Gray Media Inc (GTN.A) 2014 Q1 法說會逐字稿

Good day and welcome to the Gray Television first-quarter 2014 earnings release conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Hilton Howell, President and Chief Executive Officer. Please go ahead, sir.

Thank you so much, operator. Good morning. Welcome to the first-quarter 2014 earnings call of Gray Television. Thank you so much for your interest in our Company and your interest in our industry. As usual, I will be making a few brief opening remarks, followed by Jim Ryan, our Senior Vice President and Chief Financial Officer; and then by Kevin Latek, our Senior Vice President of Business Affairs. Following the conclusion of these comments we will answer any questions that you might have.

Before we discuss the quarter's results, I want to note the announcement we made last night that Gray is adding another number one new station and state capital to its station roster with acquisition of the NBC affiliate in Helena, Montana, KTVH. We are also acquiring the NBC affiliate in the adjacent market of Great Falls, Montana, KBGF, both of which we will be acquiring from Intermountain West Communications Company.

We are also seeking to acquire the CW affiliate for the Helena market, KMTF, from Rocky Mountain Broadcasting Company, subject to a failing station waiver from the FCC. We are very excited to be entering Montana, and I would like to publicly welcome the management, associates, and viewers of these stations to the Gray business family. These news-centered and community-centered stations will fit perfectly with our growing presence in the Great Plains and Rocky Mountain states and will complement our operations in Montana, Wyoming, North and South Dakota, Colorado, Nebraska, and Kansas.

Turning to the quarter, we are very pleased with our results. Our revenue reached $91.3 million for the quarter compared to $78.2 million in the prior year's comparable quarter, a 17% increase. Local advertising increased $4.6 million, or 10%, to $51 million. Retransmission consent revenue increased $6.4 million, or 66%, to $16.1 million. National advertising decreased by $100,000, or slightly less than 1%, to $13.3 million. Internet advertising increased by $0.3 million, or 6%, to $6 million. And our political advertising increased $2.2 million, or $336%, to $2.8 million.

We reported net income of $1.3 million, up 46.7% from $870,000 in the first quarter of 2013. And even more significantly, we increased our broadcast cash flow by 25% to $30.6 million compared to $24.5 million last year. All in all, we are very pleased with our acquisition. All in all, we are extremely pleased with the results of our quarter. With that, I will bring my prepared comments to a close and turn it over to Jim Ryan.

Thank you, Hilton. I think [Kevin] will cover the highlights from the revenue side. Again, our expenses were a little bit under expectation and really the big increases there year-over-year reflect the additional reverse comp with our ABC agreements triggering this year as well as the stations we acquired late last year contributed to $3 million of the expenses in Q1.

Turning to the balance sheet for a moment, our trailing eight-quarter average operating cash flow under our credit facility definition was $146.4 million, which gave us a trailing eight-quarter leverage ratio of 5.65, which was down slightly from the 5.67 at year end. Our debt remained unchanged at $837 million between end of quarter and end of last year, $159 million currently outstanding on our term loan and $675 million outstanding of our senior notes.

Our first-lien leverage ratio was at 0.98. The CapEx for the quarter was $3.8 million. And as we said in our fourth quarter call earlier this year, that we would expect total CapEx this year to be $25 million to $30 million with the $30 million reflecting the pending acquisitions that are still awaiting closing.

Cash taxes for the quarter was $31,000. Our NOL position at the end of the year was $225 million. Program payments were $3.8 million. We expect about $14 million of program payments for the year. Retransmission revenue, as Hilton commented earlier, was up substantially; it was $16.1 million in the quarter. You can see from first quarter as well as our guidance for second quarter that our run rate for retransmission revenue for this year would put us in the $64 million, $65 million range for the entire year. Our reverse comp with our ABC agreements starting this year in addition to the NBC agreements and the Fox agreements was $3.9 million for the quarter, which, again, if you extrapolate would suggest about a $16 million run rate for this year. And as we have talked many times in the past, our CBS agreements will kick in beginning next year and we will be fully [leaded] in reverse comp as we start 2015.

