Entravision Communications Corp (EVC) 2016 Q4 法說會逐字稿

Good afternoon and welcome to the Entravision fourth-quarter 2016 earnings conference call.

(Operator Instructions)

Please note, this event is being recorded.

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

Thank you, Gary. Good afternoon, everyone, and welcome to Entravision's fourth-quarter 2016 earnings conference call. Joining me on the call 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 expressed written consent of Entravision Communications Corporation is strictly prohibited.

Also, this call will include 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 and was filed with the SEC on Form 8-K.

The fourth quarter marked a strong end to another successful year for Entravision. During 2016, consistent execution of our multi-platform strategy drove audience share gains as we continued to invest in engaging content while also further strengthening our digital platform and reach. We greatly expanded our mobile capabilities and offerings as well as the breadth of opportunities for our advertising partners to connect with highly engaged Latino consumers, while our Univision affiliates and radio stations continued to be well positioned in the nation's largest Latino markets.

We also continue to return capital to our shareholders through our quarterly dividend, while at the same time further strengthening our capital structure via a $20 million prepayment of term loans under our senior secured term loan credit facility. Today we also announced the results of our participation in the FCC TV broadcast incentive auction, where we generated approximately $264 million in gross proceeds.

Keep in mind, this a gross amount. And does not take into consideration a potential cash outlays or additional proceeds arising from possible post auction channel sharing arrangements that we are currently evaluating. Proceeds from the auction are expected to be received in the second half of the year, and we have sufficient tax NOLs to offset this gain.

We also do not expect the results achieved in the spectrum auction to have any material impact on our day-to-day television broadcasting operations. At this point, it is our intention to use a portion of these proceeds for debt repayment, while retaining the balance for possible future acquisitions and shareholder returns.

Today, we also announced we entered into a definitive agreement to acquire the business Headway, a leading provider of mobile, programmatic, data, and performance digital marketing solutions. Focused primarily in the United States, Mexico, and Latin America. Headway is a pioneer and leader in digital advertising with rapid growth, a strong advertiser base, proprietary data assets and a programmatic demand site platform offering unique performance targeting technology and data systems to top advertisers and agencies.

The addition of Headway enhances the digital capabilities that Entravision offers to our advertisers and marketing partners, and our ability to target audiences and consumers. As well as our goal to have digital revenue represent 20% of our total revenue by next year.

Looking now at our financial results, revenues increased 7% to $70.3 million in the fourth quarter. Consolidated adjusted EBITDA was up 10% to $20.6 million in the quarter, while free cash flow, which we defined in our press release, was up 10% to $14.9 million.

For the year, 2016 revenue increased 2% to $258.5 million. Consolidated adjusted EBITDA was down 9% to $69.2 million, while free cash flow as defined in our press release was also down 9% to $45.2 million.

Turning to our television segment operating results. Television revenues were up 9% during the fourth quarter, primarily due to higher political and retransmission revenues. National advertising revenue was up 30%, while local advertising revenue was down 5%.

Retransmission revenues increased 1% during the fourth quarter. Excluding retransmission and political revenues, core television revenues were down 5% during the quarter.

Total television political revenue for the fourth quarter was $5.3 million. For full-year 2016, our television division booked $8.6 million in political revenue.

Our political revenues for the full year were significantly less than originally anticipated due to this unique election cycle. As I mentioned on the last call, while we are disappointed at how the political investment for the year played out, we do not believe this cycle reflects the increasingly critical importance of the Latino voting population. And the impact it will have on the outcome of future mid-term presidential elections as well as downstream elections.

The automotive category remains a positive story for our television business. During the fourth quarter, automotive for television was up 3%. This growth was driven by increased ad spending, primarily by Toyota, General Motors, Hyundai and Fiat Chrysler Auto compared to the same quarter last year. Looking at the various auto tiers, Tier 1 national auto revenue was up 31% while Tiers 2 and 3 revenue were flat over prior-year levels.

Other key advertising categories that generated meaningful growth during the fourth quarter included media up 39%, finance up 50%, alcohol up over 200% and direct marketing up 88%. We added 56 new advertisers to spend more than $10,000 during the fourth quarter, which totaled approximately $2.5 million in advertising revenue. Notable new brands in the fourth quarter included Aetna, [stisetta] Leadership Fund, Sanofi, Aventis and Patriotic Majority USA.

