Q1 2020 Earnings Call
Ladies and gentlemen, this is the operator base competence scheduled to begin momentarily and so that's one of your life Mackenzie place on musical Thank you for your patience.
[music].
Thank you for standby and welcome to the Gray television Inc. first quarter Twentytwenty earnings calls.
This time all participants are in listen only mode. Please be advised that today's conference is being recorded.
This presentation, there will be a question and answer session to ask a question. During the session you read the press star one under telephone if you require any further assistance. Please press star zero I would now be let's turn the call over two speakers today.
How chairman and CEO. Please go ahead.
Thank you so much operator, and good morning, everyone has yasir Mick mentioned on multi I was trying to see a gray and I want to thank all of you to joining us. This morning Torch May 20, Q1 earnings calls.
Today, we are all virtual we present in spread all over the country on the line with me are president.
Lucio about the plot me arching legal development officer, Kevin late in our.
Financial Officer, Jim why haven't we also have today, our chief operating officer Bobs nothing I'd like to welcome. Bob. This is the first time that he has joined US on this call and he made little plugs. Some interesting color to some of you during the Q when a session.
Not before.
We will begin this morning, a with a disclaimer that Kevin will provide so Kevin.
Thank you Hilton and good morning.
Certain matters discussed on this call may include forward looking statements regarding among other things future operating results.
Statements are subject to a number of risks and uncertainties actual results in the future could differ from those describing the forward looking statements as a result, a very important factors.
Such factors had been set forth in the company's most recent reports filed with the FCC and included in today's earnings release.
Many undertakes no obligation to update these forward looking statements.
Great uses its website as a key sources a company information website address www Gray dot TV.
Could it on the call will be discussion non-GAAP financial measures in a particular broadcast cash flow broadcast cash flow less corporate expenses operating cash flow free cash flow adjusted EBITDA in certain leverage ratios.
These metrics are not match replace get measurements, but I provided a supplement to assist the public in their analysis and valuation of our company.
Included in our earnings releases walking a website for reconciliations of the non-GAAP financial measures to GAAP to the GAAP measures reported in our financial statements and I'm trying to call the Hilton.
Thank you Kevin.
Well this year again as strong as we could have evo hopes corpse of again I'm certain that you felt <unk> optimism.
Our yearend earnings call in late February.
And then corona bars that.
Certainly much has changed since then.
As a company.
Could not be more proud.
First of our stations in production companies their employees, our corporate and shared services staff and our entire leadership team.
We moved quickly when do I will note walked policy across the company.
The opted numerous protocols to protect our employees.
Methodically ramped up our local news and other local programming.
Out of the way to warm up and keep business and doubled down.
What are already deep community service.
Advertisers by and large they used historic headwinds.
But they have stayed with us more than many had expected.
As you saw today, we ended the quarter with revenue up slightly due to increases in retransmission and political advertising revenue more than offsetting the decline in core advertising revenue, which was largely centered in the month of March.
The same time, we managed to reduce expenses during the quarter.
However, I want to know.
Not due to furloughs, not due to lay offs and not due to benefit cuts.
In the end our Abbott dog.
Broadcast cash flow and net income all increased from the first quarter of last year and all three measures were roughly in line with the lower end of the guidance that we had issued before the onset of the corner virus and then.
In particular revenue was 534 million.
Are you seeing $16 million or 3% from the first quarter of 2019.
Net income attributable to common shareholders was $40 million or 40 cents per fully diluted share.
Well I guess cash flow was 181, Megan increasing $58 million were 47% from the first quarter 2019.
Adjusted EBITDA was 169 million.
[noise], increasing 19 million or 13% from the first quarter 2019.
Business slowed considerably in March and the continued in the month of April.
Our sales teams use this tough environment to strengthen the strong bonds that we have with our best customers.
Some or all of planned buys and even bring in many many new customers that you will hear about more later on the call.
The clouds.
And to appear to be clearly as we entered the month of Maine.
Still our visibility is exceptionally constrained.
All of the uncertainty and variability from market to market.
From state to state.
We're in a very very strong position with regard to our liquidity to ride out this tough patch and even if the situation remains changing for the rest of the year, we expect our liquidity position to remain enhanced as we undergo the next three quarters.
[noise] [noise] [noise] [noise] [noise], so we look forward to.
During poured with the rest of the year.
And turning on a decent performance and now I'll turn it over to Kevin.
[laughter].
Yeah actually.
I'm sorry to come here, it's Pat no problem.
Right.
No thanks, and good morning, everyone.
First quarter started out well.
January February or core arbitrage was close to flat compared to prior year.
Significant political rather rolled in.
Of course come March we saw significant slowdown in economic activity across the country deal with the public health emergency as well slowdowns in the oil and gas business and some of the states in which we operate for the quarter. Our core advertising revenue was down about 4%.
In short political revenue this year total AD revenue that is our core AD revenue plus political AD revenue finished higher by about 8% compared to the first quarter of last year.
Video production companies, while much smaller or significantly more impacted by the current crunch. The center television stations recall that this group comprises rooftop sports Archie of studios in two blown wake up.
Archie have generally produces evergreen content, Rick I'm sports and to blow However, primarily police video cloud treacherous watch sports concert should not be public performances needless to say with this especially the cancellation of why public events, especially sports the production companies business largely dried up in March.