Briefly on guidance for second quarter, our local -- we are extremely pleased with how it's tracking and trending. We expect local to be up about 10%. Our Internet revenue will be increasing as well quarter over quarter, which we are pleased to see. We expect that to continue to build as the year goes on. And we have already commented on the retrans being a significant increase this year, reflecting the two agreements we negotiated at the end of last year. And then, as we said before, our remaining subscriber base for the historical Gray stations will be up at the end of this year.

Our national in Q1 was a little weak. We expect that that will continue a little bit into Q2 as well and be basically flattish year over year. But we are very, very pleased with the strong local growth we are seeing.

At this point, Hilton, I will turn it back to you.

Thank you very much, Jim. Kevin, do you have any comments?

Just a couple items. I will also be brief. Gray Television has begun 2014 by continuing the efforts initiated last year to grow our portfolio of leading television stations and ways to increase our scale in local regions and local markets. As you see from our press releases and this morning's earnings release, we have closed on all previously announced acquisitions [other than] Hoak Media and we have signed one new deal. In particular, in February we created a legal duopoly in Charleston-Huntington, West Virginia, between WSAZ, our NBC affiliate, and WQCW, full power CW. On May 1 we closed on our acquisition of our first standalone Fox station, KEVN, in Rapid City, South Dakota. We also begin operating KNDX, a Fox affiliate in Minot-Bismarck, which is the market immediately to the north of Rapid City.

We also entered into an agreement to purchase the low-power stations there, and we expect to close at acquisition in the second or third quarter. Yesterday we announced, as Hilton mentioned at the top of the call, an agreement to (technical difficulty) two NBC affiliates and the CW affiliate in Montana. KTVH, as you know, is the state capital of Helena and [supply ship to small group]. In fact, on the consummation of all pending transactions we will be proud to own the number-one television station in 28 of the 42 markets and the number-one or number-two television station in 38 of those 42 markets.

The Hoak Media transaction is a top focus of our management team. In the first quarter the FCC public comment period closed without any objections to the transaction. In early March the DOJ's antitrust division closed its investigation. In late March the FCC granted Gray's applications to acquire Hoak stations, and in April the FCC granted Nexstar's applications to acquire Hoak stations in Panama City and Grand Junction that Gray spun off as part of our agreement with Hoak Media.

The FCC, however, has not yet acted upon the remaining four applications. One pending application proposes that Mission Broadcasting acquire a station that would continue operating under a 1994 LMA was grandfathered back in 1999. The other three pending applications seek consent for Excalibur Broadcasting to acquire stations that would continue or would start a new shared services agreement.

None of these applications propose to start attributable joint sales agreement and none propose a loan guarantee or put-call option with Gray or Nexstar. The FCC has repeatedly require the parties to amend their application to supply documents and information, and the parties have complied in all respects.

Nevertheless, no one can predict when the FCC will act on these applications or any other applications that also seem to be stuck at the FCC. Under the various purchase agreements the closings are conditioned on grant of all applications. The parties therefore continue to prosecute remaining applications at the FCC and are hopeful the FCC will allow this relatively small transaction to proceed in the near term. Our highest priority is and will remain working to resolve the impasse and allow a closing as soon as possible.

On the legislative and regulatory front, the chief developments affecting the TV broadcast industry have been widely reported not just in the trade press but the general press in recent months. And therefore we will not take your time detailing those developments. But it's important to note that at Gray we do not foresee any impact in our business from the FCC's recent actions. The FCC decision banning joint sales agreements and banning joint negotiation and retransmission consent simply does not affect us. Gray currently has a single shared services agreement in Grand Junction, Colorado, which is DMA number 184. Under the SSA that Gray and Excalibur Broadcasting negotiated, actually, last summer, Excalibur's stations are sold by Excalibur employees, not by Gray. Gray's stations are sold by Gray employees, not by Excalibur.