Turning to our ratings performance. Our Univision television affiliates built upon their market leadership in the November 2016 sweeps. For adults 18 to 49 in early local news, our Univision television stations finished ahead of our Telemundo competitors in 15 of 17 markets where we have head-to-head competition. In late local news, we finished ahead of our Telemundo competitors in 11 markets along the 17 markets where we have head-to-head competition.

Additionally, our early local newscasts are ranked number one or two against both English and Spanish competitors in 15 markets, regardless of language. Our late local news are ranked number one or two in six markets, regardless of language.

During a full week, our Univision and UniMas television stations combined have a cumulative audience of 3.1 million Hispanics in our markets compared to Telemundo's two million Hispanics. We have 51% more television viewers in Telemundo in our footprint, and our reach is up 13% over the same period last year.

During a weekday prime time, in total adults 18 to 34 regardless of language, our Univision affiliates generated a higher ratings than one of the big four English language networks in eight markets. Univision's Latin Grammy telecast in November 2016 outperformed Telemundo's April 2016 Premios Deportes among those 18 to 49 in 13 of 17 markets. In addition, the Latin Grammys telecast was among the top-five prime time programming regardless of language for the night among adults 18 to 49 in five markets.

One final programming note about our television platform. We're pleased to announce today the launching of three new TBS tech affiliations in San Diego, Yuma, El Centro and Laredo markets. We will begin broadcasting Azteca programming via multicast in San Diego starting March 15.

And on July 1, Azteca programming will be moved to XHAS replacing our Telemundo affiliation in the market in order to broaden the reach of this important and growing Spanish Language TV network. We began broadcasting Azteca programming on our multi-cast signals in Laredo and Numero Centrale earlier in the quarter on February 12.

Turning to our audio division. Audio revenues increased 4% during the fourth quarter compared to the prior year. Local revenues were down 4%, while national revenues were up 19% in the quarter. To breakdown national further, national spot was up 14% while our national network business increased 26% compared to the fourth quarter of last year.

Our Entravision national audio network continues to deliver solid performance of revenue growth, driven by O'Reilly Auto Parts, Auto Zone, Home Depot, Macy's, and Sprint PCS. Key new advertisers to our Spanish network audio space included well known brands such as Uber, AARP, Quicken Loans and Wolverine apparel. These brands recognize not only the strong reach of our platform, but also the highly engaged audience shares we deliver via our industry-leading content offerings.

Today, we deliver the best content in Spanish language audio, with nationally recognized talent including Erazno y la Chokolata, Alex El Genio Lucas and Eduardo Piolin Sotelo. This content lineup is second to none and reaches a broad audience via our owned and operated radio stations, as well as through our national syndication platform. Looking beyond audio, all these shows and talent have an established and continuously growing multi-platform presence including online and mobile.

The key driver of our network success this year was our ability to greatly increase the number of customized syndicated partnerships we created with our agency and client partners, where our radio personalities became multi-platform brand ambassadors for our major advertising partners. These unique campaigns are audio focused through radio, mobile streaming, live events, and on-site promotional extensions.

For the full year, we executed 15 of these national brand endorsement campaigns compared to just two in 2015. We expect to continue benefiting from our leading talent and audio focused campaigns during 2017.

Total audio political revenue during the fourth quarter was $1.3 million. For the full year, our audio division booked $2.1 million in political revenue. Top non-political categories for our audio division during the fourth quarter were healthcare up 23%, services up 9%, retail up 16%, media up 16%, finance up 60% and auto up 3%.

Looking at our audio division ratings performance among all stations regardless of language in the adults 18 to 49 demographic, the Erazno shows in the top 10 in 11 of the 12 markets for fall of 2016. El Genio Lucas is in the top 10 in six markets, and Piolin is in the top 10 in seven markets. 13 of our radio stations are among the top 10 stations overall in their markets regardless of language among adults 18 to 49.

Lastly, we recently launched our new format La Suavecita radio on KSSE in Los Angeles. El Suavecita is a regional Mexican format that is focused on plane and mix of grupero and cumbia music from the 1980s and 1990s. It brings a unique signature sound to listeners in the number one Latino radio market in the country. While it is still early yet, we are encouraged by January's impressive audience gains since its debut who our prime time listenership increased by 47%, 32%, and 34% among Hispanics 12-plus, 18 to 49, and 25 to 54 respectively since the launch in December.