To be Canada, the impact to the shutdown a significant portions of economy had a bigger impact on April but we saw at March like everyone. We're cautiously optimistic that the gradual relaxation of state stay at home orders will be successful.
So pent up demand from consumers and businesses could improve our advertising production business. Just later in the second quarter.
Well I'll ever need to wait and see just like everyone else. It's important to recognize though that our television stations are alive weld serving their communities as local markets injured varying degrees of locked out.
Our stations rose to the challenges presented by both the public health Health crisis.
Fortunate springtime severe weather.
Oh sales managers and account executives have worked with their clients to preserve buys the clients have tended to cancel.
Sales team is actively quarter businesses, there were made to open to get that message out to local communities.
Trainee gene was busier than ever coaching are sellers on business development efforts emission unique environment.
Digital products and premium.
Our guys don't plan to do spots. Thank you know first responders or otherwise burnishing their brands rather than promoting the real goods and services for sale.
Our sales professionals continue to bring in new business throughout this crisis with over 700 do clients edited marching more than 800, new clients written in April.
All the screwed up or help us because your revenues that otherwise would have declined even more.
Early April Gray stations launch interactive online business directories to enable residents to find which businesses remained open and their new hours directories also allowed all my visitors to place orders directly to the sites will pick up or delivery of change groupons, even apply for jobs by the end of April more than 14500.
Your local businesses Jordi and one of directories offer free.
I was curious markets and as of last night, we actually crossed the 50000 local business threshold.
Meanwhile, our stations these departments and never get busier, So many march and April for that matter.
And then the career equivalent of covering a major hurricane that lasted weeks rather than ours.
In March and April our stations added several hundred hours of traditionally.
Pardon me additional regularly scheduled local newscasts as well as new specials fund raisers and telethon just lessons for children to home and live coverage in press conferences in town Hall meetings.
It's also worth noting that our stations broadcast more than 2500 additional hours of network Special reports in March and April to ensure the local companies got the information they watch a need from their most trusted source.
You know brushing ratings agencies indicate that most of our afternoon evening and nightly local newscasts saw material ratings increases well into double digits in March and April over the prior year.
Well all stations added viewers the number one and strong number two stations seem to do the best in most cases with some truly incredible increases of viewership.
On the market in the newscast.
It's not unusual to see viewership increases of 30, 60, and even 100% or more over the year going to time period.
Not all these years and stick around the summer rides in the quarter crisis Abates.
The stylish the value of our local news franchise to our loyal viewers as well as large groups of younger consumers, who really watch list of his previously that's not all going to disappear once people were trying to walk in school.
Our digital usage also experienced huge gains recently, we had 4.1 billion page views across all platforms between January April 2020.
Hey, 24% increase over the same period last year.
The year over year increases were significant January February before the cobot 19 crisis, but they really soared in March we pay the argument page views hitting 1.26 billion a 45% increase over previous I've said, just a January 2020.
In March we had 191 million users and nearly 600 million sessions figures that were around 60% of higher than our previous record set again just this past January.
Our news whether no chichi apps also set records for use in March.
YOD sales a news archer or television stations responded the public health and economic challenges by using their time and resources in March and April to help support local food banks some relief organizations.
These efforts run the gamut of telethon just you on air at all of my fund raisers to be equal concert should other events lasting for one hour to a few weeks.
Humbled to report that their collective efforts help.
He is roughly $12.8 million and just a couple of months.
All these efforts are always the right thing to do for local communities.
Supporting local businesses charities and viewers is always a smart long term investment for the future.
We're optimistic at a country has now started to turn the corner on this public health crisis with that I turn the call to Kevin.
Thank you Pat.
We're very proud of the tremendous community service stations have provided during the crisis, Pat just really.
You know much where employees most of whom are not only essential to us but are also essential to keeping their communities informed protected and prepared for the future.
If we want to spend a few minutes highlighting how we as a company and as an employer of about 8000 individuals can handle the crisis so far.
Early on we adopted mandatory work from home protocols for all employees, who could safely do so.
Centrally ended business travel ban non essential visitors and oppose new health screening protocol for those entering our location.
We announced we did not anticipate that we will need to furloughed employees layoff employees reduced hourly or salary compensation levels.
Paid time off health care other benefits or suspend delay ever do his contributions to the employees for one case.
You got to tough quarantine requirements, where appropriate as well as physical distancing rules for employees within work spaces and out in the field.
<unk>, a new benefit that ensures continued paper salaried hourly full time in an hourly.
Part time employees, who cannot work due to the corner virus pit at Tele health and telemedicine option.
Health benefit caps and wait certain insurance charters and fees, we provided thermometers pay snacks and lots and lots of hand sanitizers for location.
Thankfully our effort to now turned toward working with each station in office individually to identify the physical and other changes that they want me to make in order to begin transitioning some employees back to work at that location.
Hopeful that some of our facilities will begin to bring back a portion of the remote workers starting as soon as June 1st others to fall in the weeks thereafter.
It may be long and complicated wrote back to some version of normal. We are however, comfortable the gray television proactively took the steps necessary to protect our employees keep them focused on doing great work and ensure that this company we paint the loyalty of our employees they have provided to us.
Turning now to retransmission.
We're very close to concluding renewals with two very large anti PD.
The public health crisis did not impact the outcome of those negotiations.
Hi, just simply the timing.
