Entravision Communications Corp (EVC) 2014 Q3 法說會逐字稿

Good day, and welcome to Entravision Communications Corporation third quarter 2014 earnings conference call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Walter Ulloa, CEO. Please go ahead.

Thank you, Andrew. Good afternoon, everyone. Welcome to Entravision's third quarter 2014 earnings conference call. Joining me today is Chris Young, our Executive Vice President and Chief Financial Officer.

Before we begin, I must inform you that this conference call will contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to our SEC filings for a list of risks and uncertainties that could impact actual results.

This call is the property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Entravision Communications Corporation is strictly prohibited.

Also, this call will include certain non-GAAP financial measures. The Company has provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures in today's press release. The press release is available on the Company's website that was filed with the SEC on Form 8-K.

Our third quarter results were driven by continued growth in retransmission fees, as well as political advertising and the benefit of the 2014 World Cup. We generated solid year-over-year growth in consolidated adjusted EBITDA as well as earnings per share and free cash flow.

We also furthered our transition from traditional broadcaster to an integrated multi-platform Company, complete with expanded digital capabilities and marketing and targeting solutions. This has allowed us to strengthen our ability to target and deliver Latino consumers to advertisers across TV, radio, online, social and mobile.

We continue to return capital to shareholders in the form of a quarterly dividend, and during the quarter, our Board of Directors approved a $10 million stock repurchase program.

Turning to our results, during the third quarter, our consolidated revenue was $62.4 million, up 8% compared to the third quarter of last year. We generated consolidated adjusted EBITDA growth of 5% to $20.8 million and year-over-year free cash flow growth of 26% to $15.1 million, or $0.17 a share. Earnings per share were $0.09 per share in the third quarter.

With the 2014 political season now drawing to a conclusion this week, we are pleased to report record results for political revenue generated in a mid-term election cycle. For the year, total political revenue is estimated to be $9.3 million across our television, radio and digital platforms. This represents a 32% increase over the $7.1 million we generated in political revenue in the prior mid-term cycle in 2010. Our goal was a 20% increase in political revenue over 2010, so we significantly surpassed our goal with a 32% increase in political revenue in the 2014 mid-term elections.

During this mid-term elections cycle, we extended our political coverage and commitment to the Latino community to keep our audiences informed and up to date on the most important developments on local, regional and national levels. This year, our extensive coverage included enhanced news coverage, candidate interviews and debates. This was in addition to our efforts through our coverage and public service campaigns to empower the Latino vote by encouraging voter registration and election engagement.

Entravision developed a new political brand to (inaudible) that included public service announcements, the political website politica.entravision.com, weekly political editorials around issues that are relevant to the Latino community, and a White House correspondent with weekly stories for our local newscast.

We introduced a number of political debates. On September 29th, we broadcasted on all of our Texas television stations the Lieutenant Governor's race between Leticia Van de Putte and Dan Patrick. That was followed by the Governor's race in New Mexico that featured the first bilingual debate between Susana Martinez, speaking Spanish, and Gary King, who used a translator. On October 24th, our viewers in Texas had the opportunity to view the debate between John Cornyn and David Alameel for the US Senate seat.

Our final debate was the first completely Spanish debate in US history. This debate was for the sixth Congressional district in Colorado. Both candidates, Michael Coffman and Andrew Romanoff, spoke in Spanish to our viewers and listeners.

Overall, Entravision Communications is building a strong name in the political arena. As a Company, we are getting recognition because we are producing more quality content that is tailored to our audience. Our presence in the White House and operating stations in Washington, DC, allows us access to national policymakers. If you want to be heard, Entravision is the media platform to speak from to reach Latino voters and influencers.

Turning now to our segment operating highlights for the quarter, television revenues increased 4% during the third quarter. Local television revenue grew 1% in the quarter, while national revenue -- national TV revenues were up 1%, and retransmission consent revenue was up 24%.

We generated World Cup television advertising sales of $2.3 million, versus $1.2 million in the third quarter of our World Cup broadcast in 2010. Our total 2014 World Cup revenue was $9.8 million, which is 63% above our World Cup sales in 2010 and 36% above the 2006 World Cup telecast.

