Q4 2020 Gray Television Inc Earnings Call

February 25, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Gray television fourth quarter 2020 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question.

During this time simply press Star then the number one on your telephone keypad to withdraw your question press the pound key.

Now I'll turn the call over to Hilton Howell Executive Chairman and CEO to begin.

Good morning, Thank you operator.

She mentioned I am hoping how old the chairman and CEO of Gray television.

All of you for joining our fourth quarter and year end 2020 earnings call on the line with me as usual are president and co CEO, Pat will flattening, our chief legal and development Officer, Kevin Latex, our Chief Financial Officer, Jim Ryan and our Chief operating Officer, Bob Smith.

We will begin this morning with a disclaimer that Kevin will provide Kevin.

Thank you Hilton and good morning, everyone.

Certain matters discussed on this call may include forward looking statements regarding among other things.

Future operating results and the impact of the novel Coronavirus disease with COVID-19 on our future operating results.

Those statements are subject to a number of risks and uncertainties actual results from future could differ from those expressed or implied in any forward looking statements.

As a result of various important factors.

More information about such factors please refer.

To our company's most recent reports filed with the SEC, including our most recent annual report on form 10-K that will be filed today. The company undertakes no obligation to update these forward looking statements.

Gray uses its website as a key source of company information the website address is www Gray television.

We also will post an updated investor deck to the website within the next two weeks.

Included on this call will be a discussion on non-GAAP financial measures and in particular broadcast cash flow broadcast cash flow less corporate.

Corporate expenses operating cash flow free cash flow adjusts.

Adjusted EBITDA on certain leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the matrix.

The public on their analysis and valuation of our company.

Put it in our earnings release as well as on our website a reconciliation of non-GAAP financial measures to the GAAP measures reported in our financial statements now I will turn the call to Hilton.

Thank you Kevin.

Today, we have lots of very good news to report on to discuss.

As we approach the one year anniversary of the beginning.

<unk>.

Most of them for 12 months in my life so far.

I'm extremely gratified that gray television today.

Moving to report record fourth quarter results.

Hey, Fantastic acquisition.

Continuing momentum in our business.

And strong guidance for the year ahead.

Our people and our company overcame unprecedented challenges over the past year.

Last name despite the challenges we predicted that we would remain cash flow positive each quarter on 2020.

We met the challenge.

When the merger ruling on our revolver north of accepted any government financial support.

We adopted work from home and report from home and even produced from home policies very quickly in March.

We imposed no pay cuts.

No furloughs.

No layoffs.

No benefit cuts.

And no benefit delays.

In fact.

<unk> expanded the scope as it goes.

Lynch, who were exposed to coronavirus.

Our stations expanded their coverage of the Corona virus.

Her gains and fears dorms.

Non even known as <unk>, which I had never heard of it before in my life.

And widespread social unrest.

In fact in December.

We pay bonuses to each.

And every full time employee and recognition of their hard work during these hard times.

In response, our stations and production companies team.

<unk> efforts to support local residents to fundraisers were.

Actual concerts school on television virtual food drives and other projects that collectively was literally tens of millions of dollars for the local communities.

And in fact.

Atlas flattening will shortly discuss one such effort that we will be launching this weekend.

Our managers and account executives.

Throughout the company put new emphasis on sales training, new business development and new ways.

Selling well.

We also found an executed innovative ways to reduce expenses from top to bottom.

Gray television runs lean and mean and no one in this company would have it any other way.

The results of Grays collective efforts on.

Now.

Very apparent.

With today's earnings release.

For the full year, our revenues broadcast cash flow and operating cash flow exceeded even our pandemic expectations.

From one year ago.

We greatly improved our balance sheet through a successful bond offering and robust stock buybacks.

We continued to invest in our stations and even acquired a few new stations to boot.

And at the end of the year, we intensively dived into our planned acquisition of Quincy media, which as you know.

<unk> on the first of this month.

Yeah.

Today's earnings release announces record results, which have made us very happy.

Even as 2020 and did not through a pandemic a recession multiple hurricanes directors severe storms and social unrest our way.

Our total revenue for the fourth quarter was $792 million.

An increase of $213 million or 37% from the fourth quarter of 2019.

Net income attributable to common stockholders was $211 million or $2.22 per fully diluted share, which is on an amazing 174% increase from the fourth quarter of <unk>.

2019.

Broadcast cash flow was $424 million, an increase of 195 million or 85% from the fourth quarter of 2019.

Our adjusted EBITDA for the fourth quarter of 2020.

404 million, an increase of 189 million or 88% from the fourth quarter of 2019.

Our total core revenue continued its sequential improvement from the troughs of April reflecting better business conditions at the national and local levels.

We ended the year with a total leverage ratio as defined in our senior credit facility of three point non five times on a trailing eight quarter basis, netting our total cash balance of $773 million and giving effect to all transaction related expenses.

During the fourth quarter of 2020, we repurchased roughly 973000 shares of our common stock at an average price of $16 44 per share including commissions.

For all of 2020.

We repurchased in the open market five 5 million shares at an average price.

It's a $13 and change for.

For $75 million.

The big stories of the fourth quarter, where the refinancing that we addressed on our prior earnings call in November.

And political advertising revenue, which we also addressed on that call yet continued robustly even after election day.

And while those topics certainly deserve attention.

I want to end my opening remarks addressing two items that occurred after the close of the fourth quarter.

First we announced our acquisition of Quincy media on February the first.

Upon closing that transaction Gray television Malone stations, serving 100 into television markets.

Collectively reached 25 four.

4% of U S television households.

Leaving us ample room for continued mergers and acquisitions.

These 102 markets include the number one ranked television station.

77 markets in the first or second highest ranked stations in 93 markets.

Those are impressive statistics at any time and all the more so because it was only a few years ago that gray on stations in just 30 markets.

And at that time, our leverage was more than two times higher than it is now.

In our press release announcing our planned Quincy acquisition.

I expressed how honored and humbled, we ought to be selected by Quincy shareholders to acquire their terrific company.

Those words were heartfelt.

Quincy is a very fine company.

With tremendous television stations and tremendous people.

And it has been led for many years.

True Giants and our business.

Ralph Oakley.

The only regret that we have from the only regret that I have in this transaction.

Is that the broadcast industry will lose ralph's immense contributions to <unk>.

To the B pack.

To the affiliate boards.

Countless other important endeavors.

Work on broadcasting and for the local residents and businesses.

Who rely on our stations.

We pledge.

To operate the bond stations that we acquired from Quincy and tribute to Ralphs Wi fall on contributions.

Local service.

Local broadcast stations.

Local journalists journalism and love of community.

And country.

The final Big news is the announcement, we made this morning concerning our dividend.

As you know from our prior earnings calls Gray.

<unk> Board of directors has been intending to formally consider when market conditions permit us to return to paying quarterly dividends once our total leverage ratio as defined in our senior credit facility falls below four times.

As you saw in our release this morning, our net leverage ratio to fall below four times at December 31, 2020.

Accordingly at yesterday's quarterly board meeting after careful discussion.

The directors decided to restart graves regularly quarterly cash dividend for our equity shareholders at eight cents per share or 32 cents a year.

Those of you who follow US closely may remember that gray consistently paid a quarterly dividend for decades prior to the growth session.

At that time line, you electrify suspended the dividend to preserve our capital new capital.

Thereafter, we placed the highest pro are saying on reducing leverage.

Growing the company and more recently, we're zooming robust stock buybacks.

Executing on these priorities has been the singular goal of the management team.

It really all of the past 12 years.

And now today Gray.

Day is several times larger than it was in 2008 with a balance sheet and work force and portfolio that have never been stronger.

The board surveyed this remarkable progress and determined that now is the appropriate time to resume paying a quarterly dividend.

This historic move is therefore, another confirmation that gray has successfully executed the long term recovery and growth plans that we put in place from the darkest hours of the great recession.

We are especially grateful to our equity and credit investors and bankers for their support of our efforts.

With the dividend now returning gross capital allocation priorities will be slightly altered.

Our priorities remain low.

First to reduce our leverage over time.

Next to return capital to shareholders explicitly through opportunistic stock buybacks and our regularly quarterly dividend.

We also anticipate that the future will present opportunities.

Low gray strategically.

And as I mentioned earlier we.

We have ample room under the ownership cap.

So that we will as always evaluate acquisition opportunities.

In terms of our long term growth goals and capital allocation policies.

In short today is a good day gray.

We are gray proud of our business our stations our communities.

And most importantly of our people.

And as you will hear next.

We look forward to a very strong year ahead.

At this time I'll turn the call over to Pat Kevin and Jim to provide additional color of today's earnings release thereafter, we will open up the line to questions for all of us.

And through our CFO, Bob Smith as usual joins us today to help answer questions in his area.

So Pat.

Thank you Hilton.

Gray was blessed throughout 2020 with political advertising revenue at historic levels at a very wide field of competitive races across our footprint.

Geographical location plus high quality highly rated local news operations were once again, the one two punch that is unbeatable.

Recall that our earnings call one year ago, we predicted full year political advertising revenues from the range of $250 million to $275 million.

Later, we increased our estimate to be between $2 $75 million to $300 million.

When we reported third quarter results in early November we raised our full year political advertising revenue guide to at least 380 million. Then in late December we announced will be a broadcast over 400 million of political ads.

That point in the year with more orders on the books and anticipated to arrive thereafter today, we are thrilled to announce that our political advertising revenue crossed 245 million net in the fourth quarter alone, which exceeded our political revenue in all of 2016.

As well as exceeding what was nearly our expectation for all of 2020 of them on time.

He and our political advertising revenue was $430 million for full year 2020.

I'd like to put that number in perspective, if I can.

In 2016 on a combined historical basis through year end gray generated $9.63 of political advertising revenue per television household. Despite the lack of historical presidential spending levels and sort of lackluster statewide races.

18 on a combined historical basis through year end and with no presidential races at all persons from race at all.

<unk> generated $8.80 of political advertising revenue per television household in.

In 2020 that figure was $17 57 per television household or 82% more per household.

And in 2016.

It's worth noting two of the greatest political advertising revenue per television household was the highest across all publicly traded television group owners $16 18 in 2020.

Our combined local and national broadcast revenue, excluding political which we called total core revenue was also relatively strong in 2020, despite the pandemic recession and political displacement.