We're pleased to say these these negotiations like all of our negotiations have been conducted quietly.
Respectfully in good faith by all parties.
In the fourth quarter, we will begin when you want negotiations covering most of my roughly 500 and Bpd partners.
I look forward to our next month Retrans renewals, we can again demonstrate the value of our leading group of television stations on cable and satellite platform.
In terms of subs. It is too early for us know how the macro situation has impacted our subscriber count.
On the one hand, we are concerned or the economic contraction in the office sportsmen negatively impact subscription levels.
On the other hand, we know that viewers are tuning into local TV station that remarkable rate.
For the programming in information, we offer AMA class competition for the attention and for disposable income it seems reasonable to assume that the pay TV bundle will be more popular in this environment not less popular.
As usual, we will have a better handle on subscriber counts when we receive actual sub reports for the current period in the next two quarters.
Turning to political advertising revenue in our release. This morning, you saw that we maintained our full year 2020, political advertising guide of $250 million to $275 million.
Quite simply we believe that nothing has occurred in the last two months to shake willingness of political donors to donate towards anything occurred if we do see interested potential voters in this year's election.
The country, we believe that interest in this year's election.
Is it will be higher than we could have anticipated earlier this year.
The relevant issue set for many voters has changed and that changes how candidate stack up.
Letters or more aware than ever who the governor's mayors and senators are and just how much they're political lighter leaders can impact their daily life.
All of this means a political advertisers will likely have a larger pool of both likely voters in a persuadable voters and we would have anticipated earlier this year.
Because broadcast television is by far the best medium for persuading voters and getting out the vote.
I'm very bullish on political AD revenue this year.
Moreover, social dispensing.
Could be with us until the vaccine is widely deployed.
In that case campaigns will not be able to rely on them. Many traditional ways of reaching voters and getting attention such as political rally door to door canvassing and working the crowd to county fares and sporting event.
Television advertising should therefore be even more dispensable for these candidates and campaigns.
Actually want to win in 2020.
To be sure the pacing of political advertising will be bit different than anticipated.
Political AD buying slowed for a few obvious reasons.
We see plenty of times, including significant recent activity in numerous markets to get into political candidates parties campaigns and Super Pacs will make up for last time and the remaining month could probably even greater share of political AD revenue materializing in the fourth quarter than in recent years. Thank you for your time I now turn the call the Jim Ryan.
Thank you Kevin.
Good morning, everyone.
[noise] are.
Earnings release in the 10-Q that will be filed a little later today provide a great deal of information.
You'll also note that starting with today's release, we're no longer presenting results on a combined historical basis, because the acquisitions and dispositions that occurred late in 2019 were individually and collectively immaterial. So we are moving forward and reporting on an as reported basis.
Given the dramatic events. The began in March we are pleased with our Q1 results is Hilton mentioned earlier, while revenue was a little lighter than we had wanted.
Fences were also lower allowing for solid EBITDA delivery.
Our L.A. Q, a leverage ratio net of the 296 million a cash on hand was 4.23 times.
As expected sequentially declining from the December ratio of 4.35 times.
During Q2, we increased our cash on hand by 84 million.
So with the 296 million of cash on hand, plus an undrawn revolver of 200 million, we're in a very strong liquidity position.
Moreover, at this time, we do not expect that we will we'd I'm sorry at this time, we do expect that we will continue to generate significant amounts of free cash during each quarter of 2020 and for the full year of 2020.
Given our strong liquidity position free cash generation relatively low leverage and no debt maturities until 2024. We believe we are in a very good position, whether the global pandemic, we're all experiencing and emerge just as we are today is one of the strongest local broadcast company.
He's in the country.
As mentioned earlier, given all the uncertainty around cobot 19, we have withdrawn our previous full year guidance and are not issuing formal guidance for Q2.
However, we remain bullish on the 2020 political as Kevin just mentioned with our expectation of 250 to 275 million.
That said I know all do you want to know about more in Q2 and as with our peers. We are certainly are experiencing significant declines in core AD sale revenue in Q2, and our visibility is understandably very limited.
We are cautiously optimistic that is the state's lift stay at home restrictions the court AD environment will begin to improve.
As of today again cautioning that the situation is fluid and our visibility is very limited we believe that core AD revenue for Q2 will decline at least 33%, but with each month of the quarter, appearing to so showed sequential improvement.
We estimate that our political AD revenue retransmission revenue in other broadcast revenue in Q2 will increase over the prior year.
With these forecasts corporate revenue would comprise about 44% of total net revenues in Q2.
And retransmission when it did it shouldn't the political about 48% in total which is also about the same amount as the retransmission revenue.
To be clear again. These figures about Q2 are based on current forecast and our system. We do not regard internal forecasts. His formal guidance. We realize however, everyone is youve or some kind of predictions and whether and how Q2 will unfold. So we're providing a renter forecast as a potential date.
The point, but not as formal guidance.
Nevertheless, we're cautiously optimistic about the direction of the core revenue forecast if they hold for our Q2 revenue would be down about 30%, 3% year over year, which is not as severe as many observers have predicted naturally will do all weekend to Medicaid mitigate those declines to close work with our average.
Ties in clients.
We are encouraged by the determination by most a better determinations.
Most of the states in which we operate the conditions permit the relaxation or termination of stay at home waters.