Excalibur retained its retransmission consent rights in that contract and in fact has its own retransmission consent agreements with cable operators. Therefore, the new FCC rules do not affect our single SSA operation in Grand Junction.

The Hoak transaction would create additional shared services arrangements for Gray in Lincoln, Nebraska; Fargo, North Dakota; Monroe, Louisiana; and Minot-Bismarck, North Dakota. We do not believe that any of these arrangements need to be modified to comply with the FCC's new rules, however. The FCC's GSA and retrans orders simply will have no effect in Gray's results.

The FCC has proposed to require the filing of shared services agreements and has asked many questions about how they work, what they cover, and whether they serve local communities. The FCC has not proposed to ban shared services agreements. Gray's existing SSA in Grand Junction has benefited the stations and the local community, and we foresee the same result in the four markets where we would begin SSAs after the Hoak closing. We plan to participate in the FCC will making to demonstrate these benefits. Gray does not anticipate that the FCC will move to ban SSAs that, like ours, do not include joint sales or joint retransmission negotiation.

This concludes my remarks. I turn the mic back to Hilton.

Thank you very much, Kevin. Operator, we would like to open up the forum for any questions anyone may have.

(Operator Instructions) Aaron Watts with Deutsche Bank.

Appreciate all the detail. A couple clarifiers for me here, to kick off. Same-station revenues: is it as simple as backing out that $3.4 million of revenue you highlighted for the acquired stations? It's get you to like a 12.5% year-over-year growth. Am I thinking about that right?

Yes, you are thinking about that exactly right. If you are talking about Q1, yes. And it would be similar -- it's about $4.7 million in Q2.

Got it, okay. And then on a same-station basis would you mind pulling out what local and national spot was in the first quarter? I think you gave us 10% and 1% growth on a recorded basis.

Sure. If you are excluding the impact of the acquisition, so you are basically doing same station to same station, local would be up a very healthy 5%. National was down, reflective of the overall decrease in national. Digital would be up about the same 6%, and our broadcast operating expenses would be up about 7% if you backed out the acquisitions.

Okay. And I know you mentioned, along with a handful of your peers, that national was a little soft for you in the quarter. What are you attributing that softness to?

We think in part, early in the quarter, early to mid-quarter, it was reflective -- we think, in part, it was weather-related. Obviously, our strong presence in the Midwest and West -- certainly, weather was a big factor all over the country. We have also seen softness in restaurant, which probably initially was weather-related as well. But in fast food we are seeing some major accounts -- some of them kind of pulled back in Q1. Some of them are coming back a little bit in Q2. So there's a little bit of shifting in that category as well. Some of the Q1s, also, could be reflective of dollars a shifting to both Olympics and Super Bowl.

Okay, that's helpful. And on auto, I think in the release you talked about 11% growth year over year. Is that a good apples-to-apples comparison, or is there moving parts in that number?

I think it's a good comparison. The impact of the acquired stations, the few stations we picked up late last year, are all relatively small stations in small markets. So basically auto was healthy across the board, whether you are -- with or without the acquisitions.

Okay. And just thinking about the M&A pipeline, you guys have been active lately. You walked us through that. As you think about things going forward, do you think -- what should we expect from Gray? More tuck-ins like you have been doing? Is there the potential for something of a little more scale? Maybe you can just comment about that.

Quite candidly, we are actively looking at transactions both small and large. And, obviously, we are having to adjust some of our expectations and some of the things that we would like to do, to take into account the FCC and some of their various different issues that they have with [probably] the JSAs and SSAs. There are number of companies that we are in discussion with and more that we hope to be in discussion with. And the sizes are all up and down the chain.

Kevin, do you have anything to add to that?

I would just only add that I think there may be opportunities coming from new places that we haven't seen in the past as the FCC moves to unwind to JSAs in some cases. That and some increased acquisition activity among other parties may lead to some spinoff opportunities that would, if attractive and meet Gray's profile, would certainly be another source of things that Gray would look at.