Entravision's television audience for the 2014 World Cup was a huge success as well, delivering double-digit growth versus 2010 World Cup matches airing in the July Nielsen survey. Among adults 18 to 49, ratings were up 15% over the 2010 tournament and up 10% among adults 25 to 54. The World Cup final aired on July 13th and was up 10% over the 2010 final among adults 18 to 49 and 4% among adults 25 to 54. Our highest adult 18 to 49 ratings for the World Cup final were 11.2 in KINT in El Paso, 10.4 on KNBO in McAllen and 8.8 on KUPB in Odessa-Midland.

Television political revenues were $2.1 million in the third quarter, and were almost double the $1.1 million in political revenues we generated in the third quarter of 2010. For the year, total political television revenue is estimated to be $7.7 million. This represents a 51% increase over the $5.1 million we generated in television political revenue in 2010.

Excluding political revenue and retransmission fees, third quarter core TV revenues decreased 5% compared to last year due to weakness in certain key ad categories. Excluding retransmission and political, core local television revenue finished flat for the quarter, while core national revenue was down 11%.

Automotive was up 6% during the third quarter, driven primarily by improvements in Tier 2 and Tier 3, monies which were up 7% and 5%, respectively. Revenue in Tier 1 auto was down 2%.

We generated growth in several of our top automotive brands, led by Nissan and General Motors, which grew their business with us by 33% and 57%, respectively, over the prior year.

During the quarter, we added 42 new television advertiser that spent $10,000 or more, which generated about $2 million in advertising revenue for our television business.

Turning to our ratings performance, our Univision affiliates extended their ratings leadership position in the July 2014 Nielsen sweeps. Among adults 18 to 49, regardless of language, eight of our Univision affiliates ranked number one or two sign-on to sign-off. Additionally, 12 of our Univision affiliates are either number one or two among all adults 18 to 34, regardless of language.

During our primetime novella block, Entravision's Univision television stations delivered higher ratings than at least one of the big four English language networks among adults 18 to 49 in 13 markets. Additionally, among adults 18 to 34, Entravision television stations ratings are higher than at least one of the big four English language networks in 14 markets.

In early network news, 10 of our Univision affiliates are number one or two among adults 18 to 49, and 10 of our affiliates are -- of our Univision affiliates are number one or two among all adults 18 to 34, regardless of language. Thirteen of our Univision affiliates are number one or two in early local news, and nine are number one or two in late local news.

Now, moving on to our radio division. In our radio division, revenues were flat in the third quarter compared to last year. Our station group outperformed the broader industry, which is estimate to decline 1% during the third quarter based on Miller Kaplan estimates for the 12 markets in which we subscribe.

Local revenue is down 2% in the third quarter, while national revenue increased 5%. The split between local and national revenues was 68% local to 32% national during the third quarter.

Net political revenue in the third quarter was $339,000 for radio, compared to $41,000 in the third quarter of last year. For the year, we are estimating political revenue to finish at $1.5 million for our radio division, about even with 2010.

On a quarter basis, excluding political advertising, total core radio revenue was down 1%, with core local revenue down 3% and core national revenue up 1% over the third quarter of last year.

Our radio stations with exclusive Spanish-language radio broadcasts are in 14 of our markets for the 2014 World Cup and generated terrific results. We generated World Cup revenue of $608,000, which is $417,000 in the third quarter of our World Cup broadcast in 2010. Our total 2014 World Cup revenue for radio was $2.3 million, which is significantly higher than our sales for the 2010 and 2006 World Cup broadcasts.

In the four PPM markets of Los Angeles, Denver, Phoenix and Riverside-San Bernardino, the match (inaudible) average of 21 share of the audience among Latino adults 18 to 49, and when the Mexico match aired, the result was a 32 share of the available audience. Among the Latino males 18 to 49, the match averaged a 27 share, and when Mexico played, a 38% share of the audience.

On the national level, we continue to benefit from our Entravision Solutions network, which was a key driver of our growth in the third quarter. The ability to reach 95% of the total US Latino population remains a key competitive advantage for our Entravision Solutions network, as advertisers can effectively connect their brands with the highly-engaged Latino audience across all key demos and time slots.

In fact, the strength of our Entravision Solutions networks has resulted in a steadily increasing client base. In the third quarter, we had 30 network advertisers -- advertising partners, including MoneyGram, Best Western Hotels, AT&T, Sam's Club, Sprint PCS, Wells Fargo and Walgreens, among others.

