Q3 2020 Gray Television Inc Earnings Call
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[noise], ladies and gentlemen, thank you for sales.
<unk> earnings call.
All participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please.
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If you require any further assistance. Please press star Zero I was listening on the conference over to your Speaker today Hope you know chairman and CEO. Thank you. Please go ahead.
Thank you Mike Good morning, everyone I'm as Mike mentioned, our operator, I am Hilton Howell the chairman CEO bright television and I want to thank each and every one of you to.
Joining us this this morning for our third quarter once.
When she 20 earnings calls.
As usual on the line with me today are our president and co CEO, Pat flattening, our chief legal and development officer, Kevin laid check.
Chief Financial Officer, Jim Ryan and our Chief operating Officer, Bob Smith.
We will begin this morning with the disclaimer that Kevin will provide no Kevin.
Hi, Thank you Milton and good morning, everyone.
Certain matters discussed in this call may include forward looking statements regarding among other things future operating results.
Those statements are subject to a number of risks and uncertainties.
Actual results in the future could differ from those described in the forward looking statements.
As a result of various important factors.
Such factors have been set forth in the company's most recent reports filed with the FTC been included in todays earnings release.
The company undertakes no obligation to update these forward looking statements gray.
Gray uses its website as a key source of company information the website addresses www Q a wide dot TV.
Included on the call will be discussion of non-GAAP financial measures and in particular broadcast cash flow broadcast cash flow less corporate expenses.
Operating cash flow free cash flow adjusted EBITDA and certain leverage ratios.
Metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in their analysis and valuation of our company included in our earnings release as well as on our website <unk> reconciliations of the non-GAAP financial measures to the GAAP measures reported in our financial statements now return the call to help.
Thank you very much Kevin.
It maybe hard for all of his term member how strong we began.
In 2020 and January and February this year, how much optimism we had at the start of this year.
Now many months into this crazy pandemic Gray television is continuing to recover and recover strongly from in store pull back and economic activity that this country phased in March April and May earlier this year.
In fact in many of our core area.
Areas, well returning to normal historical levels of advertising. Despite the huge displacement of political that has occurred through the course of 2020.
Despite all the challenges at the beginning of the year. Our total revenues are again, increasing by double digits as local audiences, absolutely surge and our content continues toward improved compensation terms. All of this is due in large part.
Due to the extraordinary efforts about the quarters and sellers and producers and other professionals all around the country.
Consistent with this headline we saw in the second quarter of this year, how great business.
Slowed less than anticipated and it recovered faster than expected.
Today's release confirms that the third quarter saw this strong momentum continue.
Simply our results in the third quarter were much better than we would have had expected but.
But they would have done over the summer.
Total revenue for the third quarter was 604 million, an increase of 87 million or 17% from the third quarter to 2019 net.
Net income attributable to common stock holders was $109 million in 14 cents per fully diluted share, which is more than double this amount from the third quarter of 20 might change.
Broadcast cash flow was 271 me.
An increase of 79 million or 41% from the third quarter of 2019.
Our adjusted EBITDA for the third quarter of 2020 was 261 million, an increase of 80 million or 44% from the third quarter of 29 King.
Our core revenue continued its sequential improvement.
From the troughs of April.
Selecting better business conditions at both the national and the local levels.
Big story.
Worse there's.
His political.
Which surpassed our most wildly optimistic models.
We began the year predicting political revenues were taught our all time record from 2018.
234 million.
On a same station basis.
In late February.
We predicted full year political revenues in the range of 250 to perhaps 275 million.
Last month, we publicly increase our estimate.
Our political revenue to be between 275.
And $300 million.
Political somehow manage to.
Got even more momentum soon thereafter.
Now.
As we all Stifel. The just the ongoing election process.
And the results of tuesday's election, it up.
Peers, but our political revenues will significantly exceed $380 million.
And since we know that there is at least one run off election.
In one of our significant states and markets.
Over the next two months.
Our political revenue.
Well in the year are significantly higher.
And may even touch 400 million.
I want to share some interesting statistics with each of you.
Two of these years appear in our investment back and I would like to share that data with you and then also bring you up to date on the data for 2020.
And the last presidential election year in 2016, our total revenue had dropped precipitously, because president Trump did not advertise and.
Hillary advertise but not in the right places.
And so our total revenue was 118 million.
But we still had the highest revenue any operator.
On a per television household basis.
$9.63 per TV household.
In the mid terms in 2018, our political revenue than a record.
It was $234 million.
And a once again industry, leading number but $8.80 per TV household.
For 20, twinning, using 380 million, which we know we will exceed.
Yields an all time record.
Shifting dollars for television household, which we believe will be industry leading.
I also want to remind you that gray television.
Unlike nearly all other affiliate groups does not well, it's political orders through a third party reform.
We instead directly sell to all national and political buyers.
We can operate in this manner because buyers typically cannot reach our markets.
Without finding and by our strong local stations.
We started this direct model at the beginning of 2016 and.
And we have implemented it in every station we purchased since then including including all of those stations acquired from way calm and shores.
This business model has stayed gray and therefore has stayed to you our shareholders overtime.
Over $25 million and Rep commissions.
Just on political revenue alone and 2020.
Our 2020 savings or even higher and you add in the sales commissions on our national non political revenue this year.
In addition to these real savings, we also had stronger relationships with our customers and more efficient order execution.
We believe that this allows us to pick up incremental dollars from agencies when those become available.
In short.
Great ones, a lean should not.
Not just because we don't like bureaucracy.
We want to lean shop, because it works.
For that reason and many others. We remain we remain optimistic about our business over the long term.
Especially in light.
The portfolio the assets, but most importantly, the people that comprise gray television.
Last quarter, we again took advantage of what we believe was a significant mismatch between the value of gray television and the price at which our Companys common stock has traded that.
Oh, we purchasing a further 649000 shares.
Of our common stock before we were blacked out from trading.