As of Tomorrow, roughly 80%, 85% of our stations will be operated in states that have opened up the balance of our stations operate in states that will lift their orders by June 1st we do not have any stations operating and states. They currently have orders in effect past June 1st.
We currently anticipate that our Q2 broadcast and corporate expenses well, we'll be in the general range as we have reported for Q1.
<unk> expenses for production companies in Q2 will aggregate in a single millions of dollars, reflecting in part the seasonality of those businesses.
A few key liquidity items to update you on.
Our current forecast for full year cash interest is 175 million versus our previous forecast of 194 million.
Reflecting the significant decline in lie bore over the last few months.
Our capital expenditures currently are estimated at 60 million versus our previous forecast of 80 million and our cash taxes are currently estimated at 65 million versus the previous estimate of 80 million.
Provided an aggregate savings that 50, more 54 million in cash.
I'll turn the call back to Hilton. Thank you.
Thank you Jim.
Our company like virtually every other business in the world right now has been subject to the stored shocks to the last few months.
So during the extent of state sidewalk films in the limitations on everyday life.
It seems many people questioned our ability to keep our heads above water well.
Done an awful lot better than that.
Our stations, we establish the importance of local broadcast television stations when I first quarter results demonstrated.
The ongoing importance of owning high quality local institutions and operating a lean company.
We have no doubt that the country will fully reopened business will determine lives will turn say more comfortable and familiar pays sometime during the course of this year.
Well, it all and well beyond.
We remain convinced a gray television's best days are ahead.
Operator at this time, we ask that you open the line for questions.
Thank you at this time, we will be conducting our question and answer session in order to ask this question the assets.
Sorry, then there number one on your telephone keypad. Your first question comes from the line of Kyle Evans.
Hi, Your line is open.
Thanks for taking my questions.
I know this is not guide, but you gave the numbers really quickly and I just want a bouncing back off.
Give them again, but what I heard you say was.
As a percent of total revenue for two core 44.
And Retrans 48 is that right.
Correct.
Just wanted to make sure.
And I'm looking at them.
Net retrans margins and I'm kind of looking back at the C.H.B. for prior years and.
I know, it's hard to do right now, but any any thoughts on where.
Net retrans mortgage will go.
Yeah.
And I know you could just say lower [laughter] I'm looking for a little bit more than that.
You are correctly said repeatedly that we thought the margins were will will decline overtime.
You can do the math on the margin in Q1, and you can see that to some extent, although that is we had that heatedly for well over a year or more we've expected debt.
Our reflecting the.
The increases in the reverse comp.
Going forward.
Got it and again, our key has always been to focus on the net dollars into maximize the net dollars and not worry about a percentage point.
Got it maybe some commentary.
You are seeing between local versus national and.
Regional.
Differences that are jumping out.
I don't see a big difference in local versus national local is a little bit better by you know.
Anywhere from five to maybe 10 points on a percentage basis, depending on the month.
In so the whole quarters in that there's not a huge difference there.
State by state.
I really anything that jumps out he had she is we as mentioned in the opening remarks, certainly we are in some well patch states isn't that they're taking it a little bit harder than others.
But no other than that I wouldn't say, there's any tremendous pattern.
Okay. Lastly, I think I think Kevin said that he expects me.
In the fourth quarter as a percent of total versus prior cycle I missed the reasoning behind that and then as a follow on to that is there any concern that when these political dollars get here that lower sell through rates and lower minimum rates.
The pricing impact.
The past thanks.
Hi, this there is a potential for more back weighted into fourth quarter I think it's in part because obviously with current conditions. Several primaries have slid or it will be our sense is that it's going to be more traditional campaign season.
We are seeing a in Bob can speak to this a little bit too we are seeing nice bateyes already coming in for.
The the fall campaign season.
As far as the rates go we think that demand is gonna be so heavy that it's it's <unk>.
It's not going to make a difference on rate remember all saw some money.
He is pure supply and demand in if there is.
A significant amount of political revenue coming in that we expect we only have a finite supply even though is the pricing will be you know it'll be it the pricing will go up accordingly, regardless of where the base businesses.
Great. Thank you.
Yes.
Uh huh.
Even with.
With Wells Fargo Stephens Your line is open.
Thanks, Jim So you haven't drawn on the credit facility and sounds like there'll be free cash flow positive each quarter.
So is your expectation that you're walking the top that facility at all right. Now can you highlight it didnt really so just trying to think after all the cash savings on what you feel like your need is for it and if you did have to use. It can you just remind us of any covenant requirements that you might have or any conversations you're having with a with weathers yeah.
Oh, Okay, as we look out obviously.
As we said visibility is limited, but as we look out kind of the.
A base case, we see no need whatsoever to draw on the revolver.
We are going to continue to monitor that but I don't see the sense of drawing cashed out onto the balance sheet that I don't think I'm going to need.
As we model various downside cases.
Again, we can't envision a case, where.
We would probably need to draw the revolver.
[music].
There is one maintenance test associated with the revolver. It's a first lien test on an l. eight basis. The current covenant is 4.5 times.
It that steps down the 4.25 times on January 1st and when we ran the calculation yet.
We ended the quarter, we were at a 1.82.
So I don't see any issue with the maintenance covenant, even if we were to draw the revolver and we don't even think we're going to need to draw the revolver. So we're again, we're in a very good position.