Now let's talk about our digital business. Digital revenues increased 6% during the fourth quarter and finished up 23% for the full year. Our digital revenue has accounted for approximately 9.5% of our total advertising revenues in the fourth quarter. Like I said earlier, our goal is to increase our digital revenue to 20% of total revenue by 2018.

The consistent growth in our digital revenue has been driven by the combination of our robust online and mobile audience shares, advanced data capabilities, engaging content and strong reach of our Pulpo network. We have entered into an arrangement with IAB to train and certify all of our integrated marketing solutions consultants. Providing our sales teams with the necessary tools and educational resources to excel in today's evolving advertising ecosystem is critical to the success of our Company.

The number of brands working with us on digital campaigns continues to grow. Major brands we worked with during the fourth quarter include Chrysler, Nissan, Quicken Loans, LA Care, Hyundai, Sprint and Microsoft.

We generated strong year-over-year performances in the fourth quarter in a number of key advertising categories. Including our top category product brands which saw a 9% increase, automotive increased 7%, services were up 8% and healthcare saw a 28% increase in the fourth quarter.

Overall, our digital platform continues to benefit from our unique combination of assets and expansive reach. In fact today, we deliver the largest US Latino reach to advertisers. This leadership is partially driven by our Pulpo audience platform, which targets Latinos across all devices and platforms, coupled with big data, programmatic targeting and yield optimization tools.

The competitive advantage of Pulpo are further strengthened by our commitment to highly engaging mobile-centric content. Mobile remains a critical element of our digital strategy, as we continue to see our digital audiences connecting primarily with our content through mobile devices.

Latinos, particularly the attractive millennial demographic, continue to [over decks] in terms of usage and consumption of media via mobile devices. Mobile continues to be our fastest-growing revenue stream. Mobile revenue increased 43% during 2016, and currently makes up 40% of our overall digital revenues.

Pulpo remains the number one digital platform for reaching Latinos in the United States according to ComScore, whose latest numbers show that our mobile audience shares continue to grow. Particularly in the attractive bilingual millennial demographic. In fact ComScore data shows that through Pulpo, we currently connect with 31.7 million unique bilingual and bicultural US Latinos via mobile.

Given our expanding presence in mobile and it's growing importance, our digital teams continue to develop and introduce engaging new offerings. This includes apps and mobile first websites for Erazno y La Chokolata, Alex El Genio Lucas, El show de Piolin. In October, we launched El Garage le Erazno an animated webisode series focused on one of the main personalities of the Erazno y La Chokolata show.

El Garage de Erazno is available through the show's dedicated app and on Facebook. We have received 45 original animation clips, which have generated thousands of views since their inception.

Our owned and operated websites continue to generate record-setting usage levels, and most recently hitting 6.9 million unique visitors during the fourth quarter. Delivering a robust digital experience to our audiences remains a primary strategic focus.

I am pleased to say that our overall website sessions increased by over 50% when compared to the previous year. Including the growth in our target audience that allows us to reach over 25 million unique users, generating more than 84 million page views in 2016.

To that end, we published over 8,000 new stories during the fourth quarter. These stories produced over 20 million views across our owned and operated websites.

More importantly, we understand the importance of videos on our digital platforms, which led us to refocus our news and content teams to think digital first throughout their workday. This allows us to engage with our digital communities more effectively. I am pleased to say that this effort has been a great success, delivering over 110 million videos during the fourth quarter on our websites and social media sites.

During the fourth quarter, we streamed over 6.2 million hours of audio entertainment. This audience is comprised of an average of over 725,000 monthly unique streaming listeners. This represents an increase of over 40% when you compare fourth-quarter 2015 to the same period in 2016.

Our social media presence also continues to expand. During the fourth quarter, our cumulative social media community surpassed nine million followers across key networks including Facebook, YouTube, Twitter, and Instagram. Overall, we continue to strengthen our digital platform through our commitment to engaging content and our focus on expanding our mobile offerings.

Pulpo brings unique assets and capabilities to our digital platform, and we're focused on driving increased gains from our data capabilities and marketing technology. Today, Entravision's digital audiences includes all acculturation levels, in all key demographics including Spanish dominant, bicultural, bilingual and English dominant Latinos. We deliver a targeted, attractive and engaged digital audience spanning both online and mobile, and we believe we're well-positioned to continue delivering a strong value proposition to our advertising partners.

Turning now to our pacings for the first quarter. Television revenues are currently pacing flat in the first quarter, excluding political core TV revenues pacing up low-single digits in the quarter. Our audio advertising revenue is currently pacing down mid-single digits in the first quarter, excluding political core radio is pacing down mid-single digits in the quarter. Digital revenues are currently pacing down low-single digits in the quarter.