And each of our 2020 earnings calls we told you that while April seemed to be the very worst month for our business. We saw continued improvements in core retrans in political advertising revenue as the year what's on.

The fourth quarter of 2020 continued this trend EBIT amidst all of the political advertising on.

Our total core revenue decreased approximately 8% compared to the fourth quarter of 2019.

Significant much of this decline can be attributed to historically strong political displacement and a large number of our markets.

In October total core revenue declined 22% from the prior year again, largely impacted by political displacement.

In fact, our political advertising revenue in October of 179 million dwarfed, our total core revenue in October of $81 million.

In November with political advertising revenue, mostly disappearing outside of Georgia total core revenue declined less than 1% from the prior year in December with a resurgence in political advertising in Georgia.

Total core declined just 2% from the prior year.

Overall, the momentum that began in may with the first states reopening.

<unk> essentially throughout the year, there and thereby gradually diminishing the effects of the pandemic on our business.

As we've mentioned previously when our core business slipped in the spring as Lockdowns affected many of our clients and nearly all of our viewers. We use the new kind of on time to refocus on sales training developing new price your clients and prospecting for new business.

Back to basics exercises helped us post lowered core declines in faster recoveries, because many of our peers largely due to new business development.

We also believe that these investments in 2020 will continue to benefit benefit us from 2021 would be on.

It's worth highlighting one particular category has seen very strong growth right now that we believe will continue for some time.

2019, we starting to see new advertisers are growing budgets for gambling, which historically included state real lotteries as well as casinos with the increasingly utilization of sports betting on a state by state basis. This category grew to a few million dollars in 2020, but most of the other categories were down for the year the.

The business has only accelerated in the last few months, our pacings, which are not necessarily a great predictor for future revenue are still very encouraging because the gambling categories now pointing to a more than 250% increase over 2020.

If anything near that holds gambler would be the fastest growing core had kind of category for us for this year.

We are hopeful about a return to more normal operating levels on our core business in 2021.

So far our patients have begun the year in a good spot and we are increasingly optimistic that we will push back towards 2019 core levels in the second quarter of this year.

We asked me to highlight the continued growth and momentum in our digital business, we've often mentioned that our digital usage.

Our digital usage break in your records and that continued throughout last year. The 2020 now closed we can reported over the course of the entire year, our total online sessions rose 24% over 2019.

Our users rose, 37% and our page views on video abuse, each rose 13% over the prior year.

Year ago, we announced on this earnings call. The great digital sites had just surpassed 100 million monthly unique viewers for the very first time in December of 2019.

In 2020, we do pass that achievement.

Average day 123 million users across all platforms each month.

Many of you recall, the gray joined a number of other broadcasters and placing individual local stories live events and local news live streaming on St backs, New App called view, it which is best thought of as the Netflix for live local on free contracts.

For example, <unk> in Cedar Rapids streamed it's Friday night Lights, 2020 High school football coverage on viewing.

To review it with series reached online viewers and 108 dnas with one game alone, reaching 53 D. Ma's today, you would host content from a total of 164 local broadcast stations, including most gray stations.

The average U user visits the App 18 times per month and spent 30 minutes per session.

Finally, I'd just like to Echo Hilton's comments about the remarkable work being done in all of our markets by our dedicated staff.

The extraordinary weather events of last week presented yet another very difficult chaz.

Challenge for news coverage not only in Texas, but many other states are journalists and other team members did a heroic work again and making sure that our markets had up to the minute news on critical information.

In addition to providing extensive extensive coverage of the weather emergencies, we've teamed up with the Grand old Opry and circle network to leverage this saturday's live operating broadcast to help raise money and awareness of food insecurity.

The op rebroadcast aware at nine P M. Eastern on virtually every gray station and I'm happy to report also on grams K PRC in Houston and additional stations owned by the good people at Hearst Nexstar and Meredith.

All proceeds will benefit feeding America, a network of 200 food banks on more than 60000 food pantries in nearly every community across our country.

Now I'll turn the call to Kevin.

Good morning again.

To state the obvious we are thrilled.

Real to have reached an agreement to acquire Quincy media.

The stations that will join Gray television are precisely the type of stronger local institutions that we are consistently strive to add to our portfolio.

In this case, the new markets, our archive hand in glove fit for growth geographic footprint.

And even more perfect compass.

On the culture of empowering local managers on local professionals to make the content sales.

A ratio on scrapping decisions that they believed that suit their individual local neat.

As disclosed in our Quincy press really.

We are divesting the Quincy television stations and all fixed market in which growth great in Quincy already on a full power network affiliated television station.

Wells Fargo <unk> Hormel divestiture process on the same day that we announced the <unk> acquisition.

Yeah.

Well first round bids are not due until tomorrow. We are very encouraged at the level of interest and the divestiture stations that we have seen so far.

We are also gratified that.

That's a cool on interested parties is wider and more diverse than we've experienced in prior divestiture processes.

We expect the process will continue to move quickly with final contract executed announced and submitted to the FCC and Doj in April.

Another major recent development is our successful.

Completion of the negotiation and renewal of our largest batch of retransmission consent agreements.

This batch of contract that expire between late 2020 on January of this year.

Covers a bit over 40% of our paid N V. P D subscriber base through individual contracts with more than 480 different.

M B P D.

That includes one of them to DBS companies several of the largest cable operators and nearly all of our small and mid sized cable operators.

We successfully concluded retransmission negotiations without interruption to the public.

All of those going to be PD other than two relatively small calico overbuilding, representing less than 1%.

Our total Mvpds that day.

Today, only one bankrupt telco operator has refused to continue carrying gray stations and that impacts about two tenths of 1% of our Mvpds sub base.

And an even smaller portion of our total paid subscriber universe.

Consequently, we once again began and quietly on at another significant renewal cycle with a success ratio at close to 100%.

Looking ahead, we have one postpone negotiation.

It will occur later this spring that will re price retroactively to January one.

This summer and at year end, we will have a small number of negotiations with Mvpds, who cover about 25% of our paid Mvpds Hebei.

Then in the middle of 2022, well, we won't renew another small number of negotiations with mvpds to cover around 20% of our paid mvpds.

Good day.

For the first quarter of 2021, we anticipate retransmission revenue will increase by about 15% over the first quarter of 2020.

Retransmission revenue should increase in the next quarters. This year by large amount as a result of the renewal repricing that will occur over the next few months.

To put these estimates in perspective, I'll remind you that our retransmission revenue increased 4% in the first quarter of 2020 on a year over year basis, and 9% in the second quarter last year.

11% year over year on both the third and fourth quarters of 2020.

For the full year 2020, our retransmission revenue increased nearly 9%.

These revenue increases are the result of both annual escalators in all of our agreements as well as repricing of a portion of our Mvpds fan base in the first quarter of last year significant repricing on April one of last year.

Finally, we have now received subscriber reported from Mvpds and OTT providers covering nearly all of the three first three quarters of 2020 and a good portion of the fourth quarter of 2020.

With more comprehensive data in hand today than we have had available to us any point last year. We can now reported that our total sub counts for 2020 held up much better than anticipated on the darkest day from last summer.

As an aside when we discuss total sub counts we are only looking at subscribers for whom we are paid a fee because they received a big four affiliated channel from Gray.

In particular with the benefit of a nearly comprehensive set of N V. P D and more complete set of OTT subscriber reports for 2020, we saw a relatively significant increases and decreases at many of the operators throughout the year.

Overall, however, grays total subscriber count.

For the full year of 2020 declined only one 1% from the total subscriber count on.

On the backup at the total subscriber count in the fourth quarter of 2020 declined only one 1% from total subscriber count in the fourth quarter of 2019.

Given all the challenges the 'twenty 'twenty two it everyone. We're certainly pleased the more comprehensive data reveals our total subscriber count declined by essentially a small amount.

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

Thank you, Kevin and good morning, everyone.

In addition to this morning's release.

We'll be filing our 10-K later today, which will have a great deal of additional information for you.

Also as a quick reminder, remember that beginning in the first quarter of 2020, all of our reporting isn't on an as reported basis, because we considered the acquisitions and dispositions of late 2019 and during 2020 as being immaterial.

One final quick comment about political yes, Q4 was all about the $245 million of political but I just wanted to point out that that $245 million actually exceeded the 235 million combined historical political from 2018.

Hey, Phil mentioned earlier, our leverage ratio at the end of the quarter was $3 95, net in $773 million of cash on hand, and we stated with the announcement of the Quincy transaction at the first of the month.

At the end of this year.

With the Quincy transaction Hasnt been closed we expect our leverage ratio pro forma for Quincy to be approximately four times.

During fourth quarter, we increased our cash by $306 million.

And as of today.

We have an undrawn $300 million revolver was so we're in a very strong liquidity position.

At this time, we expect we will continue to generate significant amounts of free cash during each quarter of 'twenty one.

As of today, we have approximately $95 4 million shares outstanding in 2020, we generated full year free cash of $559 million were approximately $5 86 per share with the record setting political revenue as we look to 2021 on non political year we.

Currently anticipate total year free cash will range between $300 million and 325 billion that is excluding any additional free cash generated by Quincy Quincy acquisition post closing that transaction.

So to sum it up our average 19 'twenty free cash flow was about $5 458 9 million.

We anticipate that our average 2021 free cash flow, excluding Quincy ex acquisition, we'll be in a range of approximately $430 million to $442 million.

Given our strong liquidity position free cash generation and low leverage and no debt maturities until 2024. We believe we are in a very good position to thrive and emerge from the effects of the patent that make just as we are today one of the strongest local broadcast companies in the country.

You'll also see in the release that we've we've returned a formal guidance for Q1.

We're pleased with what we're seeing so far at the start of the year. Our total core revenue, we're guiding to an increase of.

Flat to up approximately 2% retransmission revenue growing 15% to 16% and given as Kevin mentioned, the timing of some additional renewals a little bit later this year that quarter over quarter cadence will pick up a little bit in the back part of the year.

Total broadcasting revenue again, we're guiding to be flat to up approximately 2% in the production companies will generate about $13 million in Q1.

In revenue operating expenses, our broadcast expenses will be increasing 8% to 9% that's about a $29 million increase.

And of that increased $24 million is represented by increasing reverse comp to the networks.

Production company expenses would be about $16 million corporate expenses, including transaction costs related to Quincy, we're anticipating to be about $20 million.

To add a little more color on the core revenue in Q1 January was down low single digits.

I'd be wary is up.

