GTN - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Gray Television Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Hilton Howell, Executive Chairman and CEO. you. Thank ahead. go Please

Hilton Howell

Good for Thank earnings our Cheryl. us call. for this morning third morning, you, you everyone. joining Thank quarter XXXX

our Financial Officer, As Co-CEO, Ryan. Officer, by joined Jim Latek; Chief LaPlatney; Kevin Chief usual, Development Legal our President and and I’m Pat and

at open this begin up for Kevin? And the a of our Kevin will disclaimer line We’ll end that comments, with provide. morning the we will questions.

Kevin Latek

regarding, Such Good company’s forward-looking morning, have to uses may in everyone. earnings with Certain other of website on address results. factors as reports discussed filed is release. forth operating call forward-looking set statements risks obligation a and subject Hilton. information. a matters most include The uncertainties. in this these key Those forward-looking statements. from no differ statements SEC Actual in you, could undertakes those recent to factors. among and of are in the the the www.gray.tv. been future a things, update The as Gray various results of included today’s Thank website company statements future to important its source company described the number result

of cash Included our well our the are public within We measures discussion reconciliations their to flow call website the less non-GAAP updated as deck also not cash our statements. the adjusted meant in cash broadcast company. measures, as expenses, the provided and broadcast on measurements, measures to flow, flow, in non-GAAP valuation as and are financial investor EBITDA are GAAP replace reported supplements ratios. release will These and to Included on of corporate but next cash financial will to post in metrics GAAP weeks. financial earnings analysis of assist website our few certain a free flow, an the be leverage in operating particular,

to now the Hilton. call return I

Hilton Howell

Kevin. you, Thank

of our quarter high-end a of the report of results quarter on to the pleased XXXX. extremely exceeding guidance. This expectations, for third low-end We’re the the both is and

revenue total quarter our $XXX reported issued third level, was total from XX% was the XXXX. as the of approximately this guidance. high-end our at by At of for revenue quarter previously third increased which Our million, the

and low Our of our corporate expenses below were each broadcast operating side the guidance.

Our significantly adjusted the of exceeded side guidance. EBITDA high our

several for For broadcast records a the have new past quarters we cash set flow. in row,

set broadcast of third from increasing another record million, XX% in quarter third cash for third or XXXX. $XX XXXX history. The a quarter for also the set quarter any company’s flow best at a million, new figure also quarter of all-time This $XXX our

XXXX. greatly the high of for revenue quarter Our certainly particular, point our revenue political political quarter the our million Political in an advertising for political XXXX. was expectations $XX a the year especially the a to year revenue quarter. third off-cycle again our and year. exceeded of was distinct In record point revenue throughout for expectations, Political fourth

to and net per $XX third income common stockholders share was diluted was the available for income our million, quarter Our common $X.XX. net

income net first quarter strong available common was which XXXX, share. been represents year. of per increase common expenses $X.XX to a diluted strong non-cash over our second figure of the and would transaction-related a compensation, increase over itself stockholders the the Excluding stock have This quarter

at ratio million quarter $XXX of We total cash defined basis, senior X.XX eight a on our as in leverage excluding transaction-related netting total ended trailing our quarter facility a the expenses. times with and credit balance

for our advertising local best we improve Stepping look back quarter to up from see continue year local of to across finishing and forward the these the year company numbers, advertising. with the

gross retransmission in basis both on growth and revenue net a double-digit year. see a over to continue We last

Nevertheless, broadcast and the gulf receive few past retrans we the remain distributors. we say deliver optimistic both the lot very close value a between from continue ability to fee about massive certainly disputes. to had months, to the our value we about channel have headlines the and Over cable

Finally, row, and different. time political no the revenue has this exceeded a quarters past in every was quarter our expectations for several

of is shaping now XXXX we up which year records. believe political set another a number new to will For that advertising reasons, in be we

sheet we better were our balance how robust has what we flow. have free Our Three again of cash Raycom rapid we done we and paying transformative you able resulting after been we told we from demonstrate that June it quarters hardly is closing down When do. deleveraging, in transaction, ever exactly today. to debt than to the predicted transaction XXXX, announced committed would

and noted, year as to next with the in leverage now We a in rapidly. decline is somewhere particular, continuing our remain In ratio leverage close net out fours net to target the middle threes. on

bank. made cash of under cash Last Friday, hand. prepayment of a outstanding senior $XXX facility using on XXXX the we we credit the loan voluntary million our have roughly million term in $XXX Today,

to we exploring an in broadcast growing the through opportunities and transactions Gray player numerous large make industry. busy, continue and would As quietly stronger that always, various remain small the even company

innings highest in and focus are long-term. that opportunities in find, that will and to M&A in bit by the the Still, to hard see. future shareholder the harder the latter phase have been the the finding will good to now of consolidation value makes our path We in remain we a guided lead And our guided industry.

