert Birzie - Post Advisory
Okay. Thank you.
Raúl Alarcón, Jr.
Okay. Thank you, Robert.
Operator
Our next question comes from Adam Peck of Heartland Advisors.
Adam Peck - Heartland Advisors
Good afternoon, Raúl.
Raúl Alarcón, Jr.
Good afternoon
Adam Peck - Heartland Advisors
Just continue on the TV discussion. Could you walk us through why sequentially the operating losses increased when revenues increased sequentially?
Joseph Garcia
In which sequence are you talking about?
Adam Peck - Heartland Advisors
From the third quarter to the fourth quarter.
Joseph Garcia
Give us a second. The third and fourth quarter contains seasonality in it, which is very traditional to television as well as radio and is composed of major -- some components. One of them is depending on when you want to launch your marketing, which is tying into the suites. Number two, we indicated that we have made an investment in a 9 o'clock anchor show, which will improve the overall ratings for the television, which I mentioned it was the tonight. I guess in English you will call the show tonight.
Raúl Alarcón, Jr.
Yes. That was tonight.
Joseph Garcia
So, those investments in marketing as well, were significant. More importantly in television shows is the overall increase. Taking that away, I don't foresee, or in the past any significant core expenses on overall costs. I hope that answers your question.
Adam Peck - Heartland Advisors
Sure. So we should then in Q1 see some significant improvement in operating loss year-over-year?
Joseph Garcia
First of all our trajectory is to improve year-over-year reduction of our operating losses. Quarter-to-quarter we need to be [consent] of what Cynthia needs for her programming initiatives. But, of course, overall everyday, every quarter we try to make it better than the following quarter, both in the revenue side as well as keeping an eye and keeping our cost controls in place.
Adam Peck - Heartland Advisors
Okay. And previously you've said you thought you could be breakeven by the end of the year three, then certainly before the five to seven year timeframe. Are yo u still confident you could be breakeven at the end of this year? Or do you think you have to push back on that date?
Joseph Garcia
We have a good degree of confidence that we are going to be in a position to breakeven by the fourth quarter of this year. And granted we all are experiencing economic difficulties in the adverting sector that is affecting, so all those things which were not as important as 12 months ago, they'll be coming out, but that being said, we continue to be on target in what we said before.
Adam Peck - Heartland Advisors
Okay. And then lastly, just would like to make a comment regarding the filing, we just hope you would make a public response once the Board considers the filing and if the Board disagrees with the filing, as shareholders, we would appreciate reason as to why. So, thank you very much.
Raúl Alarcón, Jr.
Thank you.
Operator
Our next question comes from John Blackledge of JPMorgan.
John Blackledge - JPMorgan
Thanks. Sorry I just had a follow up question. For radio in the first quarter, just wondering what national and local are pacing, and then how second quarter is doing. It looks like you guys outperformed the industry in the third and fourth quarter of ’07 and then you are kind of underperforming in the first quarter. So just wondering where's the underperformance and then how second quarter is pacing? Thanks.
Raúl Alarcón, Jr.
John I would like to answer this question. We see that our national pacing is pacing stronger than local. The categories of advertisers that we see a significant drop-off in expenditures on the local level are the automotive and financial categories, and SBS is not immune to the conditions of the economy. With regards to our pacing moving forward, national pacing looks stronger in Q2 than it does in Q1, and hopefully local will follow suit.
John Blackledge - JPMorgan
Thank you.
Raúl Alarcón, Jr.
Thank you.
Operator
At this time there appear to be no further questions.
Raúl Alarcón, Jr.
Thank you operator and thank you ladies and gentlemen. We look forward to updating you on our next teleconference call. Thank you, very much, and good afternoon.
Operator
Thank you. This does conclude today’s teleconference. You may now disconnect
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