Low single digits and currently March is appearing to be up low to mid single digits. So we're very encouraged by the cadence month over month of continuing sequential improvement of core revenue.

Couple of quick liquidity items for full year 2021, we anticipate cash interest will approximate $180 million, our capital expenditures of about $80 million and cash taxes will be in there.

Low 20 millions.

At that I will turn the call back to Hilton.

Thank you very much.

Let's begin with any questions that anyone may have.

Thank you as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad.

Your question has been answered and you wish to remove yourself from the queue press the pound key.

First question comes from the line of Kyle Evans of Stephens.

Hey, Thanks, Jimmy ripped through free cash flow numbers, if you don't mind.

Could you just slowly tick factor them again, and if you didn't give one for Quincy can you help us think about that.

I have some follow ups.

So the.

2020 free cash was 559 million net.

That translates to $5 86 per share.

With $95 4 million shares outstanding as of today.

We believe our free.

Free cash ex.

Excluding Quincy this year in 'twenty, one will range somewhere between $300 million and $325 million.

So a blended two year 19, 'twenty free cash flow average is $459 million.

And that would imply a 2021.

Free cash flow prior to Quincy.

Of between 430, and maybe $442 million.

The free cash flow generation from Quincy, obviously is going to be dependent on when we close.

We are currently anticipating a close.

Some time in the.

The middle of the year.

And obviously Quincy is free cash flow accretive.

We haven't gotten into.

Exactly how accretive that will be right now in part because quincey as a private company and we're trying to respect the there.

They are private information.

We will have more to say once we close the transaction on.

How much additional free cash flow Quincy will bring in sometime in the second half of this year, but I think it would be fair to say that on a two year blended average basis, whether it's 19 22021.

Even without Quincy, it's a very very compelling free cash flow story, especially on a free cash flow per share basis.

Historically, you've given great CH B numbers when you do deals do you anticipate.

Yes, Quincy is large enough that we will update THB four Quincy once we close it it may I will caution it may take a couple of weeks. They are a little a little bit of time post closing to get that all pulled together, but that is our intention yes.

And then Kevin you Ya.

Thanks.

On Retrans growth in 'twenty, and I think you said before 911 11.

Are you implying that we would we should be thinking about those same deltas off of 15 and 16% year over year guide for the <unk> for the balance of the year.

No I'm not implying that I was just simply referring to the accelerated acceleration in growth because we were renewing a group last year and a large group this year given what we have ahead.

Jim and I, both mentioned net retrans should be higher year over year increase we should be higher in subsequent quarters than we have in this quarter, but I don't think the cadence last year is gonna be indicative of this year because we renewed.

40% of ourselves on January one we didn't have that last year.

And we didn't have we won't have a big April one renewal like we had last year.

We had some going on this summer that we didn't have did not have last year. So I don't think last years necessarily indicative of a separate trend line of getting.

<unk> increase of the year.

Okay, while I have you.

You can you can you help us think about the virtual component of your Retrans sub base.

Besides that from a number of revenue perspective.

Not which I'm guessing you want them.

You talk a little bit at a high level about what the per sub per month rate has done on virtual since since inception as it tracked the more traditional cable satellite and one more follow up thanks.

Okay.

On the OTT is certainly bigger than.

Bigger than we thought it was going to be and it has grown much faster than we thought it would grow.

You've heard this from us before with with a couple of big guys out there.

Very very small OTT providers.

And each note, we're taking a different approach.

By operator.

There is.

We don't have growth in retrans growth in reverse arrangements with everybody from its just simply we're paid a fee by the network others, we negotiate directly.

Pay a fee and others.

There's a lot of variation.

Overall I would say.

There are.

Yeah.

R R.

Our preference is to have people on the pay TV ecosystem.

We had the luxury of choosing with all want them to be with the operator, who is paying us the most not the operator spending I believe.

In some cases, the OTT guys or at least in some cases are higher than mvpds.

It's a mixed bag and there's a lot to do with when the deal was Glastonbury sugar.

A deal that we did.

We negotiated three years ago is not gonna be anywhere close to or deals that we've negotiated in the last week.

It's hard to put generally on generalities around you can see those all renew at different times as well so the day rates there have been going up.

They've been going up and then be PD price, there's a lot of room to grow on both of them.

I mean, the headlines on the OTT providers are definitely at large.

They've become a meaningful component of our sub growth at this point.

Great and then lastly, you guys didn't do a call around Quincy so.

On a public congratulations to you and especially Ralph I was playing golf right now.

Can you help us think about the opportunity to consolidate and grow our station group M&A.

And maybe.

Am I thinking about that or talking about that touch on the Supreme Court case, and the UHF discount.

Okay, I'm going to say Thats from me, we think there's still.

We still think there's still a lot of patients out there that in smaller groups that.

That we think would be good fits for gray.

Geographically operationally and culturally.

There obviously are some that would not that we saw.

While industry in poker in this industry are very involved in.

And joint efforts is just the example, Pat mentioned on this weekend's operating.

And that happens all the time in this business. So we know the people who own the stations that we would like to own EMEA. Obviously are interested in buying at some point hopefully that will happen.

I think it's a fairly safe bet that the UHF discount.

We will not survive over the next four years.

At this point as you know it doesn't impact us with a discount were at 17%.

The discount were at 24% after Quincy will be at 25%.

So we still have a great amount of Bruce.

Room to grow the company without worrying about whether the UHF discount is in place or not in place.

It would appear based on the Obama administration penalty views that are reflected on this administration that UHF discount will go away.

It's unclear.

Also raise the cap.

I know those discussions haven't really seem that started yet or other focuses.

It is about two feet, a day, which obviously split to too as we sit here today.

The last question, which is probably the first question you asked me.

Gross Supreme Court case.

The Supreme Court case.

We you.

We benefited from the 2017.

Deregulation that we read.

It's been a long time.

Well I mean for them.

Supplying lots of evidence of the FCC that acquiring non big four television stations is not the end of the Republic and we backed that up this past fall with a study that showed that acquiring non big four stations in day, requiring big four stations in our markets result in higher news and more news.

And we've demonstrated again and again and again, but we are from hard data to prove that.

The Supreme Court case, which gray CFC asked the Supreme to take off in endometriosis number from <unk> to address our unique experience here unique from other broadcasters.

And a different perspective.

We were very encouraged by the oral argument we are encouraged by the briefs.

We have no insight into when they get to where it's Gonna Act other than the Supreme Court on lifting.

Issues all the decisions by the end of June So I think we'll see the patient by the end of June.

Caution again now a lot of folks think that Supreme Court is going is considering getting rid of all the ownership rules, that's not that's not what before it the 2017.

FCC deregulation was a very small step.

It allows us to acquire non big four stations outside of the largest market.

The FCC has allowed non big four acquisitions in the largest markets since 99 and outside of the largest markets on we'd be a waiver in certain circumstances. So the 2017 is a very small step.

Common sense.

It is not going to unleash great.

Station trading activity.

Just with respect to gray.

Haps with others, but we don't see a great opportunity to be swapping away on legacy number one television stations. So that we can pick up with my network affiliate or a telemundo in some other market.

So again other people may have different views on what the court decision might mean, but for us it would mean.

There may be some additional independent stations off air station Telemundo affiliated CW affiliates.

Better.

That might make sense for us to acquire as we've been kind of steadily on quietly for many years.

From a wafer processing just eliminate the need for a waiver process.

So.

We're encouraged.

But if it does that open the floodgate to Q.

Good math on consolidation as I've read so many people predicting.

Thank you so much.

Yeah.

Our next stop.

Line.

Johnson He does the Wolf research.

Great. Thank you.

Can you guys talk about what youre seeing on the ground from an advertising perspective, meaning it sounds like you're tracking flattish call. It for the last four months or so before.

Before any of the Covid comps.

With a few categories dark and I think the market would've expected more pressure and results from some of the other station owners were a bit softer than when you guys are seeing some are you seeing market share gains from low rated stations, even given your market share where you are today. So any market share stats you can share I think it would be helpful and as the weaker categories come back into the market can they be.

A tailwind that translates to a few points of growth and I guess finally, you talked about the dollars, but how does your gambling footprint look.

Bob you want to take that one.

Sure Oliver.

Address the ex U.

Gambling issue first.

First of all it's a there's a tremendous upside.

And our view for the entire year were already seen in first quarter, we saw it in the fourth quarter as well.

The gambling money is going to be a significant category.

From this point forward.

Currently we're active.

And when you when you talk about it I should add that most people think of fan dual and draft Kings. For example, could you see those all the time, but there are several more players in the market and they are all pretty active in.

They're active currently in eight of our states with pretty heavy schedule from first quarter.

For other states that are approved but not live yet, but three of them will impact our markets should we assume that will will happen yet this year and it could.

Earlier second quarter, you could add those three other states. In addition, there's 14 other states lift pre filed legislation.

That potentially we could see those states become active.

In the second half of the year, so even on its own the.

It says your active it is pretty robust schedules.

And our stations are benefiting greatly from that.

With regards to your other questions.

Our market shares.

Our growing we've outperformed on most of our markets we.

We have extraordinary.

Strong sales team sales management, we probably have like in my opinion, the best sales training program.

In the business and all of that together combine has allowed us to and often cases in a lot of markets outperform our market share.

Audience market share so.

I can speak for our group and our senior Vice President who oversees the stations, but they're pretty bullish.

The year goes on I think you're going to see more.

More and more a local sales activity and in our case, we spent a lot of time on direct local new sales development and we're seeing some terrific numbers in that regard.

Okay, and maybe you think you maybe Kevin one quickly for you on the on the sub count that one 1% decline looks like on like an outlier anything.

In terms of relative over or under exposure on a region or with a distributor to call out there.

Yeah.

John.

We saw a lot of.

A lot of moving a lot of noise within the numbers.

It's been a no surprise on the public reports.

Which big Mvpds have been shedding auto customers over the last year.

We saw on their folks picking them up.

But what we've been looking at lots of last year and this year.

In these comments to try to get try to break through the noise.

Not to pick a date certain because obviously people reported differently to try to look at that total number of subs in the fourth quarter.

So what.

Well, we take that literally as I said, the total paid big for subs.

We paid on fourth quarter of 2019 for which we have complete records now.

And we have a good number of records and estimates on the complete big for OTT and N V. P. D revenues will get and the total sub base year over year from fourth quarter to fourth quarter on says that it was just slightly down.