months. while the of leveraging opportunity, next remains absent transformative I for completely can Now rule that, excellent first for I an out the confirm excellent least next further Gray party year. the the an over cannot XX M&A possibility of opportunity at the

with the Finally, have the posted we public we future. frustrated the results the underlying in our markets, company in despite have for plans the value of been

have proud of built, the lie margins quality ahead the company for on and people opportunities are we efficiency, rightly assets all of work us our We of who with the us. the and that

purchased continues that the during undervalue of company. could limited that prices the insiders company actual which not the to market Gray quarter in Accordingly, We stock, the time great stock value the market periods recent legally we television the trade. believe have reflected during fully and some of and

repurchase million through to to intention difficult confident that one It XXXX. to all handle. the the are deleveraging XXXX expire common adopted stock to commitment acquire a Yesterday, at opportunistically year. one new new end return with to our from our including the stock XX, Board scheduled supersedes sheet. but authorization Gray and market of That’s is plans, can this of that plan prior we was Directors $XXX always December a and we our balance balancing act, balance This

today’s first together and and one company release. We extremely additional with quarters We’re now the the Raycom to Gray this of earnings are year. three pulling of Jim will together. how the performed color Pat, has company and truly people some have happy come add to Kevin

Pat LaPlatney

Thank everyone. September, Forward York. Conference accepted award, model ratings in this you, moving Hilton accepting to from Graham cost impression TVB NBCU, per In New Cable’s morning, good Hilton, & of Broadcaster that Hilton the and join at household Media Gray Hearst Broadcasting advertising. In the ABC, would announced for Award and Year CBS, selling

more Nexstar digital week, to platforms move provide – would is broadcast data media we the TV compete. announced the metric used selling. impression-based by to were accepted Impressions Last and whom see compete with happy it companies granular that advertisers too for

and needs Selling local video meet should across in us and of help of of on share us industry landscape will the impressions ad television therefore our digital allow ads to all advertisers monetize competitive broadcast our based platforms. improve the MVPDs sales inventory, better

key move of the the rolling auto categories, to group couple is out addition health. Gray sales strategy In selling, against to a across impression-based also a targeted and

on have advertising this core seen success impact sales. effort believe, positive We some have a here, will

We’ve of adding been OTT on working around the capabilities also sale advertising.

know, it’s you the advertising. in As fastest-growing sector

to Opry a the venture of for linear Hospitality subsidiary to going or our Group, Properties, name are area. broaden Recently, experience. JV’s Entertainment in the We multicast XX/X and the country this announced lifestyle service focus SVOD music new Ryman premier joint dedicated with

Circle We nod stage. the of wooden in Circle Ole a Opry with Grand chose

hobbies, food, and As offstage know, around will and you centered original family feature probably music, outdoor artist, adventures, friends. Circle programming,

of XXXX as stations, channels target a parties. channel numerous Gray on are third owned well January as stations launch We in multicast and by to across all linear

TV launch expect to XX% homes. over We network of U.S. the in

and new staffing. well as hard sponsorships The venture sales, is programming, library at technology, and and marketing work as finalizing ad

new Pompeo; and and Democratic State, with debuted Susteren. we’ve Van Greta the Amy September, new is Secretary Since Committees. candidates, as other venture program House in show and Press of other Lindsey such presidential of Full Tulsi Graham Court Senate Judiciary the attracted Our Senator Klobuchar high-quality guests, Gabbard, members

Indiana, candidate Mayor and this South Bend Buttigieg. is of In week’s Pete presidential fact, guest

coastal erosion. an We’re true to with the of also healthcare Tapping into communities. issues washing into Alaskan like our investigation impacting literally local of an high price to mission to resources our station due town away and inconsistent stories highlighting staying

We’ve Press more the now country. cleared Full XX% Court than in of

performance. just the news Sunday posts rating Full Full very Court Press four ratings network shows. for a posted Birmingham, also show’s established Press example, We’re consistently In with pleased longer routinely higher Court runnings solid than or the Birmingham higher on that rating week. show talk air a which each X.X, political brand the highest hit highest-rated or ago second weeks was our two means new show and Sunday in

the I call turn to now Kevin.

Kevin Latek

as-reported increase basis, year-over-year on increase basis. revenue Pat. a historical on a an a combined posted you, We and retransmission in that’s Thank XXX% XX%

different on Gray’s points with While our rates, a we retrans January been at have of bit double-digit pleased stronger. all should during the rather could reset year. very than numbers X the growth rates at these be Virtually contracts

As revenues during the of year. different major month we a agreements rate naturally subs result, times our our January in would reprice a any increase the on X is simply retrans month. If during at number of those function revenue retrans year, points a the the some for

because – such and mask fact, in can fluctuations could sub pretty year, spikes no small In repricings clearly see adjustments our we have results. during you sub the But billing fluctuations. subscriber these

quarter, very drop summer MVPDs. In primarily two across by cable due declined these declines markets. retrans our operators this at and sub over X% offerings or regional networks expectations publicly their non-Gray two to coincidentally, our local threatened from the channels Not to dropped third from about stations, revenue sports television large

QX. an reductions local estimates or they local QX the Those in a and cable no reduced for local stations channel slightly Of market us retrans course sub lose a station reduced retrans caused our can viewers when RSN, longer slightly viewers – all when drop or because lose revenue a get those an our MVPD, subscribers. that

of in up. a doubt of or no that thereafter number them the thereafter new good The in providers QX, QX revenue, and one QX who revenue in as signed in to and up a show early provider show these up and retrans subs two sub regain from MVPDs expect defections of hooked most probably sub term. in year. operators could rather that subs, near not next get QX as they have up soon ended the do arrive We the payments left summer will the soon reports new in with do immediately most and lost We

we to Nevertheless, we moving reports until these for where accrue us new cannot actually telling sub get folks subs went. operators

context, for year. For reports from all the virtually now operators we have first-half the of sub

largely Our in overall first-half. sub was stable count the

first-half, bit. large these for excluding two count the sub very a grew Our little MVPDs