Okay, got it.

I would just add on to that real quick that, certainly as we look at all this, we are still going to be very mindful of our leverage and continue to be prudent. We have talked about post closing Hoak would be just about six times L 8 heading into the mid-fives, we think, by the end of this year because obviously it will be a very, very strong back half of the year with political for us. And, certainly, that dead zone and that trajectory is very comfortable. So we will be, again, mindful of, first of all, looking for high quality and, also, as we continue to evaluate things, mindful of our overall leverage as well.

You stole my last question. That was exactly it. So thank you for taking it.

David Hebert with Wells Fargo Securities.

Jim, I'm not sure if you provided this. What is pro forma LTM EBITDA? You gave the eight-quarter average.

The pro forma number -- the operating cash flow number I gave you of $146.4 million would be pro forma for the minor acquisitions we made in the latter part of last year and also the Charleston-Huntington CW that we picked up mid-quarter this year.

Is that LTM or is that trailing eight quarters?

No, that was -- I'm sorry, that was a trailing eight-quarter. They LTM, the equivalent LTM number on a T 12 is $120.4 million.

$120.4 million? Okay. Thank you. And then on the Internet side, you are expecting some double-digit growth on that side. I noted that the dollars are still relatively small. But I wondered if you could give me a sense for, does that Internet growth cannibalize at all your time sales? Or do you view that as an incremental, separate, siloed kind of business?

We clearly view it as an incremental business and always have. There could be some generic shifts of dollars, but that wouldn't -- that would be just representative of broader macro trends. But in general, it's sold separately, it's billed separately. We are also pleased, as we announced earlier in the year, that we are just now beginning to introduce a full-service digital ability in our markets to not only serve -- sell spots on our site to come in and do design work and optimization work. Our clients have been asking for it and we finally found a partner company to provide the support services that we needed and white label it so it could be our brand in our local markets. And that's just getting off the ground in the last handful of weeks. And we think, as that deploys to the entire platform later this year, we are expecting to see some nice growth out of it.

Okay, thanks. And some of your peers have been acquiring some Internet companies, Nexstar and LIN being two at the top of the list. Do you feel like you need some more products and services that you can acquire inorganically?

What we did with the partner company, I think, is an excellent way for us to start. It's a fixed pass-through fee so we know exactly what they charge to do certain services and we can build that into what we then charge our clients. It allows us the support services we need without the major upfront investment. It allows us to -- since this is a new endeavor for us, it allows us to gain some experience in selling it and in dealing with our clients and our markets. And it gives us the flexibility down the road that we can either continue to partner, or we could potentially acquire those services by an acquisition or develop those services internally. But we think the initial start with a partner company, just like we have done many times in the past with a lot of our Internet or digital initiatives, we prefer to partner white label, learn as we go rather than investing a lot of money up front and then going to school.

Okay, makes sense. Last question for me -- I was on the telecom earnings call yesterday and they had mentioned some -- this was a rural telecom company and they had mentioned some small businesses having some financial issues, a lot of them going out of business. And since you are in some of those smaller markets, just curious to know how you view the health of the small business and how that might affect local ad spending.

Well, our local spend is obviously very healthy both first and second quarter. We really aren't seeing anything unusual in our receivable collections. So, we think in general, while there's always a few small businesses in any given market in any given year that will go under -- it's just the nature of small businesses -- we are not seeing any unusual trends so far. And Main Street in our markets seems to be healthy.

Okay, thanks a lot, guys.

Marci Ryvicker with Wells Fargo.

Thanks. I know national is flat in the second quarter. Do you have any visibility international trends for the third quarter?

Marci, in all candor it's just too far out to really have a trend on it yet. There's really not enough dollars to form a conclusion.

Okay. We heard from some of your peers it has picked up; that's what's driving the question. The next question is on expenses. I think you came in a little bit lower in Q1, little bit higher in Q2, excluding one-time costs. So should we use Q2 as a run rate for the rest of the year?