That's a big improvement from where we what we were looking at earlier in the year.

So we said folks we're going to come back.

Okay.

Jobs in hotels reopen in bars reopened in sports return and that day.

It did certainly.

It did seem to occur.

So we're trying to do.

Trying to.

Smoothed out the noise, but looking at full quarter versus full quarter.

I don't mean to say that everyone is kind of moving in lock step with just the opposite there are some when we look at the top 15 operators I bet you have with them has.

Double digit moving over the course of the year up or down.

So a lot of noise in there that shakes out to make it up 1%.

Alright, Thanks, a lot.

Your next question comes from the line of Aaron Watts from Deutsche Bank.

Okay.

Everyone. Thanks for having me on a couple of questions. Let me start with just the advertising question can you talk about what you saw from the auto category in the fourth quarter and maybe how it's starting off the year here on first quarter second quarter.

So in fourth quarter auto was still down but remember there's a huge amount of noise in October.

Political advertisers and auto advertisers always love your local news and so.

Obviously.

I think the whole quarter is not necessarily indicative. If you look at November it was down about 10% and maybe.

It'll bit softer than that in December which is still a marked improvement over.

Where it was last April.

So far this year it is still lagging.

I'd say, it's overall for the quarter it's down.

Pacing on pacing, which is not necessarily completely indicative of where you end up but down about 10% from quarter.

<unk>.

January was pretty good.

February was softer.

And March is it still kind of early to see how that breaks.

But it is definitely better than it had been for many quarters last year and it does look like it's slowly.

Slowly coming back in and Bob I don't know or Pat I don't know if you want to add something to that.

Yeah.

Yeah, I would I would just add.

There's a couple of our key advertisers.

Including forward.

One is.

That's a real bright spot for us and showing some real positive comps and the only other thing I'd add that is still anthos or the new name for Chrysler Jeep Dodge advertising is.

Been dark for it was dark in fourth quarter and really for a considerable amount of time on.

In local spot, but they're coming back or have come back here in the first quarter at most of those dollars are in March but there is some still in the process to be in place. So that's a positive sign to see them back in play.

Yeah, I would just add.

You still have issues with chip shortages.

Impacted manufacturing and I think once that gets ironed out the supply chain gets on her that youre going on.

As you can see that category come back.

Yeah, much stronger than where it is right now.

Okay. That's that's really helpful.

Second question, Kevin I think I'll point. This one at you with with the renewals that you got done at the end of 2020 and early this year.

Are you comfortable enough yet to get put some goalposts around what net retrans growth could look like over the next few years for you guys.

No not really.

The short answer no.

Okay.

Let me ask it another way I guess with the renewals you've done on the distribution side and then also with your visibility on the affiliate side.

How can you give us any more color on how to think about margins for retrans.

Yeah.

The retrans margin will be better this year than last year.

Remember that we had repriced.

Our network contracts at various points in 2019 and replace.

<unk> of January 'twenty.

January one 2020, all of them had an annual step up and we.

We knew that was coming we predicted it for five years at.

Timing issue so last year.

Just as we thought it would be.

This year with so many of their Retrans repriced.

Come on line, starting last year and now this cycle.

Net retrans margin should be better.

I would say no.

Net.

Without quantifying our net re trends certainly will grow this year over last year in absolute dollars and that's what we care about where as you know we don't not running the business the margins were running for.

Net retrans, we we've said it will grow over time some years, it's going to be on challenge that was 2020. This year's net retrans will be hard.

Oh actually is for sure.

Okay got it thanks for that and last last question from me.

Just with the acceleration in streaming service adoption, there's been plenty of written on the pressure that prime time viewership has been on there and I appreciate that the last year hasn't been a normalized template for for viewership, but assuming continued pressure for primetime audiences.

On broadcast.

Do you think about that impacting your business on a local level, both from an audience perspective, as well as kind of advertising coming in perception on that.

Yeah, So it's Pat I.

It's it's not a great trend on the other hand.

It's a trend that's been sort of out there for a number of years and.

At this point.

You know prime time in terms of revenue it represents to our company is.

Yeah.

I think I've got it.

I'm kind of range, you reported but it's below 20% I think.

So it is not what it used to be it's not as important as it used to be interest nowhere near.

The.

Yeah.

The amount of money or percentage basis.

Local news represents.

So Kevin you might have somebody there.

Yes.

The exact numbers with 2019 2020.

Uh huh.

Revenue by time period network Primetime with a 15 to 16 16.

<unk>.

16%.

Of our total revenue so.

50% of our revenue comes from local news year on year round again, 2019, 2020 network primetime at 16%.

And kind of I guess, just as a follow up I. Appreciate that you know prime is not driving your revenue base, but as you think about your local news viewership and other local content.

Have the ratings has been holding up there considerably better.

And what we've seen at the at the Prime time time slots I guess I'm just trying to think about kind of the overflow effect you know on your local content.

Yes.

Bob do you intend on ratings, yeah, yeah actually.

The old days of how much prime had an impact on local news, there's not really an issue any more local news tends to stand on its own and so really the lead in lead out factor.

That was certainly.

The term used much more prominently many years ago is really not an issue today. So my point is that local news can stand on its own so they're necessarily not coming to Ars six o'clock news are 10 o'clock news out of prime.

Or in the.

But prime access or anything like that so.

I guess the bottom line is that price does not have much impact on our local news viewership.

Yeah, I would just add that we're not as my local.

Yes.

But I would just add the logo hogs at the local news in 2020 had an extraordinarily strong year for a lot of good reason.

We we found younger viewers actually discovering local news.

And while viewing levels have moderated.

It's still still very very strong.

Okay. Thanks again for the time.

Your next question comes from the line of Steven Kay Hall.

Fargo.

Thanks, maybe to start off patent you made some really interesting comments about Q2 being back to those 2019 core level. Then you talked about some really strong growth in gaming or gambling. So as we think about the mix as you get back from 2019 levels. It sounds like sports betting others there'll be a much.

Bigger percentage are there any sectors that you think will be a smaller percentage going forward or anything else like gambling that you think is also a kind of kind of growing a lot more.

Yeah. So.

I think the legal category.

For a long time, it's been growing and we're continuing to see.

Growth there.

The health category, which we have a sort of a companywide focus on we have a pulse team.

<unk> continues to show pretty solid growth.

You know I think that look I think right now as we talked about auto is soft for.

There's a lack of cars and.

No issues on the supply chain.

Cause.

Availability issues. So I think that you know I think once the automotive comes back.

It will that's going to put even more pressure out there so.

That's encouraging.

Yeah.

And then Jim.

I think before you've talked about maybe putting a buyback structure in place that can be automatic during blackout periods are on a grid system.

Given the Quincy deal will you be forgoing that so that youre, just going to focus on the dividend and deleveraging through that transaction.

No.

Yeah.

Great.

And then maybe.

Alas one.

Last night, Paramount plus talks about a lighter tier that doesn't include local station content and Peacock is on some of that within MPC doesn't really obviously, a big constituent sort of partners of yours. How do you think about the evolution to streaming and how to make sure that you're really important local station content is <unk>.

<unk> in a in a lot of those services going forward. Thank you.

You know what as a virtual we can.

You can't point to come on in a room and tell them to answer that question. So.

I apologize for that.

Yeah.

The the Paramount news as we know as much about it is it is.

You do so where we need to we have a lot of questions in there.

We'll learn on a couple.

We'll learn more.

As time goes on but we don't know enough about it.

We are in terms of streaming where on the big streaming packages obviously.

In terms of local news.

People can get local news.

On any device currently obviously part of view it as well as on local websites in our station apps.

So we're there.

We need on local news in there.

They are packaging and there is obviously no analyst there's no shortage of streaming packages and streaming platforms at this point.

Yeah.

We're looking at some of them and some will be a part of income we won't.

So it will be good to be a part of it and some of which were part of it from we don't really need to be a part of it.

It's a mixed bag.

It's just we keep.

Every day I think if theres another streaming package it the whole growth, obviously getting a lot more complicated and we need to be on some of them and we don't need to be on others, but where what exactly the paramount plus means to us.

The news came out after.

On a market closed last night and we've got to have a conversation with the network and I know all of us broadcaster.

For more information from CBS on that.

Yep.

Thank you.

But again.

Our next question comes from the line of Jim Goss with Barrington Research.

From a couple of them first with regard to your capital allocation priorities I Wonder if you could talk a little bit more about them right now in the wake of your resumption of a dividend for the first time in more than a decade and the most anew.

On a position of the country stations.

And also with unrelated basis with Quincy with line $925 million.

Purchase price it looks like you're adding non stations, but divesting about six is there any guidance you can give in terms of what the net purchase price might be.

No we have no guidance on what that net is Jim I think you can you you understand why we're certainly not negotiating in public on potential with potential divestiture buyers.

When the contracts are signed up and done with.

We'll just like we did with the.

Other divestitures in the past in other transactions, we will we'll let everybody know where where that a net number of plants.

Uh huh.

As far as capital allocation goes.

First and foremost look at the free cash flow generation of the company.

There is ample room on.

Now.

A continue to return to shareholders in part with the reinstatement of the dividend starting this quarter.

As Hilton they clear a couple of minutes ago, there will from time to time be a stock buyback, we will continue to reduce our leverage over time and make very clear on.

Many many calls that if Ah.

Good opportunity for a station or a group of stations that fit our criteria become available.

We'll always take a look and we will always be interested whether we transact or not.

It depends on the facts and circumstances at that point in time, but I think our allocation will be a mix because our cash flows now are large enough and on especially.

Especially on a two year blended basis stable enough that we have the luxury of being able to do.

Mix of of the allocation rather than having focused primarily on delevering.

Over the past several years.

Okay, well listen.

So let me remind just one thing to that I mean really from the board took on the discussion yesterday I mean, it was pretty clear on the use of course Shay.

We can walk and chew gum at the same time alright.

I had probably been the highest one about reinstating the dividend because we had focused on I have frequently said that are there.

Besides delivering post acquisitions that growing the company is on.

Corey.

<unk> loans.

Extremely high porosity, but we truly believe that we can do both I chimed in on to a previous question with regard to our stock buybacks on.

On during blackout periods.

We have that in place at a certain price level I hope, we never get to that price level again.

Because we are.

No.

A much better company one on the things that the board considered and but I certainly want to tout.

Is that this management team is now responsible for our company with the finest balance sheet.