In summary, we achieved a number of strategic accomplishments in 2016, including successfully expanding our multi-platform presence and growing our audience shares. We continued to strengthen our digital platform, particularly mobile, and our television and radio stations remain well-positioned across many of the nation's most densely populated Latino markets.

We also successfully participated in the FCC spectrum option. The proceeds of which will significantly improve our balance sheet, as well as our flexibility for possible M&A activity in what we consider to be a highly fragmented Spanish language media industry here in the United States.

Moving forward, we will continue to execute our multi-platform strategy and invest in our on-air, online and mobile centric content offerings. We will also continue to develop unique offerings and opportunities for brands to connect with the rapidly expanding Latino population across all levels of acculturation and all key demographics.

Today, we announced the promotion of Jeff Lieberman to President and COO of the Company. I would like to take this opportunity to recognize and congratulate Jeff Lieberman on his new position of President and COO of Entravision.

Jeff has been a member of Entravision's Executive Team for almost 20 years. During that time, he helped grow and lead the Company through his service, business insights, and commitment to Entravision's success.

I know that Jeff will make even greater contributions to Entravision going forward. At this time, I will 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. As Walter has discussed, net revenue for the quarter was up 7% at $70.3 million compared to $65.4 million in the same quarter of last year.

Operating expenses increased 4% to $41.1 million, and consolidated adjusted EBITDA was $20.6 million. Net revenue for the year was up 2% at $258.5 million compared to $254.1 million in the prior year. Operating expenses increased 5% to $160.2 million, and consolidated adjusted EBITDA was $69.2 million.

During the fourth quarter of 2016, the Company paid cash dividend of $0.03125 per share to shareholders of the Company's class A, class B, and class U common stock. The total amount of the cash dispersed for the dividend was $2.8 million.

The Company also announced today that the Board of Directors has declared a quarterly cash dividend of $0.03125 per share to shareholders of the Company's common stock payable on March 31, 2017. The total amount of cash to be dispersed for this quarterly dividend will be approximately $2.8 million. As previously announced, we currently anticipate making cash dividends on a quarterly basis in future periods.

In addition, during the fourth quarter of 2016, the Company voluntarily prepaid $20 million of term loans under the Company's senior secured term loan credit facility. During the year, the Company made principal term loan payments of $23.8 million. The ending balance of the term loans as of December 31, 2016 is $292.8 million.

For the quarter, TV net revenue was up 9% to $43.4 million compared to $39.8 million in the same quarter of last year. The increase in our TV segment revenue was primarily attributable to an increase in political advertising revenue, which was not material in 2015, partially offset by decreases in local and national advertising revenue. Political revenue for the quarter was $5.3 million compared to $36,000 in the same quarter of last year.

Retransmission consent revenue was up 1% at $7.3 million compared to the same quarter of last year. For the year, TV net revenue was slightly up at $159.5 million compared to $159.1 million in the prior year.

There were increases in political advertising revenue, which was not material in 2015, and in national advertising revenue. That were offset by a decrease of approximately $10.5 million of revenue associated with television station channel modifications made by the Company in order to accommodate the operations of a telecom operator in 2015 which did not recur in 2016.

Political revenue for the year was $8.6 million compared to $0.4 million in the prior year. Retransmission consent revenue was up 6% to $29.6 million compared to $27.9 million in the prior year.

Radio net revenue for the quarter was up 4% to $20.2 million compared to $19.4 million in the same quarter of last year. The increase in our radio segment was primarily attributable to an increase in political advertising revenue which was not material in 2015. And an increase in national advertising revenue partially offset by a decrease in local advertising revenue.

Political revenue for the quarter was $1.3 million compared to $0.1 million in the same quarter of last year. Radio net revenue for the year was flat at $75.8 million compared to the prior year. The increase in political advertising revenue which was not material in 2015 was offset by a decrease in local advertising revenue. Political revenue for the year was $2.1 million for radio compared to $0.3 million in the prior year.

Digital net revenue for the quarter was up 6% to $6.7 compared to $6.3 million in the same quarter of last year. The increase in our digital segment was primarily attributable to increases in local and national revenue.

Digital net revenue for the year was up 23% to $23.1 million compared to $18.9 million in the prior year. The increase in our digital segment was primarily attributable to increases in both local and national revenue.