In approximately net $XXX million that currently $XXX year for revenue be We million. short, be expense will retransmission currently anticipate and calendar will our revenue approximately be million. we retransmission retrans approximately anticipate $XXX XXXX will

of MVPD believe to keep further And between delivered grow of gulf as away end and MVPD at as chipping net as end about we we value a massive subs said, will value the about retrans the of that our of we at year ahead, XX% Looking the the continue and our our revenue received. renew at XX% the subs XXXX. Hilton this reminder, current strongly and

stronger last had we Turning our robust political expectations. keeps political building revenue to positive out environment pointed and several QX blowing obviously quarters this numerous expected. than past momentum revenue, over and the developments and much it our trends We just already was

the historical off-cycle quarter historical excellent combined in to on we a XXXX, even two the basis. combined of XXX% ripped quarter, first results about third the quarters revenue the an for that We basis. high XXXX on a finished After year the and over up increased last political guided expectation through of year, third over XX%

local This turn factors, contest competitive more more money than and resulted very of first more from state ads. in races issue a the way early, anticipated. aids, early number We presidential governor the had all special races, strong primary

vote. we of cannot, stations for In be convince, I Look, and continue power to be to the cannot the political get days. on political excited rely revenue to short, buyers see local out sway about but television to the excited the over XXX – next prospects we

range conservative on guiding comfortable to quarter, basis. a $XX million of in would is are XXXX represent believe roughly revenue, For increase what a over we a combined the we XX% political million current very historical $XX to which

fundraising, this see is presidential engagement, levels we of races spending candidates we and earnest. our historical likely short, across week’s to that And see In election begin us, in strong expect now ad footprint. competitive behind

we now historical will exceeding million by XXXX on that year achieved for calendar new combined a basis. in fact, revenue that In record believe our set political XXXX we the a $XXX

Thank for turn the I call to Ryan. you Jim your over time. now

James Ryan

in Thank you, pick everyone. pre-apologize Kevin. managed I is if days. off couple a last up Good to little of the going or morning, coughing. a my bit I’m cold voice to I’m

the be a Our detail earnings of release obviously bit got is XX-Q will and a – great today. later deal filed little

reported reported, in report we’ve disclosures. way GAAP always call the we which on a with our as basis, Keeping we

gives earnings occurred dispositions if release to a the X, XXXX. combined January which on we In basis, the on and acquisitions the presented in and historical transaction addition, effect guidance results as

I’m KDLT operations does Communications the and historical earlier going which on historical QX in X. the only a QX on the results QX from of September also station year two and basis. not guidance include include transactions, acquired QX in guidance our comments occurred the for United keep this stations stations, that and our to also occurred note my for combined does of combined Charlottesville that Please historical which United to note but late Sioux combined October Falls, please acquisition our

the we line show modest with the quarter Charlotte, flat local of our and XXXX. our in revenue, over In in TV higher believe Factoring in core was of revenue, third pleased sequential first-half improvement with much general, Kentucky, core third political XXXX to Louisiana heavier the in side for Overall, revenue did the was and guidance we’re Mississippi, QX. revenue especially local our the results quarter.

improvement did categories up see strong was to advertising, our growth XXXX. strength financial compared X% QX, legal X%, with category, several continuing up in in as In home as we X%, year-over-year up well which

Third operating quarter that $XX and partially of offset million, retransmission expenses. expectations. an expected expense in increase with in by was $XX million, $XX broadcast increase which than decreases of in companies operating The expenses corporate an better within were other quarter-over-quarter overall million included lines expense came then but production

$X million of and the quarter the we of expenses, the of third million expense In expense. of hit million XXXX, transaction-related had corporate broadcast total a a line which $X was $X remaining

aggregate termination approximately of million only $XX $XX $XX million expense million and about included these of and/or expense million $XX one-time was we Of in an approximately our costs, corporate transaction-related compensation our and costs fees of in Year-to-date, line have fees, of of line. costs $XX comprised of included broadcast is $XX incentive contract professional million third-party severance. million

between $X quarter, we expenses fourth expense anticipate million corporate at the and transaction-related of least lines. approximately In split evenly currently additional broadcast the

of which estimated. annualized is $X $XX call, reaffirm million those two $XX synergies more result will originally belief about approximately last million categories, about into of arrangements Raycom year And our fall and contractual of $XX first than synergies our operational million. basic on million discussed As we merger that in the again synergies,

We’re to before always at of efficient this streamline them and we operations accomplish looking that as synergy-related to make there able to year. projects more may the will our be opportunities be a such, end few more

balance the to Turning sheet.

prepay that $XXX times end at $XXX again, at an total of hand $X.XX eight-quarter and of C. to based our of on million principal mentioned Hilton million the already Loan had flow with Hilton $XXX end of last trailing September debt $XXX amount cash quarter we was of million outstanding X.XX As of that Friday leverage a outstanding cash of billion. the aggregate ratio of had voluntarily cash Term our used the as We said, million, on

to the year lower continue Xs of into and Xs anticipate the leverage by We XXXX. end by the decreasing into the this end comfortably of

show improvement local demonstrate still is that national we to nine broadcast will revenue, first challenged, our lower a months, historical Turning improvement revenue first over expected nine over on advertising currently basis, months. combined to quarter with especially continuing fourth guidance still the the auto anticipate while broadcast

is will the revenue And political the we the rest as are cautiously already think move political and conservative pick through number mentioned, very that Kevin up quarter. fourth as of our we guidance, we optimistic