The final group of assets on the highest pre cash flow generating capacity.

That we had ever ever had and I've been with the company since 1993.

And so.

That that pre cash flow capacity is going to give us the ability to do a lot of things opportunistically and otherwise, but this dividend is important we hope that as we continue.

To run lean and mean.

That will be able to increase the dividend.

And then.

As we look at.

Relative weaknesses, we will step into the market in soup and buy back stock if we have.

If it begins to fall excessively I'm you know I will tell you guys and this is just sort of an aside on candidly Joan.

But this time about a year ago I made a comment during the Q&A session.

And Harry adjusts on television news Shack picked up on it.

And that was during a pandemic and COVID-19.

Cash stocks, where the perfect safe Haven.

And that's proven to be true.

That's Tom Gray was in the non Nexstar was on the 14th fifties and Tigner was in the non <unk> and you can see what the course of the pandemic has done for our stock prices.

So we have a heck of a business, we're going to be able to handle all of the different pieces of it.

Okay.

Thank you and one other thing then.

Yeah clearly.

Local news and other local programming as the most profitable thing any local broadcast or it can do in terms of owning your own content I Wonder. If you feel you have more room to add additional programming right now that might you might be able to take advantage of them that way.

And how that might be impacted by the tremendous surge in additional content availability with all the new streaming services.

It's Pat.

I want to make sure I understand your question. So I think look we will add local news at every opportunity.

Whether it's a recent acquisition of workstations, we've had for a long time.

Where are we where are we add local news.

It's a better service to our community and candidly a better business.

So I.

I hope that.

Answers your question.

You suggest was the question around how we're distributing local news on OTT platforms.

No no it was more of that Oh.

If to the extent to you from a replace programming you have to.

Pay syndication fee for.

And replace it with something and create on your own and you own all of the all of the content or all of the aspects that tends to be the most profitable from any local broadcast we could do and I wonder if there's more room room for more of that or is that is there a more of a challenge because of the abundance of program, that's becoming available on that.

No no I would say that.

There is room to do more local programming and we will do.

And we've been going down that path for some time now and that's going to continue. So I think you could you could plan on seeing more not less local programming on from gray stations.

If if I could jump on this Bob.

To further answer that question, we've actually eliminated.

Quite a bit of a syndicated programming over the last over two year period and saved a substantial amount of money and replace it in most cases with local news and in fact, we have a couple of our markets currently with no syndicated programming whatsoever.

And theyre substantially larger markets that are pretty rely mostly on local news. So something we believed in for a long time and certainly anytime we get that opportunity to add local news.

We tried to do that.

Okay. Thank you.

Your next question comes from the line of Michael <unk> of Noble capital markets.

Thank you thanks for taking the questions and first of all congratulations on your quarter and congratulations on Quincy on.

Regarding Quincy you indicated that they're going to be $23 million on synergies and I was wondering can you break that up between revenue and cost synergies and also are you expecting that in your first year of operations or there or is this multiple years.

First of all when we when we talk about synergies we don't we don't we.

We don't include revenue synergies other than whatever our.

Retrans uplift is given our contractual rights.

The 23 million in Quincy is roughly a third.

Retrans uplift roughly a third of.

Their contractual advantages, we bring to the table and roughly a third of elimination of duplicate cost.

Cos.

So it's a nice mixture.

On the way, we the way we have consistently.

Defined a synergy is a.

Our fully annualized 12 month amount.

Is that the.

The synergy can be achieved and implemented sometime within the first year, so to say that a little differently. If you can if you can achieve the synergies day, one and then a full 12 months, obviously accrues to our benefit if we achieve that synergy.

On day 364, we will still score as a synergy the full 12 month annualized amount because we weren't able to put it into effect within the first year.

Perfect. Thanks for that color and then as a company is obviously played in smaller markets and you're just really really executed on.

Now that you're reaching 25% it may indicate that you need to move into a larger markets and as you see the television industry consolidate kind of have you changed your thoughts on where gray plants to position itself in the industry. What is the limit in terms of the size of markets that you might consider.

And is it important for the company to reach that 39% ownership cap and how urgent is that.

Didn't you achieving that target to get there.

So Michael this is Kevin.

We have not been buying small market stations, because we like small market stations that we've been buying we're buying high quality television stations.

Most of them happened to be in midsize and small markets, because that's where the opportunity set has been in the top 50 markets. There are less than five television stations that are ranked number one on number two that are not already owned by network or one of the larger rotors like Hurst.

Uh huh.

Market's 100 to 210, there are still a very large number or their day.

There's a sizable number of television stations that are not owned by network or one of the large group owners that meet our requirements being a number one or from number two.

We have participated in every single television option I've been.

With the company for nine years now.

That involves the television station and that's the number one number two tests.

<unk> on market size, we just simply were outbid on stations in larger markets like San Diego like Las Vegas, who came in the market and while we certainly could've perfect, though with the way that we weren't afraid of the market size.

It was rather our priority we talked on Hilton talked about our priority to paying debt down in managing the balance sheet with more important than adding one more television stations. So while we certainly regret not being able to buy the gray television stations that were available.

We needed to put our.

Our emphasis was on the balance sheet person and we purchased what we can afford and if we can't then we move on its non there is no must have patients. So I first want to correct. The idea of that whereby patients in midsize and small markets because that's.

That's where the opportunity set is that.

As we look out again, there are very few opportunities on large market, who owned television stations that meet our requirements. If they become available we will participate if there is an opportunity for us.

On a more television stations.

I mean, our requirement.

We absolutely are going to look at it and we've said that many times nothing has changed that and we're going to look at it in terms of what we can what we can afford on what's in the best long term interest of the company.

So there is no magic market size, there is no magic.

Cap or stealing our core on which we look at these things we look at number one a strong number two television station.

I think we will.

Get closer to the cap over the next couple of years if.

If the UHF discount goes away and patient groups come on the market that would allow us to get there those are two pretty important requirement.

When you offered for sale there, it's gonna be a long slog.

The 39%.

Good day become available on that right.

We can strike a deal with and it makes sense for US then we could be at the cap pretty quickly, but we just we can't control what comes in the market.

So that's that part of the gating issue and then of course theoretically if the UHF discount, but this kind of goes away.

All of our competitors for those patients would not be able to participate in those those auction where those sales processes.

If you were to just kind of hear obviously from a broadcast.

Peers can continue to consolidate at this point.

Goes away.

The smaller number of folks that can that can compete for larger market stations.

Thanks for the question, yes. It does thanks for the clarification I appreciate that that's all I have thank you. Okay. Thanks, a lot of them.

Your next question comes from the line of Alan Gould of loop capital.

Thanks for taking the question I've got two please one we see what's happening with the big Internet platform starting to pay for newspaper content.

Do you think there's a possibility that they will also start paying for broadcast news content and.

And how much of your broadcast news content finds its way onto the large internet platforms and then the second question is with respect to the reverse comp based on your guidance for first quarter. It looks like it's up 20% year over year that seems like more than just a escalator. So I was wondering if I'm missing something in there. Thank you.

Yeah.

On reverse comp.

We.

We had a large step up on on reverse on January one this year and last year.

Last year, we did not move the top number the growth very much and so we were on.

Our margin.

It was higher than our reverse comp was a was not as good last year as it has been an acquirer of years and that was again a function of renewing all of our all of our network contract from 2014.

With five year terms.

This year, but it's going to be a better year and I think you'll see coming on at a particular margin.

I think you'll see a better.

Reverse.

Okay, better Retrans margin this year.

For that reason.

We're in the process of renewing so many contracts that's going to drive the gross number up again.

Again, you saw 15% this quarter on a year over year basis.

And that's going to continue through the year.

And on your first question on sort of attack.

Yeah sure. So look we don't we don't we can't say whether.

On our stations will benefit from the move to have the large platforms begin paying as they as they are in Australia.

I think there is a chance of that happening and I think on general supporting the originators of.

Content.

Any instances of local television stations.

It is a positive development and so.

Will it happen.

Not sure we certainly hope it does.

Well I can't say at this point.

Okay. Thanks, Mike Thanks for the answers.

Yeah.

At this time there are no further questions on I'll return the call to helpful. Hilton Howell for any additional or closing comments.

Yeah.

Okay.

Well I'll tell you maybe on mute.

Okay.

And it does appear if he has disconnected.

We just want to thank everybody for participating today.

Uh huh.

Joy the rest of your day. Thank you.

Thank you for participating in the Gray television fourth quarter 2020 earnings Conference call you may now disconnect.

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During this time simply press Star then the number one on your telephone keypad to withdraw your question press the pound key.

Now I'll turn the call over to Hilton Howell Executive Chairman and CEO to begin.

Yeah.

Good morning, Thank you operator.

She mentioned I on hold on how old the chairman and CEO of Gray television on Frank.

We will begin this morning with a disclaimer that Kevin will provide Kevin.

Thank you Hilton and good morning, everyone.

Certain matters discussed on this call may include forward looking statements regarding among other things.

Future operating results and the impact of the novel Coronavirus disease with COVID-19 on our future operating results.

Those statements are subject to a number of risks and uncertainties actual results from future could differ from those expressed or implied in any forward looking statements.

I think I'll take various important factors.

More information about such factors please refer.

Gray uses its website as a key source of company information.

Website address is www gray television.

We also will post an updated investor deck to the website within the next two weeks.

Included on this call will be a discussion on non-GAAP financial measures and in particular broadcast cash flow broadcast cash flow less corporate expenses operating cash flow free cash flow.

Adjusted EBITDA on certain leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the matrix.

On the public on their analysis and valuation of our company.

Put it in our earnings release as well as on our website a reconciliation of non-GAAP financial measures to the GAAP measures reported in our financial statements.

I will turn the call to Hilton.

Thank you Kevin.

We have lots of very good news to report and to discuss.

As we approach the one year anniversary of the beginning.

Most of them for 12 months in my life so far.

Extremely gratified that gray television today.

<unk> reported record fourth quarter results.

Hey, Fantastic acquisition.

Continuing momentum in our business.

And strong guidance for the year ahead.

Our people and our company overcame unprecedented challenges over the past year.

Last name despite the challenges we predicted that we would remain cash flow positive each quarter of 2020.

We met that challenge.

Mercury rule on our revolver.

We're accepted any government financial support.

We adopted work from home and report from home and even produced from home policies very quickly in March.

We imposed no pay cuts.