Operating expenses for the quarter were $41.1 million, up 4%. The increase was primarily attributable to expenses associated with generating increased advertising revenue and increases in salary expense, insurance expense and promotional expense.

TV operating expenses excluding non-cash compensation expense were, up 3% at $21.1 million. Audio operating expenses excluding non-cash compensation were, up 6% at $16.7 million. Digital operating expenses excluding non-cash comp were, up 5% at $2.6 million.

Operating expenses for the year were $160.2 million, up 5%. The increase was primarily attributable to the expenses associated with generating increased advertising revenue and increases in salary expense and insurance expense.

TV operating expenses excluding non-cash comp were up 4% at $83.1 million. Audio operating expenses excluding non-cash comp were up 6% at $65.1 million. Digital operating expenses excluding non-cash comp were up 12% at $10.8 million.

Corporate expenses for the quarter were up 14% to $7.9 million compared to $6.9 million in the same quarter of last year. Excluding non-cash comp expense, corporate expenses for the quarter were $6.1 million versus $5.3 million in the same quarter of last year, an increase of 15%. Excluding non-cash compensation expense, the increase in corporate expenses was primarily due to an increase in legal and financial due diligence costs related to the pending Headway acquisition announced earlier on this call and increases in salary expense.

Corporate expenses for the year were up 9% to $24.5 million compared to $22.5 million in the prior year. Excluding non-cash comp expense, corporate expenses for the year were $20.8 million versus $19.2 million in the prior year, an increase of 8%. Excluding non-cash compensation expense, the increase in corporate expenses again was primarily due to an increase in legal and financial due diligence costs related to the pending Headway acquisition and increases in salary expense.

Income tax expense was $3.7 million for the quarter, while cash taxes paid was $0.1 million. Given the elimination of our full valuation loans in the fourth quarter of 2013, future income tax expense will run at approximately 40% of pretax income. Although most of this expense will continue to be non-cash, given our NOL offsets.

Earnings per share for the quarter was $0.08 per share compared to $0.06 per share same quarter of last year. Earnings per share for the year was $0.22 per share compared to $0.28 in the prior year.

Free cash flow as defined in our earnings release increased 10% to $14.9 million for the quarter compared to $13.5 million in same quarter of last year. Cash interest expense for the quarter was $3.5 million compared to $3.1 million in the same quarter of last year, due to interest related to our swap agreements. Cash capital expenditures for the quarter were $2.1 million.

Free cash flow as defined in our earnings release decreased 9% to $45.2 million for the year compared to $49.7 million in the prior year. Cash interest expense for the year was $14.4 million compared to $12.2 million in the prior year, due to interest related to our swap agreements. Cash capital expenditures for the year were $9.1 million. Capital expenditures for 2017 are expected to be approximately $12.5 million.

Turning to our balance sheet. As of December 31, 2016, our total debt was $292.8 million and our trailing 12 month consolidated adjusted EBITDA was $69.2 million. Cash on the books was $61.5 million as of 12/31/2016. Net of $20 million of unrestricted cash on the books, our total leverage as defined in our 2013 credit agreement was 3.9 times as of 12/31/2016.

That will conclude our formal remarks. Walter and I will now be happy to take your questions. Gary, I'll flip it back over to you.

We will now begin the question-and-answer session.

(Operator Instructions)

James Dix, Wedbush Securities.

Good afternoon, gentlemen. A couple questions. I guess first on the auction since it is so topical.

Walter, you mentioned the $264 million does not include potential economics of other agreements like channel sharing, which you might conclude. Any color on the potential impact there and the likely timing of when we will have the final economics related to that? And one follow up on the auction.

James, yes, thank you for the question. No color, no additional color on any negotiations we might be involved with regarding channel sharing. We are talking to different parties, and we expect that something might happen in this area later in the second or third quarter.

But that is really all I can say about -- all I should say about our plans. We are pleased with the results, and it was not what anybody anticipated but we're certainly pleased with the additional $264 million.

Our goal is to use a portion of these proceeds to pay down debt. We'd like -- our goal is to have our debt-to-EBITDA ratio somewhere between two and three times. And we will continue to evaluate M&A opportunities as well as shareholder returns with some of the proceeds.

Great. And then just concerning the proceeds which you are going to get, any outlook as to when you're actually going to receive those proceeds over what time period? And then are there any or like-kind exchanges or other transactions potentially to minimize taxes? Something which is on the table, and when would you need to finalize and announce those?