$XX Core also overall that broadcast excluded to of $XX expected and compared XXXX, expense. an expenses are between and are million decrease. excludes that million compensation expenses $XX non-cash million to stock decrease QX increased retransmission from anticipated Transaction-related

expense transaction-related is non-cash of synergies. to part stock anticipated realization demonstrate in our $X decrease million excluding compensation. from – corporate million In and the reflecting addition, These XXXX, to expenses currently Raycom decreases $X

full-year on and XXXX currently date to results QX we QX the guidance, our revenue anticipate Considering our will $X.X approximate XXXX billion. of based full-year that

on Our total of billion. the will of depreciation, operating before assets, including and expenses loss the $X.X expenses million year amortization, gain for $XX disposal about transaction-related approximate

non-cash million. Full-year to approximate compensation stock is $XX anticipated

Our capital currently currently cash $XX expected flow million, XXXX cash $XXX approximate expenditures capital We anticipate operating and expenditures, anticipated million. million. repack-related will are approximate our to excluding approximate for to is currently $XX taxes

for Finally, pleased our flow our for QX over free this as that year. million we that XXXX. call anticipate point be and that comfortably we between cash will at $XXX free flow we $XXX in believed said million say would range our to we’re And this $XXX cash million

At I’ll Hilton. call this point, the back turn to

Hilton Howell

open Thank you, questions. Jim. for Operator, we’re now

Operator

Kyle Please Evans [Operator Instructions] Stephens. go question First ahead. from of comes

open. Your Kyle open. line line is Evans, is your

Kyle Evans

Thanks.

like, Day, then of in like follow-ups? before of got big think I six kind blitz early, spend the political. Labor weeks some people’s was the race, we starting spending tell more. and voices over kind I’ve bit you will a you spending a I look That’s the in the excitement after looks the little on we’re there Could Sorry, around been can approach what it mute. but hear as us traditionally curve

James Ryan

always So of fourth or the different to quarter. for historically, could be states. total cycle primary early shown cycle, up XX% XXXX the us spend is of exposure in more our after the bit because political little a

a might be so from the in the think to –we bulk And Labor be positive believe the first do quarter quarter, October we’ll there Day, post benefit see be think still first that timeframe. in is we traditional going spend normally primaries. September, we I little more, of bit a our But early than probably that But would that there.

Kyle Evans

is trying around XXXX, we were that we thinking that gave? your were CHB number Alaska. pro comps brackets big And – we were some the to to XXXX my Are in be grow that – any XXXX off of recollection we numbers about thinking there need we put forma were when from when about difficult as XXXX your pieces you

Kevin Latek

Alaska was XXXX, million XXXX. in not $XX

Kyle Evans

Okay.

Kevin Latek

Kyle, out there. there lot good of news is a

So what CHB nothing is there out $XX that that a had the this huge that out in of we referring were XXXX. percentage we is Alaska, stands like There’s stands time. XXXX really like on that to back nothing chunk million the a basis in

Kyle Evans

Gotcha.

larger difference market or counts? notable You are that you size on and retrans sub core maybe Could change some terms comment markets. any even now in Raycom you see of in

Pat LaPlatney

to the I Kyle. sure Pat make LaPlatney. question, want It’s I understand

markets about performance are relative you in smaller So asking core larger markets? to

Kyle Evans

I’m.

Pat LaPlatney

differential any real have last guys. to really a relative or counts, yes, to I with markets larger didn’t relative didn’t to Charlotte small as versus – mean, didn’t the performance difference I in in huge ask see smaller markets. mean, we you I And between Cleveland look, sub markets. our quarter, see Charlotte So, see we any,

Kyle Evans

but exposed ask your How you this you hard I less, versus roughly? satellite a Great. only to think basis. you on – are answer, to feasible guess, And for I it peers? are More, same, to it’s is relative

Kevin Latek

are. our idea. don’t no I how exposed have I Kyle, know Yes, peers

that. mean providers, everybody So to satellite to of thing. there have that else true. if our I I don’t compare same know suspect don’t else I largest how ask everyone say – two that’s – the three I But I’d and operators can

Kyle Evans

it you. One XXXX what’s to one, Okay, ask how XQ obligatory of last kind Thank great. pacing in auto it outlook? I question, your the is have and

James Ryan

encouraging. better right would But pacing. yes, it’s, which I now, first Fourth year, a now basis, better looking little it’s a relative the the on quarter, in is again, little again, a bit bit part say, of

our Next year, process. still in we’re budgeting

be we’re next sequential we – kind seems bit still getting better this I our it’s little So but expectations quarter have year. a the year. But framing been – each – for by encouraged of of auto to

continues a now seen expectation story, So us. better you’ve kind but many, little of a our that least, massive year to many a first high-class It in that’s would that into amounts going with be next the of at to problem of the part times have. up year, next later as show political different with be get year, will bit

Kyle Evans

Thank Yes. you.

Hilton Howell

Thank you, Kyle.