No furloughs.

No layoffs no benefit cuts.

And no benefit delays.

In fact.

<unk> expanded the scope as it goes.

Potential or potentially exposed to coronavirus.

Our stations expanded their coverage of the coronavirus.

Hurricanes and storms.

Non even known as <unk>, which I had never heard of it before in my life.

And widespread social unrest.

In fact in December we.

We pay bonuses to each.

And every full time employee and recognition of their hard work during these hard times.

Yeah.

In response, our stations and production companies.

Teamed up to organize and lead extensive efforts to support local residents.

On lasers.

Virtual concerts school on television virtual food drugs and other projects that collectively was literally tens of millions of dollars for their local communities.

And in fact.

At La <unk> will shortly discuss one such effort that we will be launching this weekend.

Our managers and account executives.

Throughout the company, but new emphasis on sales training, new business development and new ways.

Selling well.

We also found an executed innovative ways to reduce expenses from top to bottom.

Gray television runs lean and mean and no one in this company would have it any other way.

The results of Grays collective efforts on.

Now.

Very apparent.

With today's earnings release.

For the full year, our revenues broadcast cash flow and operating cash flow exceeded even our pandemic expectations.

From one year ago.

We greatly improved our balance sheet through a successful bond offering and robust stock buybacks.

We continued to invest in our stations.

We even acquired a few new stations to boot.

And at the end of the year, we intensively dog into our planned acquisition of Quincy media, which as you know we announced on the first of this month.

Yeah.

Today's earnings release announces record results, which have made us very happy.

Given us 2020, and did not through a pandemic a recession multiple hurricanes directors severe storms and social unrest our way.

Our total revenue for the fourth quarter was $792 million.

An increase of $213 million or 37% from the fourth quarter of 2019.

Net income attributable to common stockholders was $211 million or $2.22 per fully diluted share, which is on an amazing 174% increase on the fourth quarter of <unk>.

2019.

Broadcast cash flow was $424 million, an increase of 195 million or 85% from the fourth quarter of 2019.

Our adjusted EBITDA for the fourth quarter of 2020.

404 million, an increase of 189 million or 88% from the fourth quarter of 2019.

Our total core revenue continued its sequential improvement from the troughs of April reflecting better business conditions at the national and local levels.

During the fourth quarter of 2020, we repurchased roughly 973000 shares of our common stock at an average price of $16 44 per share including commissions.

For all of 2020.

You repurchased in the open market five 5 million shares at an average price.

A $13 on change for.

For $75 million.

The big stories of the fourth quarter, where the refinancing that we addressed on our prior earnings call in November.

And political advertising revenue, which we also addressed on that call yet continued robustly even after election day.

And while those topics certainly deserve attention.

I want to end my opening remarks addressing two items that occurred after the close of the fourth quarter.

First we announced our acquisition of Quincy media on February the first.

Upon closing that transaction Gray television Malone stations, serving 100 into television markets.

Collectively reached 25, 4%.

US television households.

Leaving us ample room on it.

Mergers and acquisitions.

These 102 markets include the number one ranked television station.

77 markets.

On the first or second highest ranked stations in 93 markets.

Those are impressive statistics at any time and all the more so because it was only a few years ago that gray owned stations and just 30 markets.

And at that time, our leverage was more than two times higher than it is now.

In our press release announcing our planned Quincy acquisition.

I expressed how honored and humbled, we ought to be selected by Quincy shareholders to acquire their terrific company.

Those words were heartfelt.

Quincy is a very fine company.

With tremendous television stations and tremendous people.

And it has been led from many years my true Giants and our business.

Ralph Oakland.

The only regret that we have on helium regret that I have from this transaction.

Is that the broadcast industry will lose ralph's immense contributions to <unk>.

Two the B pack.

To the affiliate boards.

<unk>.

Portland endeavors.

Work on broadcasting and for the local residents and businesses.

Who rely on our stations.

We pledge.

To operate the bonds stations that we acquired from Quincy and tribute to Ralphs lifelong contributions.

Local service.

Local broadcast stations.

Local journalists journalism.

And love of community.

And country.

The final Big news is the announcement, we made this morning concerning our dividend.

As you know from our prior earnings calls Gray.

Is below four times.

As you saw in our release this morning, our net leverage ratio to fall below four times at December 31, 2020.

Accordingly at yesterday's quarterly board meeting after careful discussion.

The directors decided to restart growth regularly quarterly cash dividend for our equity shareholders at eight cents per share or 32 cents a year.

Those of you who follow US closely may remember that gray consistently paid a quarterly dividend for decades prior to the growth section.

At that time on electric we suspended the dividend to preserve our capital new capital.

Thereafter, we placed the highest pro are saying on reducing leverage.

Growing the company and more recently with zoom and robust stock buybacks.

Executing on these priorities has been the singular goal of the management team.

So really all of the past 12 years.

And now today Gray.

Gray is several times larger than it was in 2008.

With our balance sheet and work force and portfolio that have never been stronger.

The board surveyed this remarkable progress and determined that now is the appropriate time to resume paying a quarterly dividend.

This historic moving therefore, another confirmation that gray has successfully executed the long term recovery and growth plans that we put in place from the darkest hour. So the great recession.

We are especially grateful to our equity and credit investors and bankers for their support of our efforts.

With the dividend returning growth capital allocation priorities will be slightly altered get our priorities remain.

First to reduce our leverage over time, and that's to return capital to shareholders explicitly through opportunistic stock buybacks.

Regularly quarterly dividend.

We also want to.

Future will present opportunities.

Gross growth strategically.

And as I mentioned earlier.

We have ample room under the ownership cap.

So that we will as always evaluate acquisition opportunities in.

In terms of our long term growth goals and capital allocation policies.

In short today is a good day gray.

We are gray proud of our business our stations our communities.

Most importantly of our people.

And as you won't hear next.

We look forward to a very strong year ahead.

At this time I'll turn the call over to Pat Kevin and Jim to provide additional color of today's earnings release thereafter, we will open up the line to questions for all of us.

And through our CFO, Bob Smith as usual joins us today to help answer questions in his area.

So Pat.

Thank you Hilton.

Gray was blessed throughout 2020 with political advertising revenue at historic levels at a very wide field of competitive races across our footprint.

Geographical location plus high quality highly rated local news operations were once again, the one two punch that is unbeatable.

Recall that our earnings call one year ago, we predicted full year political advertising revenues from a range of $250 million to $275 million.

Later, we increased our estimate to be between $2 $75 million to $300 million.

When we reported third quarter results in early November we raised our full year political advertising revenue guide to at least 380 million then in late December we announced that we had broadcast over 400 million of political ads.

As well as exceeding what was newly our expectation for all of 2020 of them on time.

In the end our political advertising revenue was $430 million for full year 2020.

I'd like to put that number in perspective, if I can.

In 2016 on a combined historical basis through year end, great generated $9 63 from political advertising revenue per television household. Despite the lack of historical presidential spending levels and so from a lackluster statewide races.

<unk> thousand 18 on a combined historical basis through year end and with no presidential races at all persons from race at all.

Great generated $8.80 of political advertising revenue per television household in.

In 2020 that figure was $17 57 per television household or 82% more per household.

And in 2016.

It's worth noting to the greatest political advertising revenue per television household was the highest across all publicly traded television group owners $16 18 in 2020.

And each of our 2020 earnings calls we told you that while April seem to be the very worst month for our business. We saw continued improvements in core retrans in political advertising revenue is to hear what's on.

On.

The fourth quarter of 2020 continued this trend EBIT amidst all of the political advertising.

Our total core revenue decreased approximately 8% compared to the fourth quarter of 2019.

While significant much of this decline can be attributed to historically strong political displacement and a large number of our markets.

In October total core revenue declined 22% from the prior year again, largely impacted by political displacement.

Fact of political advertising revenue in October of 179 million dwarfed, our total core revenue in October of $81 million.

In November with political advertising revenue, mostly disappearing outside of Georgia total core revenue declined less than 1% from the prior year.

December with a resurgence in political advertising in Georgia.

Total core declined just 2% from the prior year.

Overall, the momentum that began in may with the first states reopening.

<unk> essentially throughout the year, there and thereby gradually diminishing the effects of the pandemic on our business.

As we've mentioned previously when our core business slid into spring as Lockdowns affected many of our clients and nearly all of our viewers. We use the new kind of on time to refocus on sales training developing new price your clients and prospecting for new business.

Those back to basics exercises helped us post lowered core declines in faster recoveries, because many of our peers largely due to new business development.

We also believe that these investments in 2020 will continue to benefit benefit out from 2021 would be on.

It's worth highlighting one particular category has seen very strong growth right now that we believe will continue for some time.

2019, we starting to see new advertisers are growing budgets for gambling, which historically included state real lotteries as well as casinos looking increasingly utilization of sports betting on a state by state basis. This category grew to a few million dollars in 2020, but most of our other categories were down for the year.

If anything near that holds gambler would be the fastest growing core had cut category for us for this year.

We are hopeful about a return to more normal operating levels on our core business in 2021.

So far our patients have begun to year on a good spot and we are increasingly optimistic that we will push back towards 2019 core levels in the second quarter of this year.

We also need to highlight the continued growth and momentum in our digital business, we've often mentioned that our digital usage.

Our digital usage break in your records and that continued throughout last year with 2020 now closed.

On a reported over the course of the entire year, our total online sessions rose 24% over 2019.

Our users rose, 37% and our page views on video abuse, each rose 13% over the prior year.

A year ago, we announced on this earnings call. The great digital sites had just surpassed 100 million monthly unique viewers for the very first time on December 2019, and 2020, we do pass that achievement by averaging 123 million users across all platforms each month.

Many of you recall, the gray joined a number of other broadcasters and placing individual local stories live events on local news live streaming on sync box, new App called view, it which is best thought of as the Netflix for live local on free contracts.

For example, gross <unk> in Cedar Rapids streamed it's Friday night Lights, 2020 High school football coverage on view on.

To review it with series reached online viewers and 108 dnas with one game alone, reaching 53 Dnas today, you would host content from a total of 164 local broadcast stations, including most gray stations.

The average user visits the F 18 times per month and spent 30 minutes per session.

Finally, I'd just like to Echo Hilton's comments about the remarkable work being done in all of our markets by our dedicated staff.

The extraordinary weather events of last week presented yet another very difficult challenge.