During the first nine months of 2020.
We repurchased approximately 4.5 million shares of common stock in the open market at an average price of $13.23 per share including commissions.
Total cost of approximately.
$59 million.
We remain quite frustrated with GTN share price and the multiples of which GTN trades, giving our.
Impressive performance during this difficult year compared to many of our peers.
And the many other non broadcast media companies.
We are taking two steps to try to eliminate this mismatch.
First.
Our board of directors, just authorized a $150 million increase.
For the November 2019 stock repurchase authorization.
Which we had already purchased approximately $80 million in shares of our common stock through.
Through the third quarter.
With this additional board action the company now may repurchase up to 220 million.
Outstanding common stock and a world class a common stock through December 31, 2023.
Second as part of our expanded stock repurchase program.
In addition to typical discretionary stock repurchases and consistent with all FCC requirements.
We intend to enter into a trading plan didn't accordance with the Fccs rule Tenbfive one.
Rules, which will allow grade to execute trades under that will roll or rueful, sorry during periods when it would ordinarily not be permitted to do so.
So it's a tremendously successful new private offering.
We sold $800 million of senior notes do and 2030 with a coupon rate.
Four 4.75% at par.
We are exceptionally excited.
This outcome.
It means that we have replaced not only somewhat near term maturity notes with tenure notes.
At what we believe was a record low rate and the T V broadcast segner sector.
Or a tenure note.
On top of that.
Demand for these notes were so strong that we upside the offering from 550 million to 800 million and still had to turn away.
Huge numbers of orders.
We now have know maturity's prior to 2024, when our term being matures and all remaining that expires in 2026 2027.
2030.
We could not be more pleased with the outcome of this offering and we are grateful for the support and faith of our credit investors you subscribe to the offering and to the teams at Wells Fargo and Jones day manage the offering.
Hi, Kevin and Jim will now add additional color to today's earnings release, there. After I will open the line to any of your questions.
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Thank you Hilton.
And good morning.
Have you ever heard for years. This company is superbly position to benefit from political revenue resulted from our high quality local news operations located in politically important markets. This.
This year has proven that thesis once again.
Political revenues also confirming other critical fact.
When you need to promote your product service candidate or issue.
There is no better and no more efficient medium to reach consumers and the trusted brands safe universally available strong local television station.
Our job and gray and throughout our industry is to continue to demonstrate this fact, two more nonpolitical advertise with the national and local level.
One thing that political and nonpolitical advertises alike recognize that their audience is trust their local news anchors news teams more than any other media and a great. We're fortunate to have both very talented journalists and prestigious recognition of their efforts.
August 24 at the National Association of Broadcasters leadership Foundation selected several of our television stations, there's winters and finalists for this yours Covenant Service to America Awards. The service to America Awards recognize outstanding community service by local broadcasters and selects local radio pardon me and selects local radio and television station.
And one group owner each year for their exemplary service to their communities Grays W. J H G. T V in Panama City, Florida received the service to community award for small market television for its enterprise series remembering Forgotten. In addition, Grays W. N D U in South Bend, Indiana received the service to.
Community Award for media market television for never again prevent bus stop tragedies.
Both of the fire was for awards and a small market television and one of the three finalists for awards in the media market television category, where grace stations.
Moreover, great television itself, one a BLS broadcast ownership Group award for service to the community in honor of the investigative series measure of hate they aired across our stations.
The series of reports by lead investigated release Zurich expose significant flaws in the F. B I is reporting a pay crimes. This.
This investigative reporting led directly to changes in the way the F. B I and law enforcement measure and report hate crimes. We're also privileged to have local stations impressive work highlighted by the radio television Digital News Association recent.
Recently the R. T DNA announcer selected for Grays television local stations as National Edward R. Murrow Award winners for excellence in journalism, the small market television category. Congratulations TWD BJ in Roanoke there'll be CX in Burlington, Vermont, there'll be AFB in Baton Rouge.
And kw, TX in Waco, Texas National boroughs are a very big deal somewhere humbled by the strong showing this year in fact in May of 2020, Archie DNA awarded a combined 49 regional Burroughs for excellence in journalism to 21 of Grey's local television stations.
The news investigated and community focus of our television stations fuelled significant ratings increases in the spring when the pandemic began.
And it helped hold our ratings elevated levels as the years progressed.
We've also seen large increases in already impressive digital traffic, which continues to grow month. After month, we're about to surpass 10 billion yearly pages. This month and we were pacing to finish the year 1 billion more page views than the record we set 2019.
In terms of operations, we are aggressively rolled out live local ott's systems to 50 markets. This year. These systems allow stations to go go live online 24, seven with local news reports in fact it with this system is allowed K plc in Lake Charles Louisiana to continue their coverage during and then the aftermath of hurricane.
Laura We also completed they're all at our premium on across the entire company in the last few months Ah resale agreement with premium.
Already has enabled us to book several million dollars of new OTT AD revenue. This year, we expect that number to grow significantly in 2021.
In 2020, we also took our digital agency services in house by replacing an outside group with a skilled in house team, we reduce our costs by another few million dollars, increasing our digital margins and improving client outcomes September 1st sink back announced the launch view it.
A new free AD supported national streaming service built in partnership with leading local television groups, including Greg.
Seatback aims to be the Netflix of live local and free featuring a wide range of local regional and spent special interest programming produced by leading television stations from across the country.
Along with thousands of view it originals.
Viewers had a strong launch we are excited to see it as quick adoption by consumers as well as other local media companies want to add their local content to the App. In fact gray is such a big believer to sit back and view it that we raised our investment in sync back in August two a sizeable those still minority interest I am also happy to report that our production companies has gone from essentially shut down.
Around the spring to very busy today Rey comes sports has produced many college football games in September and two blows picked up a previous number of games as well as non sport line productions in recent months.
This summer gray invested in bringing a new sport to the U S called World Chase Tag.