Operator

Your Bank. from Deutsche next Watts question go Aaron comes of Please ahead.

open. is Your line

Aaron Watts

the bit having the A from of me of I’m couple slowdown impact environment XQ. maybe that thanks some closely too more that I there looks but other political, a kind in XQ levers are me. for little a from there? parsing a pulling it Is here, like of of just things strings or advertising of Everyone, on. core – little the questions is kind to

Pat LaPlatney

geography there Well, a – a tight displacement political. was part our sort core of definitely to due of in

the displacement. NC-X some gubernatorial races, Mississippi some core So with Louisiana, there with the degree in in Kentucky, and Charlotte to were in race

So relatively on the that there – if you’re flat account, if you’re you quarter for into local. take

Hilton Howell

especially nine part rounding again, and local, be of core, think be guidance going than the we’ve months, just slightly the end that the it is large first expectation I the in my at year. the I months six the numbers, QX what And day the better is may of of ranges, seen personal mean to

I’m probably happy to if a we’re deal the bit, a But getting quarter. displacement expectations, And if a ends problem bit optimistic see a So QX, doing getting what our will again, did which that little QX up in exceeding impact with. better. greatly going it to little political it’s again, in more I’m maybe some and little that it’s bit – happens, then – again,

Aaron Watts

feet is, the the would who aside, as political salespeople, say on the markets hearing putting that And you your advertisers? with speak overhang in you from their have concerns ground biggest your what

Pat LaPlatney

a mean, I if you basis, challenging. category go was auto on

upside, legal includes which is, awful been healthy a got we’ve the and some it’s very, the insurance. has very not generally, it’s But either. not on finance long upside side, On well, activity for time, great,

Aaron Watts

more then bigger I picture the a you heavily had Curious for a then any thoughts audience services month coming And real these and on streaming just, impact your and standpoint, guys. year launch question rating have couple whether business, next that? cord you Okay. to cutting, your it’s if or of just couple from sub of a base kind anticipate new a on the promoted this on of obviously curious

Kevin Latek

there – counted said we or we the are field. are pretty over that a crowded top like seems providers have a think launched saw it XX that launching, I note

a should a it’s guess, push XX is to people – providers The are people of bundle. a or more or XX bunch in signing seems of lot economics there’s up pushing whether get I So it our over XXXX. and XX than whether the takeaway It’s a cable or cost-efficient or for heck providers. of these easier, top these satellite

wondering Just of ecosystem. the off

We subs in actually the are going us retain cautiously that’s ecosystem. help to optimistic

Aaron Watts

much. Thanks very Okay, got it.

Hilton Howell

Thank Aaron. you,

Operator

next Fargo. of go Your comes Steven Please from ahead. question Cahall Wells

Your line is open.

Steven Cahall

Thank you.

first, maybe just Kevin, So, retrans. on

more doing the pin a net deal? at I year. figured is low know single-digit, QX between but was decelerated if retrans look then, the of expect on and the mid, up watermark end I think any that high be clear, be little you’re that try? And retrans to to the doubles, maybe can in for next on the Is seeing commentary what just the do if trends you Fox you’re wondering I So to it due subscriber I’d might net have repricing quarter, low down, grocery And like what don’t you the I I you accruals year?

Kevin Latek

So the we year, predicted. a lot lot it with that – better what results. for QX some in we’re than And prior a turn adjustments billing QX on is call the of coming payments. optimistic providers. of We catch-up QX audited we’ve explained started going to cautiously out We from

As again going it’s big the folks in until it can’t up accrue I we payments. said, two are we we who left summer we But start know these the over – operators for don’t showing think there. to

repriced low have we the double-digit QX, will have contracts that range. all an very roughly in fifth base a and our don’t Come will of escalator low, sub reprice

grow do fifth if growth double-digits, new the of should be a our I’ve So got low subs and by again, we the schedules. under nothing, will repriced

yes, say, and next as this year, referenced at the looking you be should it. absolutely So, is – I’d watermark low year QX

Fox years ago. things on deal new And in of all those a XX you second-half agreements with two repriced July did of The last of – to CBS to signed for this a all Two August CBS That prices deal, kicked when X, year. market through we affiliation XXXX. we that markets. contract happen, X, our a if back go XXXX about was XXXX. on went CBS that it added September couple of years five-year

instead up in CBS August that were market to rate this our a X has we in paying year. stepped negotiated back we of So that the September race XXXX of on

the rest certainly impact we’ll or see the third impact we quarter. CBS that middle Difficulty] [Technical coming of So have quarter in through and the through the the fourth

So will full QX, market and in of is CBS QX, that rates. the have we then of quarter a net bit especially is up a as sort retrans see of why quarter Fox and you full in taking a

us numbers prepared give guidance. any we’re growth, in growing looking show not but next our And to year, net at

again, guidance used be us don’t some in that up negotiations We this have, against in may and think those significant year be negotiations. giving coming it’s to appropriate

Steven Cahall

Jim. positivity incremental flow for – value that for your much cash or Hilton in And then new this the repurchase the either generating? the the authorization, on about shares you’re how free follow-up maybe a seeing just versus quick about for market we When in think is share

to And if maybe of $XXX any be with think would debt is a reduction versus like blended think debt I of like that flow, to kind forward reduction, repurchases to I want third probably repurchases Thanks. two-year versus cash would this share way put or we guess, free something more do frame about average than million in helpful? you

James Ryan

compelling clear think be right nicely I over don’t sort this very of over you the healthy. I in some reduction was – absent was in would it’s year very have did and of We me, – – right that M&A cash is Hilton million first are it there XXX-ish, the it of XXXX. around $XXX that delevering. priority, to But debt was front number free

through So you’re you maybe XXXX. XXX-ish is – conservative move even as be

think cash Hilton do the but we time to And think from said, to do be So the we little debt – we as from undervalued. time. also reducing have bit stock has intend able and being to of time at opportunistic our little a free a and And, I more the stock capability clearly be been a both the standpoint. buyback same strategic to maybe of

I favor valuing will getting you’ll the on, see the market us, XX bit think depend, bit. we’re to direction significantly broader answer. I may where especially reasonably value think being, the if what months is we we us if of little So And balanced next a be and tip trying think over might one undervalued, a a scale little we think that other in is good the be we’re being

Steven Cahall

Thank you.