<unk> for news coverage not only in Texas, but many other states are journalists and other team members did her low up work again, and making sure that our market is set up to the minute news on critical information.

In addition to providing extensive extensive coverage of the weather emergencies, we've teamed up with the Grand Ole Opry and circle network to leverage this saturday's live operating broadcast to help raise money and awareness of food insecurity.

The <unk> broadcast we're at nine P M. Eastern on virtually every gray station and I'm happy to report also on grams K PRC in Houston and additional stations owned by the good people at Hearst Nexstar and Meredith.

All proceeds will benefit feeding America, a network of 202 banks on more than 60000 food pantries in nearly every community across our country.

I'll now turn the call to Kevin.

Good morning again.

To state the obvious we are thrilled.

Real good reached an agreement to acquire Quincy media.

The stations that will join Gray television are precisely the type of stronger local institutions that we are consistently strive to add to our portfolio.

In this case, the new markets, our archive hand in glove fit for growth geographic footprint.

And even more perfect fit with our company culture of empowering local managers on local professionals to make the content sales operational and staffing decisions that they believed best suit their individual local needs.

This is closed on our Quincy press really.

We are divesting the Quincy television stations and all fixed market in which growth great in Quincy already own at full power network affiliated television station.

Wells Fargo come back with a formal divestiture process on the same day that we announced the <unk> acquisition.

Yeah.

Well first of all on bids are not due until tomorrow. We are very encouraged at the level of interest in the divestiture stations that we have seen so far.

We are also gratified that.

That the pool of interested parties is wider and more diverse than we've experienced in prior divestiture processes.

We expect the process will continue to move quickly with final contract executed announced and submitted to the FCC and Doj in April.

Another major recent development was our successful completion of the negotiation and renewal of our largest batch of retransmission consent agreements.

This bass a contract that expire between late 2020 in January of this year.

Covers a bit over 40% of our paid mvpds subscriber base through individual contracts with more than 480 different.

M B P D.

That includes one of the two DBS companies several of the largest cable operators and nearly all of our small and mid sized cable operators.

We successfully concluded retransmission negotiations without interruption to the public.

All of those going to be PD other than two relatively small calico overbuilt or representing less than 1%.

Our total Mvpds that day.

Today, only one bankrupt telco operator has refused to continue carrying gray stations and that impacts about two tenths of 1% of on N V. P D sub base.

And an even smaller portion of our total paid subscriber universe.

Consequently, we once again began and quietly on another significant renewal cycle with a success ratio at close to 100%.

Looking ahead, we have one postpone negotiation.

It will occur later this spring that will be price retroactively to January one.

This summer and at year end, we will have a small number of negotiations with mvpds to cover about 25% of our paid mvpds have base.

Then in the middle of 2022, well, we won't renew another small number negotiations with Mvpds, who cover around 20% of our paid mvpds.

Good day.

For the first quarter of 2021, we anticipate retransmission revenue will increase by about 15% over the first quarter of 2020.

Retransmission revenue should increase in the next quarters. This year by large amounts as a result of the renewal repricing that will occur over the next few months.

To put these estimates in perspective, I'll remind you that our retransmission revenue increased 4% in the first quarter of 2020 on a year over year basis, and 9% in the second quarter last year.

And 11% year over year on both the third and fourth quarters in 2020.

For the full year 2020 on retransmission revenue increased nearly 9%.

These revenue increases are the result of both annual escalators in all of our agreements as well as repricing of a portion of our Mvpds fan base in the first quarter last year significant repricing on April one of last year.

Finally, we have now received subscriber reported from Mvpds and OTT providers.

Nearly all of the three first three quarters of 2020 on a good portion of the fourth quarter of 2020.

With more comprehensive data in hand today than we have had available to us any point last year. We can now report that our total sub counts for 2020 held up much better than anticipated on the dark with day from last summer.

As an aside when we discuss total sub counts we are only looking at subscribers for whom we are paid a fee because they receive a big four affiliated channel from Gray.

In particular with the benefit of a nearly comprehensive set of N V. P D and a more complete set of OTT subscriber reports for 2020, we saw a relatively significant increases and decreases at many of the operators throughout the year.

Overall, however, grays total subscriber count.

For the full year of 2020 declined only one 1% from the total subscriber count on.

On the backdrop that the total subscriber count in the fourth quarter of 2020 declined only one 1% and total subscriber count in the fourth quarter of 2019.

Given all of the challenges of 2020 through it everyone. We're certainly pleased the more comprehensive data reveals our total subscriber count declined by essentially a small amount.

Thank you for your time and I'll now turn the call to Jim Ryan.

Thank you Kevin good morning, everyone.

In addition to this morning's release.

We'll be filing our 10-K later today, which will have a great deal of additional information for you.

Also as a quick reminder, remember that beginning in the first quarter of 2020, all of our reporting as an on an as reported basis, because we considered the acquisitions and dispositions of late 2019 and during 2020 as being immaterial.

The sales mentioned earlier, our leverage ratio at the end of the quarter was $3 95, net in $773 million of cash on hand, and we stated with the announcement of the Quincy transaction at the first of the month that at the end of this year.

The Quincy transaction Hasnt been closed we expect our leverage ratio pro forma for Quincy to be approximately four times.

During fourth quarter, we increased our cash by $306 million.

And as of today.

We have an undrawn $300 million revolver. So we're in a very strong liquidity position.

At this time, we expect we will continue to generate significant amounts of free cash during each quarter of 'twenty one.

Currently anticipate total year free cash will range between $300 million and $325 million that is excluding any additional free cash generated by Quincy Quincy acquisition post closing that transaction.

So to sum it up our average 19 'twenty free cash flow was about $5 458 9 million.

We anticipate that our average 2021 free cash flow, excluding Quincy ex acquisition will be in a range of approximately $430 million to $442 million.

Given our strong liquidity position free cash generation low leverage and no debt maturities until 2024. We believe we are in a very good position to thrive and emerge from the effects of the patent that make just as we are today one of the strongest local broadcast companies in the country.

You'll also see in the release that we've we've returned a formal guidance for Q1.

We're pleased with what we're seeing so far at the start of the year. Our total core revenue, we're guiding to an increase of.

Total broadcasting revenue again, we're guiding to be flat to up approximately 2% in the production companies will generate about $13 million in Q1.

In revenue operating expenses, our broadcast expenses will be increasing 8% to 9% that's about a $29 million increase.

And all of that increased $24 million is represented by increasing reverse comp to the networks.

Production company expenses would be about $16 million corporate expenses, including transaction costs related to Quincy, we're anticipating to be about $20 million.

To add a little more color on the core revenue in Q1 January was down low single digits.

I'd be wary is up.

Flow single digits and currently March is appearing to be up low to mid single digits. So we're very encouraged by the cadence month over month of continuing sequential improvement of core revenue.

Couple of quick liquidity items for full year 2021, we anticipate cash interest will approximate $180 million, our capital expenditures of about $80 million and cash taxes will be in the low 20 millions.

That.

I'll turn the call back to Hilton.

Sure.

Thank you very much.

Let's begin with any questions that anyone may have.

Thank you as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad. If your question has been answered and you wish to remove yourself from the queue press. The pound key our first question comes from the line of Kyle Evans of Stephens, Inc.

Hey, Thanks, Jimmy ripped through those free cash flow numbers. If you don't mind could you just slowly tick back through them again, and if you didn't give one for Quincy can you help us think about that and then I've got some cash.

Follow ups.

So the.

2020 free cash was $559 million.

That translates to $5 86 per share.

With 95 4 million shares outstanding as of today.

We believe our.

Free cash ex.

Excluding Quincy this year in 'twenty, one will range somewhere between $300 million and $325 million.

So a blended two year 19, 'twenty free cash flow average is $459 million.

And that would imply a 2021.

Our free cash flow prior to Quincy.

Of between 430, and maybe $442 million.

The free cash flow generation from Quincy, obviously is going to be dependent on when we close.

We are currently anticipating a close.

Sometime in.

The middle of the year.

And obviously Quincy is free cash flow accretive.

We haven't gotten into.

Exactly how accretive that will be right now in part because quincey as a private company and we're trying to respect.

There.

They are private information I will have more to say once we close the transaction on.

How much additional free cash flow Quincy will bring in sometime in the second half of this year, but I think it would be fair to say that.

On a two year blended average basis, whether it's 19 22021.

Even without Quincy, it's a very very compelling free cash flow story, especially on a free cash flow per share basis.

Historically, you've given great CH B numbers when you do deals do you anticipate.

Yeah.

Yes, Quincy is large enough that we will update THB four Quincy once we close it.

I will caution it may take a couple of weeks that are a little a little bit of time post closing to get that all pulled together, but that is our intention yes, great. Thanks, and then Kevin you kind of gave us.

Cadence on.

Retrans growth in 'twenty and I think you said before 911 11.

Implying that we would we should be thinking about those same deltas off of 15, 16% year over year guide for the <unk> for the balance of the year.

No not a point that I was just simply referring to accelerate it.

Coloration in growth because we were renewing.

Group last year and a large group this year.

Given what we have ahead.

Certainly.

What are your percentage of ourselves on January one we didn't have that last year.

And we didn't have we won't have a big April one renewal like we had last year and then we had some going on this summer that we didn't have did not have last year. So I don't think last year is necessarily indicative of a separate trend line of getting.

<unk> increase of the year.

Okay, while I have you.

You can you can you help us think about the virtual component of your Retrans sub base.

You just size that from a number of revenue perspective.

Not which I'm guessing you want them.

Will you talk a little bit on a high level about what the per sub per month rate has done on virtual since since inception has it tracked the.

The more traditional cable satellite and one more follow up thanks.

Yeah.

On the OTT and certainly on bigger than.

Bigger than we thought it was going to be and it has grown much faster than we thought it would grow.

You've heard this from us before with with a couple of big guys out there and then some very very small OTT providers.

And each note, we're taking a different approach.

By operator.

There is.

We don't have growth in retrans growth in reverse arrangements with everybody from its just simply we're paid a fee by the network others, we negotiate directly.

Pay a fee and.

So there's there's a lot of variation.

Overall I would say.

Our.

Yeah.

R R.

Our preference is to have people in the pay television.

Ecosystem.

We had the luxury of choosing we would all want them to be with the operator, who is paying us the most not the operating spending I believe.

In some cases, the OTT guys or at least in some cases are higher than mvpds.

It's a mixed bag there.