WCG combines the dynamic athleticism of Parker with the age old game of tag. The first competition began only in 2016, you're already has built a cult following around the world on September 28th Unbc Sports Group announced that had secured the exclusive use distribution rights for this rapidly growing sport and.
Tober production company Tupelo began filming the first WCG USA competitions of the season at the Roxy right here in Atlanta. The first matches of this year's season actually debut on November 12th on NBC Sports network at 11 PM Eastern.
Through December 23rd when the N B C Sports network plans to error WCG marathon appropriately titled World Chase Tag day in the USA.
I also need to mention swirl films, which is the leading independent television in urban film production Company Swirl returned to live studio production as busy as it's ever been great.
This year increased its investments swirl films, we know we know one it just over 50% of this very impressive company located in the heart of America's New video and film production capital of Atlanta, Georgia.
Has a large and growing book a business now, we'll keep it busy well into next year and with a lockable lack of available studio in sound stages, the Atlanta actually creating the biggest obstacle to execution.
This is a high class problem to have in in this crazier, when we will accept without complaint.
Finally, the entire management team is directly dies the spirit strength of our colleagues in markets that have suffered historic weather events in the last few months.
August Cedar Rapids, and Quad cities were hit with the quickly developing major storm called the duration of the <unk>.
Produced widespread damage to homes businesses and crops well beyond that experienced in the 2008 I will flood.
September and October many of our Louisiana, Mississippi markets were hit with multiple hurricanes and tropical storms.
Many of our employees effected markets experienced significant losses, especially in lake Charles in Biloxi, Thankfully every one of our employees in these markets was personally unharmed.
During these historic weather events or television stations or the impacted markets covered the storm and thereafter mountain wall to wall coverage may have our cruise reported bravely from the field.
Some of our stations had to move their operations to other gray markets just to get their lifesaving reports on the year and on pay television systems and online and.
And these terrible circumstances Grays employees once again rally to serve their local communities first Meanwhile, their colleagues in other markets stepped up to assist their fellow great employees and this time of need with generators tarps food water supplies and cash donations. These experiences while never enjoyable or part of what makes local broadcaster.
Stations, such valuable valued and trusted institutions of their local markets and short.
<unk> reporters sellers producers engineers all of our employees are working hard to ensure that in 2020 Gray continues to grow continues to serve and continues to invest all of which allows us today to continue to turn in solid numbers.
I'll now turn the call over to Kevin.
Good morning, again, and thank you pie.
As most of you know the U S. Supreme Court recently agreed to review your decision on the third circuit Federal Court of Appeals that overturned the SEC very limited relaxation of the local broadcast ownership rules adopted in the summer of 2017.
Great television filed an amicus brief urging according to take the case earlier this year.
Our brief explain how the SEC antiquated ownership rules have actually harmed local communities access to local news sources, which is contrary to the public interest.
We are optimistic that the Supreme Court will confirm the SEC has the legal authority and the binding obligation to actually deregulate antiquated rules precisely as Congress directed the SEC to do way back in the 1996 Telecom Act.
In terms of timing the court will Hulk arguments in early 2021, an issue decision by the end of the term by the end of its term in June of next year.
A favorable ruling would restore the modest rule relaxation enacted in 2017 and represented the first small step to responding to the radical changes at the media market has undergone 1996.
We hope that such a ruling will also facilitate further relaxation of local rules by a new FCC the understands the importance of enabling local broadcasters to compete more fairly with the unregulated Big Tech Giants.
In terms of retransmission today's release reported that are retransmission revenues grew at a faster year over year right.
Prior quarters. This year, specifically retransmission revenues increased 4% in the first quarter of this year on a year over year basis, 9% in the second quarter of this year on a year over year basis and now in the just completed third quarter book, an 11% year over year increase in third quarter retransmission revenue.
These revenues revenue increases are the result of both annual escalators and all of our Mvpds OTT agreement as well as the replacing of a portion of our Mvpds sub base in the first quarter of this year.
Our next set of Mdpv renewals occur in January 2021.
We are now beginning renewal negotiations covering hundreds of mvpds that collectively represent approximately 43% of our total stops next.
Next summer global negotiated agreements with the remaining roughly 23% of our sub base.
We expect that this round of Retrans renewals will again demonstrate the value of our leading to poke local television stations and cable and satellite platforms.
In terms of the sub levels, we reported on our previous call that we anticipate.
Anticipated noticeable sub declines in the first half of the year.
Our assessment was based largely on what all of US we're seeing in a public Mvpds quarterly reports.
Over the past two weeks, we have seen the public mvpds record better than expected sub level and for the most part stabilization theirself counts in the third quarter from the losses at the hide it depend AMIC in the second quarter.
We're very encouraged by these public reports.
We find that the stabilization subscriber levels in the third quarter being recorded is generally consistent with what we are now seeing in the subscriber reports we have received so far this year in the third quarter.
If the trends hope for the rest of the third quarter offer several course, yet to arrive we will need to book some modest positive going adjustments in the fourth quarter, reflecting these stabilized sub levels.
Finally, because this is an election year and have been very few any leading local news stations offered for sale over the last 12 months or so.
<unk> and now largely behind US, we expect some opportunities to arise in the coming months.
We do not have a crystal ball of course, and we therefore cannot predict for you, who what when where how much how big future M&A opportunities maybe.
And as we have done previously we plan to take a close look at any number one or strong number two ranked local television station offered for sale regardless of market size and we will evaluate each that's opportunity with a close eye on our balance sheet and market conditions.
This is not to suggest that we have not been making any strategic investments or moves in recent months.
On the contrary, we probably never been as busy with evaluating and in many cases pursuing strategic opportunities as we have been in 2020.
So far however, each of our completed acquisition or investments has not been materials of the company.
Although I can tell you it often seems to these smaller deals take more time and effort than the big deal is to acquire.
So as Pat mentioned earlier Gray. This year has made strategic investments in premium think back swirl films and royalties tag.