A major driver of our network revenue growth continues to be the Erazno y La Chocolata show, our top-ranked afternoon drive syndicated program. Ratings for the program remain strong, with a 20% increase in (inaudible) ratings during 2014 compared to the same period in 2013 in Latino adults 18 to 49. We've also increased our overall coverage of Latino adults 18 to 49 in the US by an additional 17%.

The Erazno y La Chocolata show now covers 77% of this key demo throughout the United States. Network revenue has doubled for Erazno y La Chocolata during the third quarter due to increased ratings and broader national coverage.

During the quarter, we added 42 new radio advertisers, which spent more than $10,000 and which generated $841,000 in advertising revenues. These new advertisers included Valvoline, Caltrans, (Inaudible), Alliance for Citizenship and Poole Law Group.

As we mentioned during our second quarter call, on April 1st we successfully launched Jose FM, which provided the same programming on KLYY, KBLB and KDLE in the largest Latino marketplace in the nation, Los Angeles and Riverside. Jose FM became a ratings reality in Q3 and received its first full ratings book in the month of December.

The ratings and the simulcast on 97.5 and 103.1 were outstanding, with Hispanic adults 18 to 49 rating it number three for the full week and number four in morning drive, number two during afternoon drive. In addition to strong Hispanic adult rankings, Jose FM dominates male demos and was number one delivering Hispanic men 18 to 49 and Hispanic men 25 to 54 in (inaudible).

During the quarter, we launched LA's Mananitas Morning Show on Super Estrella 107.1. LA's Mananitas is a unique combination of captivating entertainment news with the biggest tips in Latino pop and rock music. LA's Mananitas is the first Latino radio show that concentrates on being the provider of breaking entertainment and celebrity news before any other source on radio, television, social media or website.

LA's Mananitas is created by a collaboration of correspondents in different parts of the world, including Mexico, South America, Spain and the United States. LA's Mananitas is the first Entravision produced product to use social media, website and mobile in conjunction with on air.

Super Estrella in Los Angeles held its very popular 17th annual Reventon Super Estrella concert and festival at Staples Center in July 2014, with a sold-out crowd of over 15,000 loyal Latin music fans attending. Reventon Super Estrella continues to rank as the premier Latin music event in Los Angeles.

For the summer of 2014 ratings, our stations continue to be ranked among leaders and adults 18 to 49 against all competitors.

Now, let's turn to digital. As you might have seen in our press release today, we began breaking out the performance of a portion of our digital business. Digital revenues were $2.9 million in the quarter. The third quarter marked the 25th straight quarter of year-over-year double-digit digital revenue growth for our digital business. Digital now accounts for approximately 5% of our total revenues.

Digital revenue in the quarter was driven by product brand names, telcom and auto. We have significantly [streamed] our digital business over the last year through a combination of strategic investments, such as Luminar, and targeted acquisitions like Pulpo Media.

Pulpo Media is the number-one ranked leader in digital search for US Latinos on all devices and across all levels of acculturation, according to ComScore. It is an audience platform that sells digital advertising leveraging its unique reach, data and ad technology. Pulpo Media is the largest Latino digital network of content publishers and programmatic buying. We have enhanced our data assets and now have offline transaction and online data for 75% of US Latinos through Luminar and Pulpo.

An engaging and robust content offering is key to driving increased user engagement across our digital platforms, including our station websites. We published over 10,500 local news, videos and stories online across our markets during the third quarter. We streamed 5.84 million hours of audio content during the quarter, which was up 10.2% year over year and 4.3% sequentially. In the third quarter, we had 776,000 monthly unique auto-streamers.

Looking out to mobile, which remains an area of important focus for our digital group, we sent over 1.6 million mobile text messages during the third quarter, and usage levels remain at all-time highs. We are creating additional content for mobile as well with sponsors that include McDonald's, Toyota, Denver Broncos, Tampa Bay Buccaneers, AT&T, Rosetta Stone, Ticket Clinic, Chevrolet, Heineken, [Polo Banker], MetroPCS, Pizza Hut, Bud Light, Pepsi and many more.

We also continue to expand our social media presence. We finished the third quarter with over 1.6 million followers across our social media channels, which was up over 106% compared to last year.

We believe our digital platform today consists of a unique combination of advertising solutions powered by industry-leading and highly actionable data insights and analytics. All in, we deliver highly targeted and engaged online social and mobile audiences to our advertising clients across all levels of Latino acculturation segments.