A lot to do with one the deal with Glastonbury sugar.

A deal that we did.

We negotiated three years ago is not going to be anywhere close to or deals that we've negotiated in the last week.

It's hard to put generally on generalities around the OTT those all renew at different times as well so the day rates there have been going up.

They've been going up and then be PD price, there's a lot of room to grow on both of them.

I mean, the headlines on the OTT providers are definitely at large.

They've become a meaningful component of our sub growth at this point.

Great and then lastly, you guys didn't do a call around Quincy so.

Public congratulations to you and especially Ralph I hope he's playing golf right now.

Can you help us think about the opportunity.

<unk> P. A station group M&A and maybe.

On thinking about that or talking about that touch on the Supreme Court case, and the UHF discount.

Okay.

Thats from me when you think there's still.

We still think there's still a lot of patients out there.

Smaller groups that.

That we think would be good fits for gray.

Geographically operationally and culturally.

There obviously are some that would not but we we.

It's a small industry and folks are in this industry are very involved in.

And joint effort is just the example, Pat mentioned on this weekend's operating reps and that happens all the time in this business. So we know the people who own the stations that we would like to own EMEA. Obviously are interested in buying at some point hopefully that will happen.

I think it's a fairly safe bet that the UHF discount.

We will not survive over the next four years.

<unk>.

At this point as you know it does not impact us with a discount were at 17% without the discount were at 24% after currency will be a 25%.

So we still have a great.

Ono.

Room to grow the company without worrying about whether the UHF discount is in place or not in place.

It would appear based on the Obama administration policy views that are reflected in this administration that UHF discount will go away.

Unclear.

We also raised the cap.

I I don't those discussions I haven't really seen that started yet or other focuses at about.

Two feet, a day, which obviously split Q2.

Sit here today.

Ruth.

The last question, which is probably the first question you asked me.

Growth from core coast.

The Supreme Court case, I can say.

We benefited from the 2017.

Deregulation that we.

It's been a long time.

Well I mean for.

And supplying lots of evidence of the FCC that acquiring non big four television stations is not the end of the Republic.

And we backed that up this past fall with a study that showed that acquiring non big four stations in day, requiring big four stations in our markets result in higher news and more news.

And we've demonstrated again and again and again, but we are from hard data to prove that.

The Supreme Court case, which gray CFC asked the Supreme to take off in endometriosis generic to <unk> to address our unique experience here unique from other broadcasters.

And a different perspective.

We were very encouraged by the oral argument we are encouraged by the briefs.

We have no insight into when they get to where it's gonna ask other than thats been almost always issues. All the decisions by the end of June. So I think we'll see the patient by the end of June I would caution again now it's a lot of folks think that Supreme Court is going is considering getting rid of all the ownership rules, that's not that's not what before it the 2017.

FCC deregulation was a very small step.

It allows us to acquire non big four stations outside of the largest market.

On the FCC has allowed non big four acquisitions in the largest markets since 99 and outside of the largest markets only be a waiver in certain circumstances. So the 2017 is a very small step.

Common sense it.

It's not going to unleash great.

Station trading activity at.

At least with respect to gray.

Perhaps a low with others, but we don't see a great opportunity to be swapping away on legacy number one on television stations. So that we can pick up on my network affiliate or a telemundo in some other market.

So again other people may have different views on what the court decision magazine, but for US It would mean that.

There may be some additional independent stations off air station Telemundo affiliated CW affiliates.

Better.

On that might make sense for us to acquire as we've done sort of steadily on quietly for many years.

The waiver process is it's just eliminate the need for a waiver process.

So.

We're encouraged.

But if they can on opened floodgate to.

NASA consolidation as I've read so many people predicting.

Thank you so much.

Yeah.

Our next quite Alright Goldstein.

Johnson Neatest of Wolf research.

Great. Thank you.

Can you guys talk about what youre seeing on the ground from an advertising perspective, meaning it sounds like you're tracking flattish call. It for the last four months or so.

Before any of the Covid comps.

And with a few categories dark and I think the market would've expected more pressure and results from some of the other station owners were a bit softer than when you guys are seeing some are you seeing market share gains from low rated stations, even given your market share where you are today. So any market share stats you can share I think it would be helpful and as the weaker categories come back into the market can they be.

A tailwind that translates to a few points of growth and I guess finally, you talked about the dollars, but how does your gambling footprint look.

Bob you want to take that one.

Sure Oliver.

Address the.

Gambling issue first.

First of all it's a there's a tremendous upside.

And our view for the entire year, we're already seeing in first quarter, we saw it in the fourth quarter as well.

The gambling money is going to be a significant category.

From this point forward.

Currently we're active.

They're active currently in eight of our states with pretty heavy schedule from first quarter.

For other states that are approved but not live yet, but three of them will impact our markets should we assume that we.

It will happen yet this year.

It's early the second quarter, we could add those three other states. In addition, there's 14 other states that are pre filed legislation.

That potentially we could see those states become active.

In the second half of the year, so even on its own.

It's your active it is pretty robust schedules.

And our stations are benefiting greatly from that.

With regards to your other questions.

Our market shares.

Our growing we've outperformed in most of our markets we.

We are extraordinary.

Strong sales team sales management, we probably have in my opinion, the best sales training program.

In the business and all of that together combined has allowed us to and often cases and a lot of markets outperform our market share.

Audience market share so.

I can speak for our group and our senior Vice President who oversees the stations, but they're pretty bullish.

The year goes on I think you're going to see more.

More and more local sales activity and in our case, we spent a lot of time on direct local new sales development and we're seeing some terrific numbers in that regard.

Okay, and maybe you think you maybe Kevin one quickly for you on the on the sub count that one 1% decline looks like on like an outlier.

Thing.

In terms of relative over or under exposure on a region.

Or with a distributor to call out there.

Yeah.

John.

We saw a lot of.

A lot of moving a lot of noise within the numbers.

It's been a no surprise from the public reports.

Which big Mvpds have been shedding auto customers over the last year.

But then we saw other folks picking them up.

We've been looking at like the last year and this year.

And these comments I'm trying to get trying to break through the noise.

And I could pick a date certain because obviously people report differently, but to try to look at that total number of subs in the fourth quarter.

Well, we take that literally as I said, the total paid big for subs.

We paid on the fourth quarter of 2019 from which we have complete records now.

And we have a good number of records and estimates on the complete big for OTT and N V. P. D revenue, we'll get and the total sub base year over year from fourth quarter to fourth quarter on says Hey, I was just.

Slightly down.

That's a big improvement from where we what we were looking at earlier in the year.

So we said folks we're going to come back.

They got job from hotels reopen in bars reopened in sports return and that did that did certainly.

It did seem to occur.

So we're trying to trying to.

Smoothed out the noise, but looking at full quarter versus full quarter.

I don't mean to say that everyone is kind of moving in lock step with just the opposite there are some.

When we look at the top 15 operators I bet you have with them has.

Double digit moving over the course of the year up or down it was.

So a lot of noise in there that shakes out, but make it up 1%.

Alright, Thanks, a lot.

Okay.

Your next question comes from the line of Aaron Watts from Deutsche Bank.

Hi, everyone. Thanks for having me on.

Couple of questions. Let me start with just the advertising question can you talk about what you saw from the auto category in the fourth quarter and maybe how it's starting off the year here on first quarter second quarter.

So in fourth quarter auto was still down but remember there's a huge amount of noise in October.

Political advertisers and auto advertisers always love your local news and so.

Obviously.

I think the whole quarter is not necessarily indicative. If you look at November it was down about 10%.

On Navy.

Little bit softer than that in December which is still a marked improvement over where it was last April.

So far this year it is still lagging.

Say, it's overall for the quarter is down.

The pacing on pacing, which is not necessarily completely indicative of where he went up but.

Down about 10% from quarter.

January was pretty good.

February was softer.

And March is it still kind of early to see how that breaks.

It is definitely better than it had been for many quarters last year and it does look like it's slowly.

Moly coming back in and Bob I don't know or Pat I don't know if you went on to add something to that.

Yeah, I would I would just add.

That a couple of our key advertisers.

Including forward the same one.

That's a real bright spot for us and showing some real positive comps and the other thing I'd add that is still anthos or the new name for Chrysler Jeep Dodge advertising has been dark for we'll start with fourth quarter and really for a considerable amount of time on.

And local spot, but theyre coming back or have come back here.

First quarter. It most of those dollars are in March but there is some still in the process will be in place. So that's a positive sign to see them back in play.

Yeah, I would just add.

A lot of issues with chip shortages.

Impacted manufacturing and I think once it gets ironed out the supply chain gets on here that youre going on.

See that category come back.

Yeah, much stronger than where it is right now.

Okay. That's that's really helpful.

Second question, Kevin I think I'll point to two point of view with the renewals that you got done at the end of 2020 and early this year are you comfortable enough yet to get put some goalposts around what net retrans growth could look like over the next few years for you guys.

No not really.

The short answer yes.

Okay.

But let me ask it another way I guess with the renewals you've done on the distribution side and then also with your visibility on the affiliate side.

How can you give us anymore.

On how to think about margins for Retrans.

The retrans margin will be better this year than last year.

Remember that we had.

Rice.

Our network contracts with various points from 2019.

First of January 2010.

You referred to 2020 all of them had an annual step up and we.

That was coming we predicted it for five years.

As a timing issue so last year.

Uh huh.

Just as we thought it would be.

This year with so many of their Retrans repriced.

Come on line, starting last year and now this cycle net.

Net retrans margin should be better.

I would say no.

<unk>.

Without quantifying our net Retrans certainly will grow this year over last year in absolute dollars and that's what we care about whereas you know we don't not running the business the margins were running for.

Net retrans with sales.

It will grow over time in some years, it's gonna be on challenge that with 2020. This year's net retrans will be hired.

Oh for sure.

Okay got it thanks for that and last last question from me.

Just with the acceleration in streaming service adoption.

Been plenty written on the pressure that prime time viewership has been on <unk>.

I appreciate that the last year it hasn't been a normalized template for for viewership, but assuming continued pressure for primetime audiences on broadcast.

How do you think about that impacting your business on a local level, both from an audience perspective, as well as kind of advertising coming in perception on that.

Thanks.

Yes, so it's Pat.

Look it's not a great trend on the other hand.

It's a trend that's been sort of out there for a number of years and.

At this point.

You know prime time in terms of revenue it represents to our company is.

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