Each of these investments includes the cash purchasing some equity interest as well as a new or expanded operational relationship between the target and gray stations or a great production companies.
We have explored several similar investments this.
This year, yet these for businesses, where the only one so far to offer attractive growth and diversification opportunities for Greg.
We have also entered it and we have also entered into some immaterial television station transactions this year, including the following transactions over the last roughly.
16 weeks.
We had a Cvs affiliation one market we ended a fox affiliation in another market.
We purchased a full power Telemundo Honolulu, where we already on the N B C and C. B S affiliate.
You purchase a full power independent station and Odessa, where were you on the Cvs in CW affiliates we've.
We purchased the non license asset to the N B C acquaint in Columbus, Georgia and began insured services agreement with the licensee.
We entered into an agreement to purchase and CW Me television My network and Telemundo affiliated stations in Lubbock, Texas.
What were you already own the N B C affiliate.
We also reached an agreement to purchase an unlicensed asthma asset of that market sparkly and thereafter begin a shared services agreement with the Fox licensee.
We purchased the N B C and C. B S stations in the tiny market, Juneau, Alaska, which provided us with their 94 local market and our 20th stay capital market.
And we are currently working on a few other immaterial deals none of these transactions will move the needle for great as a whole they deliver meaningful scales stations in these markets.
And that will allow us to better serve those communities viewers and the local businesses.
Thank you for your time and I now turn the call the gym Ryan.
Thank you Kevin Good morning, everyone I think our earnings release in the 10-Q there'll be filed a little later today will provide a great deal of information for all of you. So I'm just going to quickly go over some of the highlights now remind everybody that as of the first quarter. This year all of our reporting has been on and as reported basis because any.
Heck with visions that we've done have been clearly immaterial to the financial results.
We're pleased with the results for Q3.
Our total core was down approximately 14% what and that was within the range we had expected.
We saw sequential improvement during each month of the quarter July core was down 16 August core was down 12% September core was also down 12%, but when you have to begin to consider the significant amount of political with displacement. We began to see in September and September political revenue.
With $71 million just for the month compared to a core revenue total of 85 million. So obviously, we dealt with a lot of political displacement and our total.
Q3, political revenue of $128 million was dramatically higher than we had anticipated from the last earnings call.
To put the Q3 results in perspective remember that in queue to our total core was down 30% with April being down 38 made out 34 in June down 17. So clearly we are seeing improvement from the the the.
The box downloads of the economy in the second quarter.
We increased our cash on hand by $88 million and we ended the quarter with $467 million of cash on the balance sheet, plus and Undrawn revolver of 200 million.
Hilton already commented on our very successful $800 million note offering.
475% 10 year notes do 2030, we were exceptionally pleased with that.
And.
We use the the proceeds for redemption of 2024 notes costs of the transaction and the remaining roughly 250 million.
Of cash is for general corporate purposes, which may include paying down debt or other corporate purposes.
Given our strong liquidity position free cash generation relatively low rule average and absolutely no debt maturities until 2024, we think we are in a very good strong position too.
See the rest of the pandemic through and come out and thrive as the world gets back to normal hopefully as we move through 2021.
Even all the uncertainty around COVID-19, we have withdrawn or full ear previous guidance and are not issuing formal guidance for Q4 2020. It has been an incredible political advertising year and.
Hilgers already indicated that our political range of 380 385 is undoubtedly low at this point.
Especially with a special Senate runoff election in Georgia in.
So we definitely going to finish the year and up here with a very strong political number.
I also know that you want to know more about Q4. So again, just commenting on trends, we're seeing now and that using this as formal guidance.
Total core revenue for Q4, we expected to see pine again in the 10% to 15% range, but as we saw in Q2 and Q3 total total core appears to be sequentially, improving and each month is Q4.
October.
Core is decreasing and the low 20% range because of massive political displacement November is very encouraging we're seeing mid single digit declines in core at the present time December core declines are showing high single too low double digit declines, but we believe there.
As an opportunity for momentum to pick up in December now that we are mostly past the election cycle.
And.
Late year buys begin to come in.
The month of October alone saw significant political displacement of core revenue, we had $175 million of political revenue just in the month of October compared to a core total core revenue number of $82 million, which would explain why core in October was down in the 20% range.
When we started this year, we expected approximately $235 million political revenue and where I can see that by at.
At least $150 million that hundred $50 million of additional political we picked up this year impossible and perhaps a little more means that our political upside nearly offsets are anticipated total decline in core revenue in 2020.
Again, the figures I just gave you.
Our current forecasts and current pay seems it is not to be interpreted as formal guidance, but we are trying to be as transparent as we possibly can with some relatively limited visibility.
R. Q for broadcast expenses will increase over Q3 19 in the low to mid single digit percentage range and that reflects almost exclusively eight at our approximate $20 million increase in reverse compensation.
Year over year.
Our core expect our corporate expenses in queue for are anticipated to approximate R. Q3 levels that we reported today and our production expense.
Connection companies expenses will aggregate in the mid teens to upper teens millions given the seasonality of that business and they also given US Pat commented that those businesses are coming back and getting increasingly busier.
As we've cycled through the worst of the Lockdowns in the second quarter.
A couple of quick.
Liquidity updates or original cash interest estimate was $194 million.
We're updating that now it's 176 million.
We started the year with the Capex.
Estimate of $80 million, we reduced it as we went through the second quarter trying to be prudent now that the year is finishing much stronger than we anticipated, we're bringing our capex estimate for the year back to 80 million.
And the cash taxes.
We now expect to be around $80 million this year again.
Reflecting much our our expectations of much improved revenue performance from where we were viewing things in the second quarter.
Currently we anticipate any of the year with between 675 and $725 million of cash on hand, and depending where final political numbers go that that range could obviously increase a little bit.