From a liquidity standpoint.
Great and then Hilton I have one for you and I'm sorry to put you on the spot here a little bit take has said it is engaged with M&A discussions with four parties you can give us a little bit of an outlook for M&A for the industry I think there's a perception out there that gray is less amenable to the approaches because it's a controlled company. So again.
Sorry to put you on the spot but was just wondering if you could just comment on a on that industry team at all thank you.
Well with regard to industry M&A Stephen I.
Candidly I think from Grace standpoint, we continue to plan on.
Trying to grow the company through that process.
Whether or not.
I'm really large transactions would even be desirable and a in an environment like we're in right now is an open question.
But they're all and wall or I think perhaps accelerate.
Some of the issues that have risen in the last couple of months.
A lot of operations for a lot of singles and doubles to come up and so I expect us to continue to grow with M&A.
With regard to great being a controlled company or at least.
The family, having a large acquisition.
With it.
Our company is not for sale, what I have made very clear.
On many different.
Calls.
We are open to many different structures that will continue to grow the company.
And add to shareholder value.
Across the board.
Hmm, there's nothing in there.
That is going to applaud that.
You know, we're going to let it.
Lose it stability because I think that's an essential quality of a company is to have the stability to carry forward them and bus more than quarter to quarter to invest or belong Tom.
And I've had.
The blessing and of course being with this company since we had one TV station.
And had taken it to the pink sheets too.
You mentioned more exciting change you know.
You know a little below sort of two decade period of time.
And we hope to continue that pattern, we think beyond just TV stations. There are other alternatives and other venues for growth, but as you just look with regard to the TV station portfolio.
There are so many different things that we have that can lead to growth.
As they begin to get rolled out we'll do that is.
You guys see 3.0, whether it is our digital footprint, if you listen to Pat's comments.
We're getting 4.1 billion that's.
I think that our ability to monetize that continue to grow that is remarkable or other assets with regard to the production companies while.
You know sports is shutdown.
George will return.
And I hope sooner rather than a later.
And those businesses will be returning goods.
Good returns to our company and good grows to a company as well.
So we think we have all avenues of growth open to gray.
And in no way does that put me in a hotspot I've said the same thing.
Four quarters in quarters in years and years.
Great Great answer thank you.
Thank you.
<unk>.
Yes.
Okay.
Hi, Thanks, guys couple from me.
Just going back to the new clients that I think Pat talked about written in March and April seems like a pretty big number under the circumstances for sure.
Can you give some color on how those were sourced tend to what extent they'll be aren't going clients that separately you talk to the cost savings that didn't include headcounts or furloughs can you talk about where you're finding the savings than it is there a run rate for us to think about going forward.
Yes, so I can.
John It's Pat I can I can take that question on the.
The new clients.
The you know it is a big number and we were proud of it I would tell you that it's in line with.
Yes, [laughter] non pandemic time, so so that's a good thing.
There were.
A lot of.
Sort of different types of do advertisers, we actually had a fair number of.
Churches, and but other sort of spiritual group should reach out and want to air messages of hope and.
Player like that type of thing.
It actually added up to what is a pretty significant number then we had a lot of sort of home improvement new on the proof Clos lot of people are said to help.
You know felt like they wanted to do those honeydew jobs. It that the button offer whilst we saw some of that.
We saw some well auto dealers and hadn't but on TV for long time, Ed. So will we keep those clients either that's certainly our hope.
We think we'll have a good chances of keeping a lot of them and for the second I think your second question I'll turn it over to.
I guess.
Jim or Kevin you want to heal Alan.
Yeah, as far as expense reductions or the expenses coming in under.
Under guidance.
Combination of a couple of things.
Well, why we certainly weren't furloughing or lane anybody off a Q1 or Q2.
You know there was to spin because of the circumstances virtually no new hiring so that was part of it we generally.
Forecast heavy a in expenses Q1, thinking we're going to come out of the box a little faster with our plans for the year and that tends to not happen as quickly as far as operational tempo goes.
Oh the other one other piece of it was we had some.
Favorable a turns on our accounts receivable allowance for bad debts at the ended the year, who is higher than we would have liked we've seen it.
We worked hard on that early part of the quarter January and February and we were able to take down our reserves accordingly.
There was some some of the favorable difference as well as the produced the results you're seeing this morning.
Right. Thanks, maybe one big picture and also obviously wants the wants to pin that my Kid.
We mentioned earlier I mean, you know travels nonexistent entertainment is non existant for all intents and purposes.
You know some things like that.
You know not huge dollars, but it does you know every little bit adds up.
Okay, maybe one quick follow up you know big picture, how are you guys thinking about.
Longer term at subscriber attrition as it relates to Retrans no theres an acceleration from here does that change the negotiating dynamic between gray and the distributors networks would it be better if actually all parties were just less aggressive.
Uh huh.
John I don't know the direction of the sub counts as I said <unk> call.
I think.
We have.
I think our negotiations.
Over the last couple of months are exactly the way. They were last few years in the way that we the breast or at least the foreseeable future, which is we have it.
Steve and aggressive you have the value of our stations and the other side.
To their benefit and trying to negotiate though well as possible.
The way, it's kind of always been known we have conversations in good faith about what we bring to the table in our viewership and.
Relative to.
Prime and relative to everything else on the dial and we come up with the.