Hilton Howell

I do, I I fair. think that’s – And think that’s

But think is the Raycom a the going fashion. coming superb matures in really synergies out, the benefits in to see we’re flow how free out. everything cash balance from this I have and to we’re transaction sort seeing to our of of going we’re to try but

cash return we through meet to flow think stock shareholders the delever, So got to giving at free same some to time while our our repurchases. we’ve ample targets

Steven Cahall

lot. Thanks Great. a

Operator

go question Ryvicker ahead. Please of Wolfe Marci next Your from Research. comes

open. is line Your

Marci Ryvicker

you do from or dish Kevin, gain? same numbers time get when of you get same part you, numbers, come do of the – DBS Sling big Sling month? numbers asking Thanks. because a the delay a on digital obviously this sub this sub had pretty at both and morning I’m those for And the

Kevin Latek

QX to the had see were what that was better a encouraged Yes. We than expected. we number lot for dish

of, numbers months. carrying affiliates. reports Marci, not going getting is the We be because O&O So weeks well the get do not next we’re that for Sling of Sling to carrying bodes couple and stations and over

give reason payments. TV won’t us therefore no or reports of they local – stations and there’s send no to So carriage

Marci Ryvicker

at about Got complaining it. payer. point not but some a at the And repurchase all, Gray then, was dividend share I’m

about dividend, that has to curious leverage depend if ratio and there if would dividend, a your why repo returning both? over discussions regular So on paying not been why

Hilton Howell

very will paying our relatively seriously Board I It’s in of the not and news honestly, likely Board returning give on will at and Marci, be if, tell yesterday some you something The discussed Board Directors is we subject you soon. future. when, that question a point to meeting. matter to in are weighs something that we dividend our the some

Marci Ryvicker

Great. you. Thank

Pat LaPlatney

To quickly. follow on very it up, Marci,

transaction, ago, exactly of Hilton thing, as in the prior to couple Raycom down. to If same the said a recall we you began years several leverage row, a quarters bring

same the something thinking kind – and So to – like this and end of were was XXXX said kind XXXX, we the the of then. he of XXXX the thing cycle ahead towards end

reset And farther done and years And so importance. of pick got as And those through cycle. Raycom looking that short more having think, go now and the clock it’s I more think into XXXX, up XXXX we’re we XXXX, I farther really kind will forward. discussions two

Marci Ryvicker

you. Thank

Operator

from Goss go comes question ahead. next Your of Research. Please Barrington Jim

Your line is open.

James Goss

It have if I anything successful leverage it reprioritize remember tie to you end notion to you of talking you’re I for in whole capital what you’ve lots do to the some might years. leverage – allocation, of relative into down sequencing low getting don’t this get really your And just Xs At what – the know… of to is because me of can point, Thanks. been about. by XXXX. seems That’s that

James Ryan

that… think I

James Goss

much X? want to get you …if beyond

James Ryan

very is think a end that we’re get very free it then balanced. think to if, immediate – reconsidering I very right? flow, be think a to be, allocation little we down short-term, fair, going that point to where leverage allow cash I more I zone, appropriate its we company XXXX, if But in very, be when we the and reconsider does then In comfortable would those be to Jim, it expect reprioritize the priorities. our up to absolutely

James Goss

any that? lose dollars reductions would some Okay. of that from at retrans exposure but there for but terms I’m OTT And move find some be try to usage services the choose retain antenna wondering experienced. greater you’ve you this in Is might to as to your Kevin, sub advertising

Kevin Latek

have going and cable number you discovering digital of what to and just back get think, Jim, signals very better I antenna. satellite a that’s years, think put been on systems. going for a can broadcast high-quality, lot out Folks much it’s a of on up I when been we put signal than high-definition but

market. and So the TV penetration, all year, penetration, every their have subscription are the increasing around – OTA place, over we’ve pay-TV of somewhere really lot knows, house. probably folks OTA kind an seen certainly over-the-air both The one a estimates every of no it’s who the OTT

people cable. as that to and to is move the helps reach with the And XXX% are to right, to our it OTA, that message available homes continues not available multicast reinforce market. in those that on can business, us which we folks advertisers only You’re provider the generally of

who on Our reach folks the reach the sell portion only us, also advertising because is cable of satellite against better can they a market. than

So sales. for challenge and measuring we those rating the are I agencies have households rating us – with industry caution a it confidence that’s OTA that that of real challenge and for yet, the will folks. the the that helps any don’t

a are ratings do we we had were to think the homes, the our ratings higher So what than measured And those. agencies actually need we we us showing see would if capture if – we were OTA now. lot

James Goss

assumptions? think is, optimistic be I’m you great question anything think, has going political last wondering, there is wrong, is my everyone that that XXXX. to And in embrace to notion could could I derail Okay. seemed the everyone’s go that