It's too soon to make predictions for 2021, let alone issue any guidance still it's our expectation at this point that we will see core revenue continue to improve during 2021 as we left the declines in 2020 brought on by the pandemic in the political displacement our production companies will return a returning to was.
Full sway to producing sports events and finally between as Kevin said between January one in mid year 2001. We will also have the have repriced almost all of our retrans contracts, representing about 66% of our sub base. So we would expect gross and net retrans the show significant growth.
In 2021, as we as we read price, 66% of our subs and with that I'll turn the call back to Hilton.
Well thank you Jim.
2020 is thrown in credible.
President and challenges that all of us personally.
Professionally.
Nevertheless, our performance this year, clearly validates grays decades long commitment to acquiring investing in and locally operating the strongest local television stations throughout the country now in 94 markets.
Because these types of television stations.
[noise] declined less and recovered faster.
And most other types of media companies.
We are confident that great television continues to have an exceptionally bright future ahead.
The broadcast business.
For all that you heard.
Remains an outstanding business.
Absent and opportunities for further significant M&A over the next year.
Deleveraging remains the first four two for gray.
With capital returns in the form of stock box.
Beginning immediately.
Next importing.
On our February earnings call before the pandemic.
I told you that our board believes that we can continue to deleverage the balance sheet and pursue buybacks wallet. The same re instituting a quarterly dividend.
Our board.
Has not yet reached the final decision to zoom the dividend just yet.
But I believe that it will soon reached that decision.
As noted in that February call. However.
The board considers reinstalling the dividend, what our total leverage ratio.
As defined in our senior credit facilities falls below.
4.0 times on a trailing a quarter basis.
After netting total cash home phone.
Well there are very strong political revenue this year fully compensates for the pandemic impact on our core revenue remains to be seen.
Regardless went on that leverage falls below four times.
Board will consider where the market conditions, then permit us to return to Bang are poorly dividends and at what level, we would initiate that dividend.
So operator at this time, we ask that you open up the line for questions.
Yeah.
As a reminder to ask a question you want me to press Star one on your telephone.
Withdraw your question cross the pound or hash key please standby, but we compiled acuity roster.
Your first question comes from Stephen can't help from Wells Fargo. Please go ahead.
Thanks that $15 per household an article is is pretty outstanding I was wondering if you could help us think about maybe the split between local versus presidential as well as the split between candidate versus pack are Super pack on that and you know you mentioned the runoff in Georgia I was wondering if you're also seeing any.
<unk> expressions of interest from Pacs are super packs.
As some of the votes stuff goes to court and whether we could see a continued sort of long tail. If the election process runs out a little longer and how that factored into your updated political guidance.
And then maybe just on net Retrans I mean, you talked about the really good visibility you have 2021 on the gross side as well as some of the expenses based on the queue for guidance. So I know that the timing for net retrans sets up this year to be I think down a little bit. So I was just wondering if you have any expectations at this point for 2021.
Let me, let me just begun with political and then I'll ask that Bob Smith kind of comment on it because he also has a lot of color dot things too but interesting.
We mentioned 380, we know it's gonna be north of that we don't know exactly how high north it will eventually be we know that we have a run off between rubber warnock on the Democratic side and Senator Kelly Lafleur on the Republican side.
Uhm that will begun.
Has begun and will culminate on February the fifth.
I believe.
But we will see significant spending there on both sides.
Obviously, depending upon the counts and what states, but we still don't know exactly where the.
And it should turn out.
Is the balance of the Senate is in place.
The amount of money.
It could be exponential.
Georgia, unless I am unfamiliar with what has happened during the course of this conversation.
Not yet released its final numbers as.
As I began this call. This morning are incumbent Senator.
David Purdue had north of 60%.
And his opponent.
John all soft.
Was in 47% area.
If for some reason.
Senator produce numbers.
Should drop below 50% when final numbers are out.
In Georgia, we will have to run off.
<unk>.
And we have the dominant station.
And every market and the highest market share every market.
In Georgia, except Atlanta, and make them, we were in Augusta, where in Savannah, where <unk>, we're in Thomasville Tallahassee.
We're in Albany, Georgia, we're in Columbus, Georgia.
So gray is a company.
Will benefit from any one off the remainder of the year and then the first five years of 2021.
While I don't Wanna steal his thunder.
Our investment in Maine has been.
Has turned out to be a prolific one.
We actually sold probably our largest value 30 seconds spot.
This past Sunday during the Patriots game and the six figures.
Which was a presidential add money.
But the the Senate spending.
Bending at the house.
Obviously, the presidential spending and then after the passing of Senator Ruth Bader Ginsburg.
The issue money spending has been extraordinary in every case every help.
Bob do you want to follow up on the political with anything you have to say there.
Sure he'll be happy to.
The you asked a little bit about the breakdown is how it went.
With gray and approximately the presidential race accounted for about 23% of our overall revenue the house nationally about 16% in the Senate is Hilton just mentioned was extraordinary that's roughly a little over 40% of our horrible revenue.
And that's where some of the biggest.
Numbers were on good terms of race an issue money. We're in those Senate races. There's still describe what happened that made you saw similar situations in Wisconsin, and Iowa as well.
In Alaska for that matter, so really record rates and certain programming areas record cost per points and.
Really just robust.
And a lot of markets and a lot of states.
Yeah. Since you had two questions. Stephen that was are there any further follow up some political blurry turn it over to Kevin identity most of the.
Maybe I should real quickly he did ask about Georgia and I wanted to say that we are seeing dollars already in Georgia for the January 5th runoff.
That's great you have Georgia on my mind, and I would love to hear from Kevin on on the Retrans side. Thanks.
Thank you yeah.
Hi, Stephen So obviously are closest gonna be.
You have a large step up next year, it's hard for us to get.
We have no guidance on what that is because we.
Some of the conversation. So it was my nose I've yet to begin some have and obviously.
It's hard to predict where those are gonna close.
On the reverse we know what C. B S and Fox. These are gonna go to cause of course, that's perfect stays we do not know what the.