I think it's partly reflective or maybe an average of Q1 and Q2. Obviously, there's, in Q2, as we pointed out very clearly in the release, there is a NOTO non-cash charge because we revised our paid time off policies effective April 1. And with us it's always -- I think using an average is probably a little better because we tend to -- some of our employee counts will swing a little bit from quarter to quarter as, given the nature of small markets, we have a fair amount of turnover. It's just inherent in our size markets and in our business model. Also we get a little variability in our health and welfare since we are self-funded. So blend first and second quarter, and it's probably a reasonable estimate.

Now, the only other thing I would add to that is, as we get into especially fourth quarter, you would see in increase in national rep fees because they will take their commission on virtually all of the political dollars that would come in.

Okay. Can you give us an update on your DT stations, remind us how many of you have and maybe what the revenue and EBITDA contribution is?

Yes. Through 2013 is probably the easiest number to look at and compare to 2012 on a full-year basis. Our digital second channels at the end of 2013, we have 58 program streams. It was about $20 million of net revenue and $10 million of cash flow. That would compare to about $15 million in 2012 of net revenue and about $8 million of cash flow in 2012. So it's reasonably sized. It's not huge in relation to the overall Company, but certainly a very healthy cash flow. It comes in at a higher-margin than our core business because of the nature of the D 2 channel and its expenses are significantly lower. And it's growing nicely for us. So we are very pleased with them.

Great, thank you so much.

[Charlie Trench] from Tiburon.

A question I have with regards to comments you've made about your leverage and how you try to utilize free cash flow to want to get to a reasonable leverage and de-lever -- can you comment a little bit about what your expectation is for the year? At today's level, is this where you want to be or you had expectations to be lower?

Well, I think, first of all, we've clearly said that post closing Hoak we would be at about six times on a trailing eight-quarter basis going back into the 5's, which is certainly, by the end of the year, given the strength of the political, which is not an uncomfortable zone. I think the bigger question is -- over the shorter-term on leverage would be if it stays in that zone because we have good acquisition opportunities that fit our profile because they are strong market leading station, and clearly something like that would be free cash flow accretive. Or if those opportunities either take longer to present or, quite frankly, there isn't the opportunity because we like high quality and we are willing to be patient for that, then obviously free cash flow is -- free cash flow generation is significant and we would probably de-lever a little quicker.

Okay, and then one last question with regard to maybe the guidance or just the strength in the local ad space as it relates to auto. You had a pretty good quarter. In light of some of the OEMs having very weak 1Q numbers and obviously the recall news, are you seeing pacing levels for 2Q affected? Are the US OEMs having a little bit of a bump, or do you still continue to believe that the auto sector in the US and in your markets are doing okay?

Right now, for we have seen so far in Q2, that seems to be doing okay. And there's certainly no big red flags in that sector that we are seeing.

Okay, and then one last question on M&A -- you had mentioned earlier, in the first question, that you wouldn't be looking for smaller or bigger deals. Is this something, more of the second half focus? Or are you willing to make deals ahead of the Aereo news? Or are you waiting for that overhang and then start to really tack on the strategy?

Aereo has absolutely no impact on us one way or another, and it certainly doesn't have any impact on us with regard to M&A. So, we are looking now and the only thing that slows us down is just trying to find the right quality of assets that fit with our corporate culture and gain a price that we can mutually agree upon.

Okay. So a lot of the opportunities out there -- there's no one that's saying, hey, we will renegotiate or engage post-Aereo? Everyone seems to -- it's not an issue to trying to close a deal or why folks have been quiet about transactions is what you are saying?

No, it is not. I don't think has an issue, really, one way or another. And I think it has a negligible impact upon our business. And I don't think it's slowing M&A down at all. I think probably the biggest issue you have really is more FCC uncertainty rather than Aereo uncertainty.

Great, thanks.

Jon Evans, JWest LLC.