Kevin Latek

the that of competitive House Senate are just think, a make impeached competitive see impeachment’s the unimpeached. in less is legislature. House only starting. just if is anything, would now. and mean going No, I in play. President President the get the getting right Senate state The split to Virginia is not I the of becoming more – the I favor don’t bias momentum

yet We Supreme in divisive. This even Court the have to public or and hearings. out at retire could going more don’t become the the of have more bring interest will justice XXXX more a and elections. an in any moment, We don’t And Senate. public issue trial that trials is

of being better, think all I weaker. So bias the not in is favor

to Trump. back this on Trump’s are time wider more is raised I make million, – of they $XXX if than the competitive more aggressively was like will fact, more be in about mistake skipping play. Democrats is which this of states And, Wisconsin, Ohio, playing that, go XXXX, Michigan. that around expectation see the are So million states and have this point going it broadcast the election. than more to frankly at not $XXX that’s tossup television anything, time number and we to they XXXX every than in states he raised And in in is the presidential

So that’s us. good for

Hilton Howell

Even if morning you that’s we terms off and on this of an take record our all-time historical what announced off-year. in is this political, –

there I’m on know absolutely next expect the really we optimism probably So I year’s for year. numbers. optimist than I robust other that have no large this but is biggest election call, indications that anything presidential

Kevin Latek

out even earlier. points, give you call this call didn’t two Let Jim, on Richmond, which me just on data we

for – our Richmond. NBC had XX – of Our don’t a State spending that. another the NBC We typically that’s on Richmond, We on it’s from candidates. seen candidates XX State had never lot House, separate the we’ve in Station, on air and House see And antidote. air

was weeks talk of Election a not it Governor’s week, place There run-off, was Louisiana. about, but race Day, we ago. week this couple it from a takes Saturday. is Tuesday all Their

So spending in we seeing are Louisiana. still

– on in strong Tuesday, very we stations, New Louisiana, In Freeport, we fact, in Orleans, got had Alexandria. we Monroe and Rouge, – remember, have Baton

almost entire cover the we So state there.

orders down money everything Election one was of was day, and when We coming just that and else quoting in. is on the in got Day still another $XXX,XXX worth

of So being better, the weaker. favor bias it is not in

James Goss

as as ago, Well, few years sound you Okay. you sounded concerned degrees. a XXX

time have around? this You

Kevin Latek

through see would was had again. of political unique guys, ever coverage. Trump the XXXX she to that It of us in I the and spend. position Hillary So say I think ever a didn’t think thought was them. do that spend I blue any been states, free year has rallies we’ll was don’t I really terms get she mean, strangest in able

think blow to And so going the think be I it’s – XXXX through ceiling. going is to I

James Goss

right. All

there. We’re you. holding it Thank

Kevin Latek

right. that. I’ll Well, take But, all

James Goss

Thanks so much. Okay.

Operator

Your Please of next question go ahead. Dan from Benchmark. comes Kurnos

open. is line Your

Daniel Kurnos

year. for Great, guide thanks. morning, goes and Good there next your political

the capture what a you guys I of mean, Slim – but synergy QX, know on expense to questions. would Jim. have crushing it Just picking you, don’t couple you announced side. I are the you if through

that mentioned one. of could in exceed sort number year that you mean, I So, even you

just a heading we I’m QX? into a of delta much how could So of sense and where to trying get see you’re at

Kevin Latek

which transaction-related, you hard more think can the see to back I from going comp, you it’s Again, in see core the be when much reverse to year-over-year. that the significantly guidance number, QX. is down the back you out table out

synergy real of think I that’s your So realization. your indicator

year, few of increases a more those the being efficiency. getting places. in staff move that completed it’s of still really of especially going couple it’s got potential it’s this one while which little bit a weeds a at to projects, those have in to automation already. and million kind year-over-year stations We’ve when we’re a will – into point our reduce it that allow – But helpful it’s at It’s – not you’re $XX-ish and down numbers, us

Daniel Kurnos

helpful. bid? there Do M&A your other later as be guess, side the Got haven’t And is, probably consolidation be of the on I it. larger point the only Hilton, you of question and this innings been asked table a think needs That’s in to to then a the recipient the on you willingness at front.

Hilton Howell

would interest that at a in and number shareholders. any your that it The I’d interested we say, candidly, is But you asked. is, I one The not Gray of larger first in in question of months grow Sure. is look footprint to itself for than long-term today yes. question interested and answer best answer it suggest of ago glad you interested, putting sale. to second permutations the the our of your with three what did just is, Raycom. I’m very company out is our

of lots issues handle issues, seamless, of issues, very we a social professional political handled – and of professional in We and personal we handled lots tactile operational way. lots

But those done with get are Gray is that on million are because too in to number numbers pillaging coming us interested. synergy of interested good. TV our There’s ways raping see in stations, deal and and didn’t a damn You and permutations. any there’s we too many a

demonstrated in Are brings future calling and the capacity Gray But can chance. us up to a its and dime move what and Not on and the a phone up has so. we sale? interested see putting picking for we’ll a banker do

we potential Board or those different certainly any pass, to Our whether of of not know. ideas, is come don’t in favor

months It killed done but get took day, it. Falls stuck XX but XX near months. stuck Sioux everything the Latek, to all for we Kevin with It it damn the wants we us done, stubborn. right, also by end of with We’re who

question so, hope on that sides, answered And I’ve both Dan. I

Daniel Kurnos

No, super Christmas list card all we And point. think not Kevin’s I at helpful. Yes. know that’s pie is on this

Hilton Howell

man. good my on Oh list, card Christmas no, got He’s it’s back he eventually okay. a

Daniel Kurnos

for Thanks the Hilton. color,

Hilton Howell

Thank you.