The other two retreads, there's a reverse comp will be because those are of course percentages. So the better we do and retrans the better a b C. N N. B C will do is that what it's I don't know the top I can't tell you what <unk>, but the and I don't know what the gross revenue as I couldn't possibly tell you within that revenue or that'd be tran.
Ah number would be or the reverse comparable we gotta have you gotta have an input to the formula which is the grocery trends uhm. So we're.
We have a lot of work ahead of us next.
Two months or so and.
After the first of the year, we will have a bunch of that behind US we'll have a much better feel right now it's it would just be guessing <unk>, we're trying to provide.
Some forecast that'd have something anchored in reality, but if I were to gossip with a little it'd be just bought a gas and I don't think that's very helpful.
That sounds good thanks, Kevin.
Thank you Stephen next question.
Your next question comes from Damn kernels from the benchmark. Please go ahead.
Dan Carnose your line is open.
Hey, Thanks, good morning can.
Just just maybe on core your.
You guys are are much better end of the range on kind of at least initial queue for pacings even.
Taking into account the absolutely ludicrous amount of political you booked in October so I'm just wondering.
If you guys have any thoughts as to you know.
You mentioned, a little bit your prepared remarks, but why you guys are kind of outperforming the peer group.
Outside of the election.
Hi, Thank you for a combo.
Go ahead and hold them.
Go ahead you.
No I think it speaks to what we said many times past, it's the it's the quality of our portfolio and the strength of our local stations.
They are the the first go to buy in all of those markets and I think that's helping us during the recovery process from the pandemic.
We are we were very pleased with what we're seeing so far on a pacing basis for November being only down low single digits and December is not surprising being down a little bit down more right now but December often comes you get you get farther in in November and early December and then you'll get the.
Hopefully a flurry of last minute buys into the year, which will will bring December up a little bit so.
Again, I think it's back to the strength of the news strength of the overall.
Station in the community and that's that's.
That's.
What gives us the edge.
I would I would also add dance paddle Platt.
Implemented a.
Invest it implemented.
A very strong training program.
First stations that we've been.
Running now for.
North of 18 months.
I really think that's having an impact.
We're farming are sellers with the best tools out there.
Clothing premium and I think that also contributes to the numbers.
Got it that's helpful and is there any just generic category color you could give us adjourn just around sort of what's what's improving.
Yeah, I'd say across the board.
Everything is improving.
On a relative scale, we saw each month of September you've got to kind of throw on October you definitely have to throw up with the political.
That's the story for September and October but.
July August November.
In the categories all of them appear to be improving sequentially auto is is still down but.
Much less so than.
The depths of the second quarter.
And going in the right direction again, each month getting better.
We've seen strength in financial.
Medical has been strong lately coming back.
Legal you bundle all of those three categories together under abroad bandwidth services and actually that's been holding up pretty well this year and again showing.
Improvement.
As we've gone month after month, so we're encouraged there.
Again, it's October you Gotta, just ignore but in November it looks like home improvement.
Services.
Are all supermarket markets, even are all showing positive trends right now and actually showing in the green and again automotive.
That have been down I'd have to go back and look but I think in April or May was down.
30, 40%.
If it's now November looking like it's.
Somewhere in the Los double digits range. That's I think that's dramatic improvement and as we've talked before is is supplies and inventories.
Continue to catch up.
We think that's going to continue to improve where.
Where there is inventory dealers seem to be selling the cars pretty well in some places. They still are are saying that they would like to see a little more inventory catch up to them, but I think overall, it's a it's an encouraging trend.
Got it that's that's really helpful color and then maybe just one last one if I can sneak one in for Hilton I mean, you were incredibly comprehensive with your.
Overview on shareholder returns and how you are kind of your use of capital I know historically, you said things like we need to get bigger or I need to know that you've said it absent a transformative M&A transaction you will be aggressive with returning cash to shareholders I'm just carry.
Yes.
You have sort of almost unprecedented flexibility thankfully because of all of us political with really strong balance sheet.
How much does that says pending SEC court case play into how much powder you need to potentially keep dry versus just things that you think could come on the market and even that notwithstanding.
I guess to borrow a different phrase do you think you can still walk and chew gum at the same time here.
Then well first let me start up the last yes can we walk and chew gum at the same time, you Dadgum straight we can.
One of the reasons that you only here so far right now about what we're doing is we still remain in a period in the broadcast business of all.
Almost unknown.
Lack of clarity, we don't yet know who will be appointing the F. C C.
And there is a I think a fundamental difference between the two parties.
Approach to regulation.
And that has an impact on all M&A.
We have.
I had never had a situation where the third circuit it should've happened decades ago, where.
Where the third circuit has been challenged by the United States Supreme Court, and how 'bout will have an effect.
<unk>.
Ownership, whether that is just purely within a local individual market or if it should extend something beyond the cap is.
I don't know and so I was literally playing on election night.
That we would just have.
An answer one way or another and answer it.
We don't yet and so.
When when uncertainty raise it makes it difficult to.
<unk> to make a clear correct decision.
There are all kinds of issues, whether or not uhm discount remains in place.
Whether or not.
9% cap.
Names in place, whether or not sort of the prohibition <unk> multiple stations in certain markets based upon no different sizes.
All of that so.
So the one thing that we do know that is certain is that in the midst of the pandemic.
Dash.
Is king.
And so what I think we have demonstrated to all of you in the Wall Street.
Is that we have a business that we have built up over in excess of 30 years, just a couple of stations.
Two two and a half billion dollar company.
Uhm that generates massive amounts of free cashflow.
We have spent a significant amount of money this year.
Under 100, but approaching 100 million unstoppably purchases.
Uhm, we have done and Kevin ticked off some of those.
But.
And the up or hundreds of modems.
<unk> small deals and non television station acquisitions that'll all upgraded.
Across the board and yet we're going to be in a position.