Can you just talk a little bit about your retrans? I think in the last quarter that was a surprise there. And I think you said that they would be at this level. What I was curious is then can you help us understand is it Q1 of next year that you will have another significant bump as you go through the upgrade process?

Yes, it would be Q1 next year because we -- just speaking for historical subscriber base for Gray, we have roughly 4.5 million subscribers that would come up for renewal at the end of this year. So, we will obviously see that benefit as we begin 2015.

And that $4.5 million is on your base of what? I'm sorry.

Our total historic base is about $6.5 million.

Got it. And then the other question --.

And we renegotiated $2 million very late last year.

Got it. And then the $4.5 million that you have coming up -- are those fairly old contracts or are they fairly recent? Or I guess --.

The majority of those would have been repriced basically three years ago in this kind of a standard three-year cycle that a people in the industry are in, which is obviously coming up again at the end of this year. So they were not terribly old. They were priced, we think, basically to market a couple of years ago. Certainly, the market has moved up since they were priced. We would expect significant increases as we move into the renewals at the end of this year. But it's not a case of -- the two contracts we did at the end of last year, we have indicated, were very old and very underpriced. So the step to market was very significant for them. We certainly expect a big step-up on the $4.5 million at the end of this year. But it wouldn't be as dramatic as the step-up we saw on the $2 million we did at the end of last year.

Got it. And in the last question relative to that, when does the other side of the cost start to escalate on you that you have to pay to the --.

Our ABC reverse comp started this year with our renewal of ABC. We have been paying NBC for a couple of years now as well as Fox. The CBS agreements come up at the end of this year, and we will be, obviously, paying CBS beginning next year. So actually it times out pretty well because, as we go into next year and start paying CBS we will have completely repriced our subscriber base within about -- most of our subscriber base concurrent with that happening and all of the subscriber base within the last 12 months of stripping CBS and starting to pay them in 2015. So we think we are in pretty good shape from that standpoint.

Would you expect to keep this 50%, where you get about half of what it goes up by? Or how do you view that?

It has been our sense so far that that's where, at least on the deals we have seen to date, that's where the marketplace is. And we will -- it's still very early in the year, and I'm sure we will be talking a lot with CBS as the year goes on. And I'm sure we'll come to a mutually agreeable set of terms by the end of the year.

Thank you for your time.

(Operator Instructions) Jim Goss with Barrington Research.

Before I ask the questions I was going to ask, piggybacking of what you were just saying, Jim, basically you are making an interesting point in that if you are getting into renegotiations that could potentially as much as double, in some cases, the value of your retransmission, then when you have to pay reverse comp for the first time you will basically hit a flattening rather than any sort of dip in the value you would have in that revenue stream. Is that a fair way to look at it?

I think that's kind of the way we are looking at it, yes. Obviously, we get -- you say doubling; I'm not sure we are doubling. We've got a lot of subscribers up so we certainly will price to whatever the market standard is at the end of the year, and it will be a significant increase. And again, with CBS kicking in at the same time, we think the -- being able to reprice our subs at the end of this year is going to have a significant smoothing effect for that -- obviously, that increase that we have been planning for quite some time.

Okay. A couple of other things -- I was wondering if the FCC approach to JSAs, et cetera -- given your command of smaller markets, would these rules possibly even provide you an opportunity, since you are uniquely poised to provide local benefits in those sort of markets in the way you always have, in getting multiple touch points or presence in a lot of the smaller markets because they were underserved markets, anyway? Can that work out to your favor rather than be an impediment?

I think what you are asking is, are there opportunities for us to start new JSAs under the FCC waiver outline? I think the answer to that is we are going to have to wait and see if the FCC actually grants waivers and, if so, what the actual criteria are. At this point there's announced criteria. We are not sure how they will be applied. So I think the whole industry is going to just need to see if there's actually going to be an opportunity [to do] new JSAs down the road.