Regarding the fourth quarter, Entravision's total revenue is pacing up to mid-single digits. Excluding political revenue and retransmission revenue, our core revenue pacing is down mid-single digits. Core radio and digital are outperforming television at this point in the quarter, which continues to see a typical national ad environment, particularly as we cycle up against healthcare-related spending from the Affordable Care Act initiative in the fourth quarter of last year.

In summary, we continue to execute our growth and transformation strategy during the third quarter. Our core television and radio station groups remain extremely well positioned in key markets across the United States, and our progress building out our digital business continues to bear fruit with the acquisition of Pulpo. Our expanded revenue streams as well as prudent cost management and our strength in balance sheet is driving contingent net income and free cash flow growth.

I'll now turn the call over to Chris Young, our Chief Financial Officer, for a review of our financial information.

Thank you, Walter, and good afternoon, everyone. Beginning this quarter, we are presenting our financial results in three reportable segments -- TV, radio and digital media. On June 18, 2014, we acquired Pulpo Media, and as of the third quarter of 2014, we separated the results of Pulpo and our existing Luminar data business into a new operating segment, digital media, which we believe enhances our investors' ability to evaluate our three separate operating platforms.

As Walter has discussed, net revenue for the quarter was $62.3 million, up 8%. Operating expenses increased 6% to $35.9 million, and consolidated adjusted EBITDA increased 5% to $20.8 million.

During the third quarter of 2014, the Company declared and paid a cash dividend of $0.025 per share to shareholders of the Company's Class A, B and U common stock. The total amount of the cash dispersed for the dividend was $2.2 million.

Also, as part of the previously announced $10 million share repurchase program, the Company repurchased 800,000 shares of Class A common stock for approximately $3.5 million in the third quarter of 2014. As of October 31, 2014, the Company has repurchased a total now of $1.6 million shares of Class A common stock for approximately $7 million, at an average purchase price of $4.48.

For the quarter, TV net revenue was up 4% to $41.3 million, compared to $39.7 million in the same quarter of last year. The increase in our TV segment was primarily attributable to advertising revenue from the World Cup, an increase in political advertising revenue, which was not material in 2013, and an increase in retrans consent revenue.

Radio net revenue for the quarter was relatively flat at $18.1 million, compared to $18 million even in the same quarter of last year. Our new digital media segment generated $2.9 million in revenue for the quarter, resulting from primarily the acquisition of Pulpo, which did not contribute to revenues in prior periods.

Retransmission consent revenue for the quarter was $6.6 million, compared to $5.3 million in the same quarter of last year. Retrans revenue for the year is estimated to be approximately $26.5 million.

Operating expenses for the quarter were $35.9 million, up 6%. Excluding non-cash comp expense of $0.3 million, operating expenses for the quarter were $35.6 million, up 6%. The increase was attributable to the acquisition of Pulpo in 2014, along with an increase in salary expense in the quarter.

Corporate expenses for the quarter were down 2% to $4.9 million, compared to $5 million in the same quarter last year. Excluding non-cash comp expense of $0.6 million, corporate expenses for the quarter were $4.3 million, versus $4 million in the same quarter of last year. Excluding non-cash compensation, the increase in corporate expense is primarily attributable to an increase in salary expense.

Cost of revenue, a new expense line item relating to our digital business consisting primarily of the cost of online media acquired from third-party publishers, was $1.5 million for the quarter.

Income tax expense was $4.6 million for the quarter, while cash taxes actually paid was $131,000. Given the elimination of our full-valuation allowance in the fourth quarter of 2013, future income tax expense will run at approximately 40% of pre-tax income, although most of this expense will continue to be non-cash given our NOL offsets. We currently estimate our cash tax outlay to be approximately $1 million for the year 2014.

Earnings per share for the quarter were $0.09 per share, compared to a negative $0.24 per share in the third quarter of 2013.

Free cash flow, as defined in our earnings release, increased 26% to $15.1 million, or $0.17 a share, for the quarter, compared to $11.9 million, or $0.14 per share, for the same quarter of last year. Cash interest expense for the quarter was $3.3 million, compared to $4.9 million from the same quarter of last year due to the successful refinancing of our debt last year. Our free cash flow conversion rate was 72.4% for the quarter.