Close the year out with advice close to three quarters of a billion dollars in cash.
We are instituting.
As we mentioned.
A stock purchase program.
Two frogs, one based upon the five one.
And then from time to time, when we are not in a blackout period.
Discretionary bypass.
And Ah Board approved all of that yesterday.
And so we're going to continue to look.
I will say in almost surely for myself personally.
I still believe it is in the best interest of our shareholders.
To continue to grow this company and there is.
Ample room for great to do so.
And we are interested in accretive.
Acquisitions to continue to grow.
Our portfolio.
Even in the face of Covid.
And and so that is still.
A preeminent bull.
We will see what is what is available and what is not.
But we do think we can do both of those but we're not gonna, let our stock price.
Sit down here at these prices. This is ridiculous I mean, not I mean, I played about millions of dollars of stock in the twenties.
And personally.
And.
We think we're just grossly undervalued.
And I think that we have on like a numbers crew not just our words, but our numbers.
That we've got one of the finest portfolios.
Done in television stations.
That are being led locally.
And are dominated more markets and the free cash flow stolen from them.
It's just fantastic it's just.
Ridiculously large amounts of money.
This is a great place to be a great place to be that I cover that at all.
Yeah, I'd say, so Hilton that was a very comprehensive answer to that and I really appreciate your insight there thanks very much.
You bet.
Your next question comes from Kyle Evans from Stevens.
Hi, Thanks for taking my questions Congrats on political and like some of that cash balance at the end of the year.
Kevin I think he said that the C. B S was unknown experience on the reverse side for Retrans I thought you guys had a renewal with C. B S. In 2021, and my wrong on that one.
C B S news at the end of 2021.
And you know you.
You guys give the cleanest look at gross.
Worse and not Retrans in in there for you should expect a noxious questions like the one I'm about to ask what what do you think the right.
Steady state and that margin is for that revenue second.
And and if you don't want it.
Answer it ask it a different way should start with a fan or a three.
I mean, all citizens are retrans is because our local stations get more viewership than any other channel and their market. So you know not to be too club about it but we think retrans should predominantly b R. A.
Compensation for our local investments are local programming our local team.
But you were balance lots of issues for me negotiate now reconciliation agreements Ah since everybody else.
So we.
<unk> to say for years, we're not focused on the margins, we're focusing how much how many dollars. We can put in the bank and we're going to continue to do that so I'm not gonna get locked into.
Have a line that says great things that recent market should be extra y.
<unk> it depends on everything else is going into a negotiation how much time do we get for local commercials. How much motion are we doing what else are we getting.
What else will be giving and so it it's a lot of stuff in the margin is just it's looking at one side of the <unk> one part of the elephant.
It's a pretty big Elephant Thursday February.
<unk>.
Affiliate and Alright network relationship is very deep at many levels.
We way all of those things.
Both sides of those negotiations again the rate is just one part of that.
Conversation.
Would you say that the blended average relationship for the Big four is the same as it was a few years ago better or worse.
More contentious not worse.
We haven't had a network negotiate renewal negotiation on awhile, So I can't really comment on more things maybe today versus.
Where they were when we got to them a couple of years ago and our next negotiation.
C. B S. At the end of next year, So I think I need to ask somebody else okay.
Jim really appreciate the monthly granular detail encore I'm glad to hear on it was improving what's your early read on.
Gambling that's category.
Bob why don't you comment on that.
Yeah, it's actually very promising and certainly a bird.
To become an emerging category.
Right now I think there's legalized gambling in 19 states and six more passed it. So you don't have the country will have legalized gambling and what started out as a couple of accounts spending some money and some of our markets where it's legal his is now up to about four or five different gambling firms that.
We expect all beyond the ear and first quarter and so we're very optimistic seeing what the girls in that category throughout the year. We think it's gonna be just that much better beginning at first quarter and throughout all of 21, it it's probably without a doubt one of the more exciting.
Categories for US currently just because it's it's it's moving very quickly and what kind of dollars. They spend are pretty significant in our markets.
Great. Thanks for taking my questions.
Your next question comes from Jim Goss from Barrington Ri six.
Thanks [noise].
Hilton you just provided.
Some indication about still wanting to go to grow your franchise.
And given that you're pretty well covered in your existing traditional agree types of territory's if you needed to move outside of your traditional markets. What parameters are characteristics would qualify as candidates for consideration.
If you grow a little bigger what what sort of things would be you'll be looking for.
Well I mean.
<unk> you can look at the world that's available out there.
Great actually spurts.
Not that I know that our reputation has to be on the.
I've been married to smaller markets and and dominant position windows effective markets with the right column acquisition, we puts up a.
A lot a much larger markets.
You know, they're doing exceptionally well.
So you know we will be working cool individual <unk> symbols and double so there's a bigger transactions both available and the world is getting smaller I mean, we're we're on the Baskerville and you know a typical nine and.
<unk> in terms of consolidation there's not.
There's not many players that are left in terms of people, who are just emotionally operators and desk, mostly acquirers gray.
<unk> one of the few that Ramon starving I'm ready.
To do so.
So we will work for portfolios that compliment hours.
In terms of quality.
<unk> Giaga so I.
I don't know.
Noticed.
But we fine, but thank you very much liked to have.
Submit that some exposure to.
To this notes that we do business Sun.
So if you look at our portfolio on a geographic doses grew.
Gray will earn in a typical stove.
Not just on the market, we will dogs are more of a whole state.
You can run some stroke just to start with some album Wood every single market.
Some of them we have <unk>.
Per cent of the markets and then nobody missing too.
That gives us tremendous amount newsgathering could possible.
I can't tell you the number of stoves, but gray hosted the local dubose for the senatorial auditors.
And so you know all of those that are going to be necessary.
You know we have grown dramatically.
In terms of new affiliates with Telemundo for the Hispanic market and we will continue to work to grow that.
Particularly those will there's a significant Spanish speaking population.
And so.