Operator

Michael comes NOBLE question Kupinski Capital of next from Please Markets. Your go ahead.

line is Your open.

Michael Kupinski

all, moving impression Thank company towards per a you. of And cost model. for want I to the applaud first

of makes I trying a couple and sense. my around get But I’m just that. have it’s to head questions think a I It logical move.

cost model, pricing other moving the has some impression accepted on model, what to to TV up sales can this pricing in your little about How umbrella variance you might how impression? does the bit to been always talk per in of the the other mediums a stack just local market. offer And a mediums against advertisers it? sense Historically, that us per the have challenges you be? moving in Can cost give pricing

Pat LaPlatney

Yes.

though XX I game, local those television, have a that, of when you And in hours upside is the is world an in the all a right? hours think to in draw year-on-year sell real early quarter you I even the the it’s engaged at today, day. – rating So would there difficult we audience. And live actually there. X:XX morning audience in it’s X.X sell

with audience And for most to we what’s so, and being great large big a take good TV media local to becoming that, very our combine is relative audience it linear a digital to an audience have the other and benefit ultimately news able us. is enormous

that different all these deal of place. across in significant with measurement bring impressions different the goal which same It’s all those a it the to you’ve when platforms, got can aggregate together in be systems Again, a bunch advantage. ultimately, you you would today

Michael Kupinski

potential trying the rates? just Gotcha. per cost I then a moving company or how mean potential it And just understand to with And from the moving impression the I’m increase that in the towards does revenue opportunity? the wondering – get pie. positioning do at now I’m direction? terms programmatic their to of piece kind terms I’m move looking automatic of larger in the in just of is other model, you compete broadcasters industry of

Pat LaPlatney

Yes. Gray. you’ll No, with still just think not I it’s be competing broadcasters. again, But other

industry in news in other most buying the entire the ultimately, too. they business platforms, it’s opinion, by all a single audience think of that able where sale. audience. for the And way, to better community, be better good the I for And for it’s really – gather the have utilize my to other broadcasters,

that getting something challenges other initiative you’ve efforts our our linear and of more the One that buyers that’s read about to or accessible it probably audience, in and allowing making large is area. tip

direction. So right of in sort again, moving but it’s stage, early it’s the all – all

Michael Kupinski

Thanks for the it. color. appreciate Great. I

Hilton Howell

Sure.

Operator

Your Media. JK next question go comes Please from John Kornreich of ahead.

open. line is Your

John Kornreich

$X.X billion revenue? about said expenses? you what repeat did say What estimated you Can quick. real Jim, Yes, the about you full-year

James Ryan

$XX transaction-related non-cash the a stock that including $X.X would million also include expenses is estimated of comp and said billion. about I

John Kornreich

after is a So more corporate BCF like is of…? adjusted is $X.X – kind but that is overhead, or that billion, that

James Ryan

corporate a that’s it would also for it the overhead $XXX the I we’ve number. flow, million full-year is that to defined operating this as said years, that And – No, year. include about be tracking cash

John Kornreich

a [Multiple Right. not BCF? OCF Speakers]

James Ryan

code. L.A. at, OCF, an That’s which zip blended the correct. That’s an two-year – call a it’s it put XXX-ish would

John Kornreich

Right, so BCF.

James Ryan

two-year OCF blended average. a on

John Kornreich

Oh, two-year Okay. blended?

James Ryan

XXX. just May looking the XXXX around months up around OCF straight is XXXX of for XXX be in XX to the be

John Kornreich

to – on what a And range gave cash of million. $XXX you think, I free million $XXX and Right. flow,

James Ryan

Yes.

John Kornreich

Is that just fiscal XXXX?

James Ryan

Yes.

John Kornreich

the And expenses? transaction million is that net of $XX

James Ryan

expenses. transaction the excludes It

John Kornreich

It already excludes it.

you. it. Thank That’s Okay.

James Ryan

Okay.

Hilton Howell

Thank you.

Operator

Please ahead. Your go of comes Kyle Evans Stephens. next question from

Your line is open.

Kyle Evans

One bit there. I focus more was mentioned you a the OTT detail quick company. believe broadening that for I of little the follow-on. hoping

named You new this go exchanges. on three OTT I where have competitors OTT? the kind have that ad with just you of might wondering focus was

Pat LaPlatney

Yes.

today, specific I quickly we’re terribly direction be tell can’t as that Kyle. would you we moving I as that But So can.

Kyle Evans

Okay. Thank you.

Operator

There questions I at remarks. over are turn call closing time. for the the further will to no presenters this back

Hilton Howell

quick take of I moment just you to And morning. all Cheryl. attending you, this to one again thank thank for Well, want

so companies But success about I year. synergy far excited these the think two numbers importantly, very more has The We’re of have this achieved clear. bringing great together, been we are operational sterling. what

what an shared here, they’ve really are and that And end one team of And for enormously you Thank our are exciting the and and corporate year. our services, as country what talk the of proud is truly We we achieved the and you and invigorating it time I’m headquarters one. and they’re company. professionals our the being our in in building. stations, for company in we across will to working at

Operator

This concludes today’s participation. conference call. Thank you for your

may You disconnect. now

Gray Television (GTN) 7 Nov 192019 Q3 Earnings call transcript