Cash capital expenditures for the quarter was $2.3 million. Capital expenditures for the year is estimated to be approximately $10.2 million.

Turning to our balance sheet, as of September 30, 2014, our total debt was $362.2 million, and our trailing 12-month consolidated adjusted EBITDA was $77.7 million. Cash on books was $46.3 million at September 30, 2014. Net of $20 million of unrestricted cash on the books, our total leverage, as defined in our 2013 credit agreement, was 4.4 times at September 30, 2014.

This concludes our formal remarks. Walter and I now would be happy to take your questions. Andrew, we'll turn it over to you.

(Operator Instructions) James Dix, Wedbush Securities.

Just a couple questions on the ad environment, and then one on just M&A. I guess in terms of your fourth quarter outlook, I think a quarter ago, when you talked about the third quarter, you talked about the potential for -- I think you had flat pacing to improve a bit. It looks like it did. What's your take on the chance for the fourth quarter pace to move around a bit, especially now that the election is over? And then I guess I'll just follow up in turn.

Jim, just a quick comment on that. I mean, we have seen some improvement here in the last few weeks in national. It has started to improve slightly. We expect that improvement to continue as we head into the second half of the quarter. Certainly, political was very strong in October, as you can imagine. But overall, our actual pace right now for fourth is better than it was for third.

That's right. The broadcast properties right now are pacing, all in, with political, up mid-single digits, so we're in a better position now than we were at the call looking out for third quarter at this point. I mean, if you look across the revenue streams, two areas where we're showing improvement, a little TV. If you're looking out October, November to December, it seems to be progressing nicely. The problem with local TV is national TV doesn't seem to be showing the same trends.

National radio is also a very good story. National radio continues to improve month-by-month as we get deeper into the quarter, so those are very good signs.

Okay, great. And you mentioned one category that was a tough comp on the national side, the Affordable Care Act. I mean, what's your outlook for that now? I mean, because we are beginning our second renewal -- I mean, enrollment cycle with this quarter. What's your thinking about that and then, I guess, the healthcare category generally being stimulated by that or not?

Well, it remains a category with a significant gap investment. As compared to last year, this year, for example, the Affordable Care Act is pacing at about minus 27%, with $4.2 million versus $5.8 million in the prior year, so it's a significant gap there as a result of less spending on the Affordable Care Act by insurers and the medical community.

I think this time around last year, you saw a ramp up. You saw some healthcare money start to come in in the third quarter and that fourth quarter. Early in the fourth quarter, it really hit hard. I mean, this year, you're going to see the healthcare folks hold off a little bit until later in the stage. Perhaps in early December, we should expect healthcare to pick up, but right now healthcare is not doing anything what it did at this point last year, just because it was a unique one-off item.

Okay, great. And then just on auto -- and that's the last of my ad questions -- what's -- we've heard from various people in the TV universe about the health of auto, both nationally and locally. What's your outlook now for it versus what you've seen so far this year? You gave pretty good color on the tiers, but I'm just wondering what you're thinking about auto going forward, especially with strong auto sales but some guys saying that's not flowing through, at least to some of the general market spending, as much as they might have thought.

Right. Well, overall for auto in the quarter, we were up a little over 2%, but prior to this quarter, we've had, as you know and as we've reported, very healthy automotive growth through the year. Certainly, the amount of political advertising that we had come through in September may have been a -- may have contributed to less auto for us in this quarter, but our core growth, even though it was up slightly -- Nissan, Toyota and Honda lead the way, while Audi and Volkswagen were new brands, and General Motors increased its investment in the Texas region.

So I think that overall, I think we'll continue to -- we will get back to better growth as it relates to auto. We certainly see that as we're looking towards the end of the year, as well in 2015.

Okay, so no real concerns of like slipping into the negative category like some broadcasters have?

Well, the auto right now is pacing flat to slightly negative as we sit here today, but some of that business could have been just displaced by some of the political ad debates that we've been going through the past month, and we're pretty optimistic. At least, we're fairly optimistic, I should say, that we can break back into the positive territory, but there's still a ways to go yet.

We had such strong automotive advertising in the first half of the year, that we're not surprised it slowed down slightly here, but we do expect it to rebound in 2015.

Okay. And then, I guess, lastly, what are your thoughts now on the M&A environment, both in terms of broadcast properties as well as potentially other extensions maybe in the digital area? Just what are you seeing out there, and is that something where we should expect some activity over the next six to twelve months?