Right. Well, we have sufficient NOLs to cover all of the proceeds, but there might be some like-kind exchanges. We do not know yet. We've talked about it and are some opportunities out there that we're looking at, but nothing definitive to announce certainly today.

I think we will be seeing the proceeds probably -- if it is a staged, I understand staged release of funds, I think we'll start seeing funds released probably early in the third quarter and on into late third quarter and probably early fourth. Is how I see it playing out, given the information we have today.

Okay, great.

And as the cash comes in, I think you had this question. The timing if you are going to look for a like kind exchange ruling, once the cash arrives you have got 45 days to list your targets and then you have 180 days to close to be able to get that tax treatment that we are after. So we already have our qualified intermediary set up which is necessary as a first step, so that is all in process and we will see how it goes.

Okay. So it is 180 days from the time you receive your cash.

Correct.

To closing date, okay. Great. And then just on the fundamentals, I may have missed it. What was the auto category for radio or radio/audio in the fourth quarter, what was the growth on that?

Auto was plus 3% for both radio and our TV segments.

Okay. And then what is the outlook for the auto category across your properties this year, and is there any color on particular manufacturers? I know some companies have talked about what Ford is doing and some cuts they are making, at least at the national level, or reallocations. So any outlook you could give there on that category, and anything you're seeing in particular by nameplate or tier that stands out to you would be helpful. Thank you.

Well, what grew our auto that 3% in the last quarter was really the Tier 1, it was the national tier. For the outlook for this coming year, you have got 75 new vehicle models scheduled to be launched. There is still a lot of clearing of existing inventory campaigns that are going on that we're getting some benefit on.

If we look into Q1, right now auto is still pacing positive in the low-single digits, particularly for TV. It's slightly negative for radio, so it's a bit more of a mixed bag.

As far as any particular brands are concerned, I would expect the current folks who were big spenders, the pickup truck manufacturers, will continue to be the drivers of our auto category. We're still expecting certainly much more modest growth that we have seen historically, just given where we are in the cycle and where auto revenue is as far as a percentage of our revenue. But we're still -- the expectation is still for modest growth.

Okay. Great. Thanks very much.

Thanks, James.

Thanks, James.

John Kornreich, JK Media.

Hello. Back to the spectrum, did I hear you correctly, the NOLs will cover any tax liability?

Yes, Jeff.

That's correct, Jeff.

What were the NOLs going into 2017? What was the amount?

$309 million.

Wow. At roughly what level of BCF would you be giving up in this transaction?

No material BCF is going to be given up in the transaction. No change in our day-to-day operations, John.

Okay. Maybe I'm misreading this because of expectations. But to me, this number is a monster number. Okay?

But you downplayed it so much. There was no press release as every other company did announcing the results and which led a lot of people to think you got nothing. Because why would you be so silent about it. What was the thinking here about downplaying this so much?

Well, John, you have to keep in mind there are still a lot of conversations going on in the space that are related to the auction. And we felt why not give this more time to shake through some of the deals that we are still talking about, and perhaps give some color on the call date. And unfortunately, we are not across the finish line with anything yet so we just decided --

So the $264 million should have a plus sign with it maybe.

It could.

Yes.

Possibly.

Okay. The Headway acquisition, I assume under $10 million?

Right abouts.

Okay. And radio rebounded a little bit in the fourth quarter, but it looks like a short-term aberration. Why is it returning to weakness again?

Well, it did -- it rebounded, but we've started out slowly here. In the first quarter, national has been a little slower to develop than we had planned. But we still expect a good year in radio despite a bit of a slow start, and it has been a mixed bag this quarter.

January was a rough start to the year, and I think the industry saw that. It's been slowly progressing deeper into the quarter, and then Q2 numbers look even better. So I do not think it is the beginning of a new trend.

The total political for the year was $5.5 million, correct?

It was $10.6 million all in.

So the $5.5 million was just the quarter. And how does it -- (multiple speakers).

Go ahead, John.

The $10.6 million broke down TV versus radio?

Sure. The TV was $8.6 million for the year, radio was $2.1 million.

Okay.

And rounding gets you to, I'll call it, $10.7 million instead of $10.6 million.

Right, I think that is it. Retrans for the new year, $30 million, $31 million good number?

Yes, expect a run rate quarter in, quarter out of about $7.8 million, mid-single-digit run rate.