Terms that are mutually beneficial I don't know how this necessarily.
Impacts other than yeah, we'll be making much stronger points out our dominance on rating.
He goes station I don't really know that that and I don't know.
Quarterly answer the questions I'm not sure really how to answer the main thrust, which is with happy to South I don't they don't know we won't know for sometime.
Alright, thank you.
Let me can I just add one thing Mrs. Hilton just sort of this liberal wanting to go sort of dark cloud.
Cooling of ours has slowed over our industry and the whole country.
I think that it is validated the the business strategy of gray seeking to acquire the and continue to grow went into that Stan.
Highest quality local television broadcasting companies and.
In the country.
And poor.
When the time period, when industries and businesses are simply shut down I mean close their doors for us to pick up 700, new clients. The first month and 800, new clients in the next that it never done on our airwaves before I think that proves the strength of our dominance in those local markets and then.
Uh huh.
The <unk> the the.
The starting numbers increased viewership and then should go back to Pat's comment it's gone from 32, all hundred percent increases and all of those.
Different categories.
I get that augurs, well I think that with regard to retransmission consent.
Beers should being.
And I think it may be grade that needs to lead. This charge you know a different calculation the based upon.
Our market share versus just being a national silly because these kinds of numbers in this kind of crude.
I think is absolutely outstanding I could not thank god.
Better validation of the company that we have built than what we had been able to lay out and so I just want to re point that out to you because there is a silver lining for our company and then for our industry as well.
So I'm bullish about the future.
Your next question comes from a line of Jim Goss with Barrington Research Nexgen. Your line is open.
Thanks, and helping this night or go in line with what you're saying that I've wondered with the.
Increased viewership is at the onset of the academic.
But you didn't get it to take advantage of it so much because of the reduce ed demand and pricing I know, you'll have a reversal of that trend as the economy's open up.
Because we're probably lose some of the viewership said lumpy home, but maybe you will have an opportunity to get some of the AD demand to the extent.
Some of the local advertisers are able to open up and have that the funds available to spend how do you see that dynamic working working out in terms of like the pace of the recovery and the shape of that recover.
I think when.
I believe and I'll, let anyone else that's on here put throwing opinions on it.
Hi.
I had been through you know.
Third really dramatic.
Advertising recession that I've been through personally.
One thing that always happens is the strongest station.
The fastest recovery.
I think so what we have done here has proven.
Our numbers to reviewing community.
And then the people that turn on television right and especially with regard to local lags.
I think it's going to give us a very good position.
As as we go forward because no auto automobile advertising.
Well they still have a lot of stuff that they've got to get moved up there off there Walter you know.
Showrooms with regard to legal financial everything and I think all going to come back.
Good place that can actually moved their products and that's our TV stations.
So I think will help us with regard to pricing I think it will help us with regard to demand.
And I think that because we didnt.
[noise] retreat owning.
In the space. This is.
This disgusting thing we're going through.
Yeah, we've doubled down and triple down we invested.
Added to our Nols, we put in late night newscasts, we were able to do it and then.
And then have an hour anchors.
And all of our markets relate almost immediately into the people that were at home because there were broadcasting from their homes.
So you know over 90 somewhat markets I mean, it's.
There was a connection has been established in the course of this pandemic, but I think is going to augur well for the success of our business in the medium and long term.
I hope I answered the question.
On Wall Street Journal My Soapbox.
No I was also wondering though partly.
To the advertisers who pulled back for various reasons.
Come back into position and the interest in placing those ads and paying higher prices or do you think though some of your markets has been damage. So happy harder to get some of those dollars back.
I do not think we could've been damaged one iota I phone that.
When people come back and we've seen some of this on our own board of directors Chief financial officers of how to use furniture serves on our board border drunk yesterday.
They have gotten fish C Corps there.
I'm sure, it's an excess of 100.
Stores back open and where they are in our markets, they're trying to advertise with the people that can get the eyeballs and that's gonna be us and I think that we have better data to sell in our account executives will have a better cells ability to make that Dutch across the board.
So I think we like the question.
Okay, and maybe one other things maybe for Jim.
Great.
That's true run a tight ship in every way shape and form that one of the sanctions then coming out [laughter] as the revaluation of physical office space requirements in a you know bus there.
Duration of the people going work remotely or greater extent is there any consideration of dressing.
Or.
Developing any cost savings in that area that that might be sustainable.
I don't think theres going to be any significant cost savings even if it in some circumstances. We we continue to run more dispersed in more remotely.
Simply because we are now when it seems to be actually working it seems to be working relatively well.
But I think the basic costs or whatever we're doing probably still stay about the same.
As mentioned early on and Kevin's remarks, we are just just now beginning to start to think through.
Each of our locations across the country, how we how we transition back some odd to all over some portion of our employees.
Okay.
That's highly dependent on the physical plant, we're dealing with the size of the stats lots of variables there were literally location by location.
We're just now beginning to think start to think through that and what it will mean are there maybe a little bit of cost.
Associated with that if we have to do some certain [laughter] pardon me.
Huh.
Some modifications to buildings to help social distant seen things like that but we right now we don't expect those costs would be.
A significant and we'll as we continue to work through that and as we report.
Our next call a you know we can update everybody on on our progress on that project.
Okay, maybe one last thing Kevin.
There is this sort of environment create any potential for relief in Washington for things like major market.