We are blessed and cursed with the dominance of our stations in a lot of markets. Our market share is pretty strong in some markets already. So adding an additional TV station to our market share has been a reason why we have not explored JSAs in a lot of markets already. I think the more interesting opportunity coming from the FCC's crackdown is the possibility that some folks, some broadcasters may simply unwind JSAs and SSAs entirely and seek to sell the station or break the stations up, either to clean things up themselves or as part of a larger transaction.

I think that is where we may find some opportunities in an outright acquisition in an attractive market or potentially a station that was failing under someone else's leadership that we may be able to run a little bit more efficiently and run a little bit better. But in terms of just straight up start of the JSA under the new waiver criteria, it's just too early to predict whether that is actually going to provide an avenue for anybody.

Okay. Also with the somewhat softer scatter market going into the upfronts, recognizing that's a network event, not a local station event, is there any carryover impact on your own ad pricing in the local markets?

No. The upfront market has no impact or bearing on what we do in our markets.

Okay. So it has -- it's not reflective of any trends that you might be experiencing as well?

Right.

Okay. Last thing -- there was an interesting article in the Wall Street Journal this morning titled, more ad dollars flows to pirated video, pointing out that some of the digital ad sales placements that were intended to specifically target certain types of ads, certain types of activities in placements, wound up not getting used entirely in those intended areas. And then they wind up on a lot of other sites, some of which are pirated, some of which might be worse, and that effectively offset some of the perceived benefit of digital ad sales placement, which would be that targeted element.

I was wondering if you have any experience along those lines that might perhaps holds up the more traditional ad sales, where you have a better idea exactly where things are being located and what you are going to get for your money.

Well, with our digital platforms we are controlling that inventory and that placement. So I think there we are -- our customers know what they are buying and we are servicing them accordingly. I didn't have the opportunity to read the article, but it strikes me as being maybe more a very broad-based national type buys that are putting themselves over multiple platforms. And I think that's a completely different market and a completely different buy.

And again, in our markets and in our platforms we are controlling what's available to be sold and we know who we are selling to. So we obviously want to deliver on our sales and make them effective for our clients because we've got to go back and see them next week or the week after. And we have got long relationships with all those people in those small markets. And service is number one for us.

I was thinking less about your digital ad sales and more about the notion that -- the old saw about half of our ad dollars are wasted, we just don't know where -- that sort of thing. If the same experience winds up happening in some of the supposedly better targeted alternatives, that might negate some of the perceived advantage and provide some support from your own ad sales efforts in the broadcast area and other traditional media. That was really my train of thought.

You may be right that. If people are dissatisfied with where they are spending now that some of it might get reallocated. And certainly, if they want to put money down in our markets, we will be happy to talk to them about it.

All right. Well, thanks very much.

Barry Lucas from Gabelli & Co.

Thanks and good morning. I was just hoping to get a little political update, if you will, and thoughts about whether or not you can beat 2010, the last nonpresidential year, and any particular races or states that may provide some upside, acknowledging that we are still pretty early in the year.

Well, as you point out, Barry, Q1 was basically at our expectation. We are pleased with where our numbers look like they are going to come out for Q2. Certainly, as we've talked many times, 50%-plus of our total political spent ends up in Q4. You can go back year after year, and that has been a consistent trend. So we, obviously, are expecting a very, very strong fourth-quarter and a healthy third quarter.

I don't think there has been anything terribly surprising yet. We might have -- Kevin, you can feel free to chime in here. But all in all, we are pleased with what we are seeing so far, and we think we -- we have said that we did $58 million in 2010, the last off year, and we think we will do better than that in 2014. But clearly, as we've said many times, we are not expecting to break the presidential year record of $86 million from 2012.

Great. Thanks, Jim.

(Operator Instructions). And at this time I show no further questions in the queue, and I would like to turn the call back over to our speakers for any additional or closing remarks.

Thank you very much, operator. I just want to thank everyone for joining us this morning. We are excited about our results. We really are excited about what looks ahead for 2014. Thanks for joining us, and we will talk to you next quarter. Thank you.

That does conclude our conference for today. Thank you for your participation.