Well, we haven't spent much time looking at broadcast assets just right now. I think that activity slowed down quite a bit, and there weren't that many assets that fit our profile and our strategy to begin with when the market was especially hot as it relates to broadcast assets.

But we believe digital is our area of growth. We're constantly evaluating opportunities in digital. We think that Pulpo is a terrific fit for us. It fits our strategic core assets in television and radio, our radio network, Luminar. It expands our digital assets and allows us to become the largest Latino digital ad network. We'll be able to extend our reach into Latin America, diversify our core assets. Our broadcast assets now have been diversified with this high-growth digital asset.

And finally, it adds significant digital revenue as a portion of total revenue, so we expect to be able to grow that category here well into 2015 and beyond.

So if I'm right -- is the majority of your digital revenue at this point coming from Pulpo?

Yes, it is. It is at this time.

Okay, great. Thanks very much.

Thanks, James.

Michael Kupinski, Noble Financial.

A couple of quick ones. In terms of the radio division, I know this is a smaller subject for you guys, but it had charted off pretty strongly earlier in the year. Then we saw some deceleration in the third quarter, and I was just wondering -- I think that a large portion of that growth was probably due to La Chocolata, if I recall, and I was just wondering did it just suffer from the weak national advertising in the quarter, or did it run into some competition, or is it just cycling against its strong ratings? I mean, can you give us some thoughts on that particular program and how it relates to the total radio revenues and the pacing as it goes into the fourth quarter?

Well, a couple comments from at least my point of view -- one, that we continue to invest in content. We think that that's very important to us in many areas, including our radio business, digital business as well, as well as our TV business. Our content continues to perform well. It takes time to build up the audience, but we're certainly pleased with our results.

In radio, in national, for the most part, we've had a pretty good year. Certainly, our network and national sales business has been strong. But we have struggled in Los Angeles. That said, we've turned that around. We turned it around late in the third quarter. We're now starting to see the results of the ratings increase in Los Angeles that I spoke about here in my comments, and we're seeing the revenue as well as ratings continue to improve with our Los Angeles cluster.

So we're pleased with the way our radio business is performing, especially pleased about our national sales and network sales area.

Yes, we seem to be executing on the radio side as far as content is concerned, and the local markets got a little choppy for us in the third quarter, and that's one of the big reasons why you saw the lack of growth, I'll call it, but the content execution is there on a national scale. Our national guys are getting it done, and you've got LA ratings now, which take time to convert, to monetize from when you get the ratings, but I'm seeing either number two or number three in LA as a cluster. It's an achievement that we're going to make a point to monetize over the next couple quarters.

Just following up with a question earlier about the M&A environment, are you guys interested in the Disney stations at all, or a portion of those? Is that on your radar screen, or are you concentrating more so on the digital side?

No, I would say, Mike, that that's not on our radar screen. We are concentrating more on the digital side. If there were a broadcast opportunity that really fit our strategy going forward, then of course we'd take a look at it, but right now, most of our focus is on digital.

And any updates on the negotiations with Univision about your expanded -- well, any updates on Univision regarding their retransmission proxy? Has there been any expansion in terms of discussions with them beyond just the retransmission, or is there anything that you can provide us regarding those discussions?

Let me just say that we have a great relationship with Univision. We've had -- that relationship goes back since we started the Company in 1995. So we have had different discussions over the past year, and I'm sure they'll probably heat up here as we head into the end of the year, but we expect to -- whatever we have to agree to, we expect that both parties will come together and it's obviously mutually beneficial for both of us to reach an agreement.

And I just wanted to kind of clarify going into the fourth quarter in terms of the pacing. What you're saying is that you're -- are you seeing auto and other key categories strengthen from the third quarter into the fourth quarter? It just doesn't seem like it's robust, but it is strengthening. Is that what you're saying?

No, we're not saying that necessarily. Auto as a category is pacing down right now. A big part of what we're seeing as far as the improvement in the pace, we said we were up mid-single digits. A big driver of that is political, Michael. If you took out political, our pacing gets down to the mid-single digits, and that's broadcast only. That's not including our digital, and it's not including retrans.

Right. Right. That means you're actually seeing weaker.