So you can look through the world.
And some pretty pretty well, so what kind of things that we would be interested in.
And.
So, we'll we'll just gonna wait and see what opportunities present themselves.
Okay. That's a very helpful. Actually one other thing then do you have any U T. S. C. Three that Oh update in terms of how many stations you plan to have some impact on over the near term and what type of applications you might be thinking about.
Yeah, It's Pat I can pitch in on that one so.
In general the rollout of Apoc throughput owes is starting in larger markets and a rug.
So I would anticipate and I don't have hard numbers on this one I would say.
That we would have.
You know somewhere.
Hi single digit stations number of stations.
Rolled out over the next 18 months.
We're actually doing an experiment, where we're outfitting a stick in.
I see with ATSG three porno, so we could do some of around it.
Experimentation and testing on three point O and then again I think in terms of the applications for three point out revenue producing applications I mean.
It will take some time for those to develop.
But I think it's largely going to be focused around targeted advertising.
Getting data and video and automobiles.
And perhaps a few a few other.
You know approaches to Canada, we made out of thought about yet.
Alright, Thank you very much.
As a reminder to ask a question press Star one. The next question comes from Alan's World from New capital.
Thank you for taking the question, Kevin I know the elections not decided but if it is a democratic administration and a Democratic F. C. C. How would you expect that to to change the rules for the broadcast industry.
I think you're talking about ownership rules.
I guess owner on your ownership rules.
Yeah, So I get so.
I guess I don't see too much changing uhm.
The.
Assisi adopted I wanted to a market rule.
In 1940 before television was.
<unk>.
Since 1940 S U C relaxed and allowed to television stations to be owned and 1999 and the Bill Clinton's term.
And in 2017 pile out some additional consolidation two O. Two T V stations can be Oh and.
Midsize markets those are the only two FCC ownership.
Deregulation instead of COVID-19, Florida and the TV space.
And.
In terms of how do you tighten uhm that I mean, it's almost like asking how do you fell off before.
I don't I don't see that the I don't and what's he hasn't so you're gonna tell US can't you can only one zero stations per market cap 71.
Uhm.
With the exception of large markets under rules again and I've been around since 99, so I I.
I'm hard pressed to figure out how do you make it worse the national ownership cap was again with a rider Congress told the SMC. This at the cat by 39% hard to see the essence, who over in that camp.
On this told them make a 39%.
And then we have the wildcard or with the Supreme Court's Gonna do.
Again, the Supreme Court is only looking at night with the local rule. So that's newspaper television cross-ownership, which does not in fact.
And whether you can own T television stations in that size markets. Those are the questions for this <unk> not looking at the national ownership happened to uhm discount, but it's certainly likely that they'll have they can come up with language and that influences those those items, but I just I just I don't see a package.
I see to lower the national cat or lower the number station shipping on the local market from one to zero.
In our markets and large markets I don't see any.
Just don't see them, saying that you can't on to television stations and the largest markets when you've got 12 different owners for example.
Sorry.
Thank the one you're ready that there might be some push around on his chair maybe joint sales agreements the last.
C C under Democratic initiation moved to make joint sales appointments attributable for honors for purposes, which effectively makes an illegal gray.
<unk> has no joint sales agreements so that's not an issue for us.
Is there a bottom line.
Is there a chance I'm, sorry, there's a chance that the 39% cap could actually be raised.
And there's always a chance.
There's always a chance right I mean.
At some point folks me realize the broadcasters uhm compete against companies that have no regulation Facebook typically takes as much money out of a local market is number one or number two T V station in Google typically it takes them more money out of a local market. Then every television station combined to say that those guys can do whatever they want but no regulation them over.
Trying to compete and being stuck with these horrific ownership regulations, maybe that will finally resonate with some folks.
We've seen what happens let me continue to apply these these outdated coolest a little markets local news is expensive and that's why you typically have only one company and a small market that can afford it produce local news, it's just not enough revenue to go around so.
Is it possible that let me see.
An FCC under a Democratic administration that recognizes that in and and relax you should cap I think it's possible I I, just I I'm not optimistic it seems that a router it from Washington is.
Regulate everybody not necessarily.
Yeah.
Look regulations on off so we can better compete it seems that the reaction pence.
Recipe seems to be put more regulation, some big tack as opposed to take regulations off of broadcasters. So we can better compete with the guys with no regulations.
But again this is all surmises as to what May happen, we don't even know who the F. C C.
Chair manner chairwoman will be.
Or <unk>.
The fifth commission would be so it is.
Ramos asking if they can arrange that may 17th.
I don't really know how to predict that.
Okay. Thank you.
And your next question comes from account Supinski from novel capital markets.
Thank you and thanks for taking the question as a follow up to that Kevin I know that there's some thought about regulation on the big Tech monopolies and so forth and there is some big Tech companies have said that they planned to allocate money too well for content.
And I know that there is some discussions with other media companies about the value of that do you <unk> have you had any discussions with some of the big Tech companies about providing content for for cash payments and what do you think that that is an opportunity at some point for for gray.
Well I need to be clear our content is on every big <unk> Big Tech platform right and we've been.
Facebook users Facebook stories about maybe three years ago. It was great television suitcase studying how local media can get onto Facebook stories.
We've been alive on fire absence 2017, we've been on Roku since 2014.
<unk> so.
So it's.
It's not like we're not out there and and.
In Tech Tech platforms, and and I also run all the O T T platforms.
Content.
It can be found on Twitter Facebook your name it.
In terms of compensation those conversations seem to be.
To say fairly limited.
Okay, Alright, that's that's all I have thank you.
Yeah sure.
That was our last question at this time I will turn the call back over to the presenters.
Well, thank you everyone for joining us.
For the third quarter earnings religious school look forward. This one will bring up all of when it's Gonna result.
In 2021.
And so thank you and we will talk to you soon.
Alright. This concludes today's conference call. Thank you for participating you may now disconnect.
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