Measure affiliate Dropless or any other things that you might have had an interesting.
I think it's little too early to tell I and the overarching.
Back that we are a couple of months from me.
Oh election means that it to especially tough push to.
Expect the FCC, we'll be taking any major actions.
Okay. Thanks very much.
Your next question comes from the line at the AD products with benchmark Dan Your line is open.
Thanks, Good morning, and most of the high level stuff's been talked about but maybe Jim I don't know if I can pin you down explicitly on how April core came in and then maybe just further you know just talk about booking trends what gives you that optimism outside of what Hilton talked about or you know we've heard some other companies mentioned.
And maybe an OEM a you know restart once the plants get back up and running if that's contributing to sort of why you think things continue to get better.
And then on on the political side is there any change in sort of the buckets and the way you think that comes in you know at you reaffirmed your guidance and Kevin you gave kind of good overall color but.
Is there any concern that maybe president took a little bit lower just due to the free air time, but the down ballot stuff, which we've heard isn't coming in incredibly happy right now kind of makes up for that or is sort of the general outlook still relatively the same getting unwritten level.
The president has a quarter of a trillion dollars in cash right now.
And more days ahead to raise money and you've seen the articles that president is now a presence campaign is actually placing ads on TV remember there were no ads for President Trump <unk> for Kennedy Trump.
Years ago, Myrsini has today and I think we'll see a lot more.
In part because it was if you had this may be slipping away.
He's running for reelection it's a very different than perhaps is intentions. When you ran four years ago.
And as I've mentioned <unk>.
If we didn't have this cobot crisis, you probably would have done 20 rallies in the last 40 days and that would have garnered a lot of free press.
Instead, he's not doing rallies in the podium and white house is not necessarily helping him right now so I think advertising is gonna be.
Important for them to define biden and to get the vote out so.
Certainly expecting presidential spending from him then nothing has happened it would suggest that it's going to be lighter I think as I said I think this environment suggests that we'll see more spending and.
Oh level, not just not less.
Yes.
So to go to the west and the sequential notice of of Q2, as we said her weight based.
Hey scene.
We think you know, it's looking down at least 33% for the whole quarter.
But we said it was sequentially what appears to be sequential improvement. So you can assume obviously april was down more than 33%.
May is looking better.
And June it as of today is looking like the best month quarter.
So we're we're again cautiously optimistic on that trend line and we'll see how you know where it will lead to encourage you need it looks like it's getting better.
Your next question comes from line as John Kornreich with J K Media. John Your line is open Yeah, Hi, Jim just a human me a bit on Retrans and you can read reiterates some things that you've said already and in the past.
How much is up for renewal this year and win.
Kevin you want to jump in in terms of subs, Yeah, 50 about 56% of decides they are up for renewal this year.
We have one major deal that is up a in March and of March and nowhere tone negotiating the rest of them are up at the end of this year at December 31, more or less.
One major now and.
No regimen with Nvidia Yep, correct and.
Your annualized Retrans in the first quarter was about.
850, 860 is that.
Pretty much the way, it's looking now for the year little bit on the low side, but.
No I think it would be for a full year basis, it would end up being.
I'm, a little bit higher than that because again, Kevin mentioned that there was a deal up at night and of March So obviously.
That doesn't go to win new rate grid, you know he was the first three months of this year, where it to the rates negotiated three years ago. So it would be would that contractors to step up beginning or will be a step up to get retroactive to April 1st So that'll move the number up a little bit over the next nine months, Okay, and what what was unusual in it.
First quarter 213 million.
Oh I don't think there was anything really unusual in first quarter do you expect it all along that your net retrans was gonna be down in the first quarter.
Yeah, I mean I think.
I'd have to go back and see what we said exactly when we guide for Q.
A one but the gross number came in.
City close to the guide in the the <unk> expense number was also pretty much what we thought it would be so I.
So yes, we would have expected in a muted Q1 are you willing to say that net retrans for the years.
Just a very simple will be up.
I get about how much is will be up.
I mean come at a sub skinning or subs gonna be down, 12% or they're going to be down 5%, there will be down and five to seven yeah.
I mean that was rhetorical question I [laughter], John I don't know the direction of the subs and no because half of our contracts are fixed fees, regardless of sub count.
At that impacts than that.
That's why we're not making any guidance and directly in the release or or indirectly.
Okay.
I was surprised that the net retrans was actually down 10% in the first quarter.
And I recall, all the contracts that every network contracts steps up on January 1st and last year was [noise].
Okay into new Rick Records.
And we said repeatedly the 20 was a tough year for us on the Riverside.
Because of the affiliation agreements the renewed a in you know part years in 19. So now we're getting a full 12 month effect as well as a rate increase effective January one. So this was always gonna be for many years. We've said this was always going to be a tough year in reverse for us.
And that cycle could reverse in 21, when you negotiate 56% that carries into next year and yes, Riverside. He has already been settled well there'll be another step up in all those agreements on January one next year too [laughter], but you're right with it and they like leaves that would basically be even to reprice roughly 50 per.
Set of our sub base at the end of this year.
It's a much you know it's a much better picture for gross next year, you know with with that many subs repricing.
Okay I got an easy went for your Jim how are you willing to say revenues will be up.
In the second quarter of 21 versus the second quarter 20.
Second sort of 20.