Right, but what we have seen is that as we moved into the quarter here the last few weeks, that there has been an improvement in digital generally from where we were when we started the quarter. But now that we're through the political cycle, we believe that the improvement will accelerate.

Okay. All right, perfect. I think that's all I needed. Thank you.

Thanks, Michael.

(Operator Instructions) Brian Warner, Performing Capital.

Just a quick question. Can you sort of give us a high-up view on what your thoughts are regarding the spectrum auction? I'm sort of particularly interested in sort of strategically maybe you'd sort of frame some of the parameters that you're thinking about, because it seems like you're in sort of a unique situation.

Well, we, like others in our industry, have taken a good look at the Greenhill report, and we've assigned some people here to continue to review it and to monitor the FCC's progress as it moves towards the auctions in -- spectrum auctions in 2016.

I think we all recognize the fact that the FCC has been successful in engaging broadcasters in the values or the perceived values of what these broadcast properties may be valued at or the spectrum may be valued at going forward, but we don't believe that -- I mean, the goal of -- these valuations are based upon the FCC clearing 126 megahertz. We think that that's going to be very difficult to do, and therefore the spectrum amount that the FCC will be recapturing will directly affect the total value of the forward auction, so we continue to look at it.

It's interesting. It's an opportunity that certainly we have a responsibility to our shareholders to look at, and we'll continue to study it.

Fair enough. Thanks very much.

Thanks, Brian.

Gordon Hodge, Tracker Research.

A question related to spectrum. I'm just wondering if you wanted to -- in evaluating it, you thought there was an opportunity to channel share with one of your duopoly stations. Is that -- and maybe you haven't gotten into this that far, but I'm curious. Is that something you would require -- that would require Univision's approval, for instance, if you were to move from a UHF to a -- or a full power to a Class A, for instance, in a market and channel share? Or is that something that you would do on your own?

No, anything that we do as it relates to what we refer to as the JSAs that we have with Univision, duopoly's in, well, six markets -- but anything that we do with those stations that we manage and operate and Univision owns, it would require their consent. And it may be that at some point, we might have a conversation over channel sharing going forward, but we haven't at this point, and we'll see how we continue to review this opportunity.

Univision is reviewing the spectrum auction as well, and we have no idea what their thoughts are in terms of how they're looking at it.

But to be clear, also, that's as it applies to the Univision stations that we (inaudible). I mean, that does not apply to the non-Univision stations, and we have a few out there. We would not have to go to Univision, obviously, to -- if we're thinking of doing something as it relates to the auction, we would not have to go through Univision to act on that.

Well, but I want to be clear that anything we would do around this auction would be with Univision's -- we collaborate with them in every way, which includes informing them of whatever plans we have. That is how close our relationship is with them.

Great. And then just a question again on digital, and I think you said that the revenue that you're breaking out now is Luminar and Pulpo Media, so I gather there is meaningful revenue still that's digital related to the radio and the TV business and that we should not look for that to be broken out separately, but that's still a growing business, I gather.

Well, I think over time, the goal is to gradually put more and more of our digital business into that unit, but right now, correct, the standard [bare] ads and the advertising on our various websites and mobile, for that matter, will continue to be a part of both radio and TV digital.

Gordon, what the Pulpo acquisition has given us is that it strengthened our digital team significantly with the talented management and expertise that comes with -- digital expertise that comes with the acquisition. Justin Kuykendall, the CEO of that company, is one of the founders -- is a founder of the company and one of the leaders in the team of digital, and there are a number of other people that come with the company that are just terrific and very experienced in digital, so it strengthens our already existing digital management that we have.

And in that acquisition, there's some terrific technology, proprietary technology in marketing planning, campaign management, real time bidding, CRM, so one of our goals is to -- as we integrate this company into Entravision, is to be able to make sure that everything that goes into digital revenue as we classify it as digital is pure digital, and that's what we're working on as we speak here in this quarter.

Perfect, and I'm glad that's where you're focusing from an M&A standpoint, that you think that's where the growth is, so thanks very much.

Sure, Gordon. Thanks.

Thanks, Gordon.

This concludes our question-and-answer session. I would like to turn the conference back over to Walter Ulloa for any closing remarks.

Andrew, thank you. This concludes our third quarter 2014 earnings report. We look forward to speaking to all of you in the first quarter of 2015 to provide you our fourth quarter and full-year 2014 results. Thank you for participating.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.