Okay, $31 million. And let's see, there was something else. Lastly, the digital revenues that you forecast for a quarter of total revenue, is that for 2017 or just next year $2.3 million?

I think -- you're talking about the 20% number that Walter threw out earlier?

The 20% yes.

20% growth, that is our goal to reach, John, in 2018. And this acquisition of Headway will certainly help us -- will put us on the path to reach a nickel.

I hope you get there the good way.

Pardon me?

That is a pretty big number, because you're going to have maybe another political bounce in 2018.

I'd say it is a big number, and we are on the road doing that. We are at 10% at the end of this year, and the goal is to be at 20% or above by next year.

Okay. Last question, Chris, just remembered. Am I right in saying, I assume I am right, that your retrans of $30 million carries no expense?

It does not carry any expense, you are correct.

Okay. Thanks a lot. I will see you down in Boca.

Thanks, John.

Bye, John. See you there.

(Operator Instructions)

Michael Kupinski, Noble Financial.

Thank you. Just a couple of quick questions. How much of the spectrum proceeds were -- are going to put into escrow for the prospect of like kind exchange provision?

Upfront, all of them. All of the proceeds are going to be filed away with qualified intermediaries, and then we will see what we can do about finding targets to apply the usage.

Got you. And in terms of the 20% goal of digital, would that also include acquisitions in digital?

No. Yes, the like-kind exchange would not apply to digital. You would have to buy FCC broadcasting at related assets to be able to qualify for the (multiple speakers) funds. There is a 1033 optionality which involves the acquisition of stock of a broadcast company, which is all something that we are looking at.

Got you. And were any of the stations that were sold underperforming and could actually help with the total Company performance?

No, I think the right way to think about this is that there will be no material change in our broadcasting cash flow as a result of this transaction.

And realizing that retransmission is net of network comp because it is just a payment to you from Univision, but retransmission growth at 1% I guess if you want to look at it from that perspective could be well below that of broadcast industry. And I was wondering where the Company stands with its proxy agreement with Univision, and will the Company be able to negotiate retransmission on its own? Is that a prospect?

Well, we have always felt that the better arrangement for both companies is to sit down and work through a deal with Univision, and that is what we continue to work through with Univision. So those conversations are ongoing. The 1% comment is, that's a fact.

But what you have to look at is that the last year, the prior-year number that you were comping up against, was a bit higher. Because there were some true-up payments made in the prior-year period. So if you would normalize for that, you were talking about a mid-single-digit growth rate which is basically what I think you should pencil in for this year until we have news as far as the proxy negotiations are concerned.

Got you. And then in terms of obviously starting off a little slow in the first quarter, but can you give your thoughts about the prospect of cutting some expenses, particularly in television in light of a little lackluster first quarter of a little lackluster start to the year? And what your expense outlook might be for the television and radio segment for the 2017?

Sure, Mike. So I can give you a bit of guidance which is a bit out of the ordinary because we do not guide revenue, but I can help you out with expense a little bit. So for the year, TV expenses will be flat to slightly negative, that's quarter in, quarter out.

And then for radio it is a two-piece equation there. For the first half the year, expenses will be low- to mid-single-digit growth and then the backend of the year will be low-single-digit growth.

Okay. And then can you give us some thoughts on ratings for your stations, particularly just on the maybe on the cumulative type basis how your stations are performing in terms of ratings versus what I guess the network, Univision network, might be seeing in terms of its ratings? Can you just give us a flavor of the direction at least?

Well our news had a good -- we had a good fall sweeps, and it has been showing continued improvement. We put that into that script there. So you may want to go back and read through it,

But generally the news ratings story is very positive. And I think if you go back, and Univision had their call earlier last week, the Univision network ratings story is one that is improving. They have made some organizational changes as far as people running the show over there on the content side, and there seems to be and we are seeing it in the numbers an improvement and some traction with respect to the ratings nationwide which is all good.

I also commented, Michael, that with our Univision and UniMas television affiliates, we have a combined cumulative audience of 3.1 million Latinos in our market footprint compared to Telemundo's two million Hispanics. So we have 51% more viewers than Telemundo in our footprint, and this has been consistent for a number of quarters.

Okay. Great. That is all I have. Thank you, guys.

Thank you, Michael.

Thank you.

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

Thank you, Gary, and thank you everyone for participating in our fourth quarter 2016 investor conference call. We look forward to talking to all of you again in May when we will announce our first quarter 2017 results. Thank you.

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