Yes, I know I'm wanting to back online.
Stick my neck out that probably for that what I think.
I I think that that's a reasonably safe assumption to make at this point in time [laughter].
Thanks for your help I really appreciate it.
Your next question comes from the line of Michael Kupinski with Noble capital Bakken Michael Your line is open.
Thank you I just have a couple of quick questions. I was just wondering do you have a sense of how your stations have or are performing relative to the other stations in your markets and I'm just trying to get a sense of like whether your local states rankings or actions you've taken to reach out to your best clients have had a in your particular market.
Yes.
Maybe Bob you want to take that.
Sure I could do that as much mystery all.
We monitor or competition.
Quite Hamlin as you know the store formats workstations means that we have a lot it never want producing revenue markets and.
And along with political as well.
So we're pretty comfortable.
We're seeing the white shirt <unk> dollars, most of our markets, probably not 100% them, but.
Very cool very close to that secondly, we'll do it also yeah, we do outreach.
Sure biggest clients in our markets would you ever gets involved GSM gets involved.
I've talked a few big clients, so talk to some of that agency owners to some of the biggest added see owners and the political were just this week and so just to take their temperature and so we're pretty for all that want a strong relationships in our local markets and that's why we've been able to I think also get.
New business on either.
There's been a.
A few superstars in that regard throughout the company so.
We're in a good competitive position I would say that.
Okay and then thank you for your comments on you're interested in M&A I was just wondering given the pandemic has your comfort level our debt leverage post this pandemic changed in anyway.
Okay.
Well our leverage you know what the ended the quarter was 4.2 or three.
We had said a in our yearend call back in February we we indicated that we thought we would end up the year somewhere in the threes now obviously, we've we've drawn full year guidance for all the obvious reasons, but at the same time I still think leverage is.
Probably somewhere in the lower fours by the end the year it may be a little bit.
It might might fluctuate a little bit as we move quarter to quarter, but when the political hits in fourth quarter I I think we you know the leverage is somewhere in the lower force.
I think overall in you know where we would be by the ended the year and then thinking ahead to 21, assuming 21 its quote unquote normal.
We'd be we feel pretty good about our leverage range and I think we'd be.
I think they currently are among the lowest it appears space and the you know moving over a period of time moving even lower so I think we've got some flexibility with leverage.
But we also like.
We'd like to ZIP code were in currently in the ZIP codes will be ready to over the next you know now to be under 21, and then it 22.
Gotcha and as you think about acquisitions going forward post the pandemic any thoughts about the high end of your leverage range, what you're willing to go to what you're not willing to go too.
Has that changed.
We've always been a little careful to you you said arbitrary highs and lows.
Certainly before the pandemic I mean, I think the rule of thumb for the industry in the depending on timing of deal size of deals. If you just think about how the peer group is front over the last.
Three four years to be kind another big large deal you might be a little bit over five to maybe five and a half going with the trajectory going into the fourth <unk> threesun.
People have done that and then wash red repeated right like we've done that several times I think going forward, what would be probably a more comfortable range really.
We need to get through the current environment and understand clearly what the what the future environment is if it's pretty much back to normal like Oh, you know 18 19.
And what everybody thought 20 would be before the pit that make it then I think that would lead you to one conclusion, if the post pandemic new more normal is slightly different [noise].
You know than the old normal than NIM, you might end up it a little bit more conservative leverage standpoint, I think right now it's kind of impossible to two to say other than we're very comfortable with where we are.
And where we see ourselves heading over the next 12 18 months.
Great. Thank you very much where that appreciate it.
Gentlemen, your final question comes from the line of Davis Hebert with Wells Fargo Davis Your line is open.
Hi, everyone I was not limit questions to thank you for that answer, but I guess, just one last one thanks for fitting me in here with no much sports I'm. Just curious I think the answer is no vendor and speakers and your agreements with the networks were lower payments and or rebates city Btds.
And as you renegotiate some of these deals you cannot soon to be a conversation. Thank you.
Hi, David It's Kevin the short answer is no remember this network sports agreements.
Our negotiated between the network in their respective affiliate associations and that presented to affiliates.
Commendation too in or non interest to the agreement.
Did you basically have a form agreement for all affiliates in the country would you pay a pro rata share of the total amount negotiated based on female population.
You don't have an individual negotiation or sports.
With with the network when you're doing affiliation image sports deals are separate so I.
I don't anticipate there was no there's no trigger.
Example, with NBC you paint NBC Olympics see every year, even Olympic serving two years, that's the way the payments restructure.
We are going to get Olympics, we got it 2021, but I don't.
C.
Any near term.
Relief, especially since the networks is our understanding is.
Actually required to pay the league.
Regardless of the let's say to play if there are we fundamentally the networks and that will open the conversation, but at this point it seem to do though [laughter] networks are still paying the league for [noise].
Their contracts.
Great. Thank you.
This concludes our question and answer session I would now trying to hold back over to help them how closing remark.
Well, thank you very much operator, and thank everyone for your very insightful questions. Thank you for your time this morning.
It is interesting times that we live then we will come through these.
My personal feeling is we will come through these times a lot faster and I know that this company will emerge from it much stronger than it was going to even began in the strong when we started so thank you for your time, the we'll talk to next quarter.
Hi, its indefinite this concludes todays conference call. Thank you for participating you may now disconnect.
[music].