Nexstar Media Group Inc (NXST) 2014 Q4 法說會逐字稿

Good day, everyone, and welcome to the Nexstar Broadcasting Group's 2014 fourth-quarter conference call. Today's call is being recorded.

All statements and comments made by management during this conference, other than statements of historical fact, may be deemed forward-looking statements, within the meaning of Section 21 of the Securities Act of 1933 and Section 21-A of the Securities and Exchange Act of 1934. The Company's future financial conditions or results of operations as well as forward-looking statements are subject to change. The forward-looking statements and comments made during the conference call are made only as of the date of today's conference call.

Management will also be discussing non-GAAP information during this call. In compliance with regulation G reconciliations of this non-GAAP information to GAAP measurements are included in today's news announcement. The Company does not undertake any obligation to update forward-looking statements reflective of changes and circumstances.

At this time, I would like to turn the conference over to your host, Nexstar President and CEO, Perry Sook. Please go ahead, sir.

Thank you, operator. Good morning, everyone. I know it's a busy day for those of you on the call. Thank you for joining us today, on my birthday, to review Nexstar's record fourth-quarter and 2014 financial results and to discuss several recently completed transactions we believe will drive future cash flow growth in 2015 and beyond. The much younger Tom Carter is also here with me on the call this morning.

I'd like to start off by just hitting a few of our highlights for 2014. 2014 was another record year for the Company. And by adhering to our long-term playbook we achieved outstanding financial growth and set the stage for continued near- and long-term growth.

Our key highlights include -- further expanding our platform and scale; completing the accretive acquisition of 12 TV stations within the year and 2 complementary digital businesses; successfully renewing retransmission consent agreements with over 200 MVPDs, representing about 40% of our subscribers, including several major MVPDs in that mix. In doing so, we extended our record of uninterrupted service in our markets for 10 years.

We entered into long-term affiliation agreements with one of the top four networks at the end of the year. We maximized our political revenue opportunity in our markets with over $64 million of full-year political ad sales. We increased our annual return of capital through dividend payout and managed our capital structure and cost of capital to finance our near- and long-term growth. And we, during the year, entered into agreements to acquire stations in Phoenix and Las Vegas and Des Moines, all accretive transactions.

The value of our strategies and initiatives are reflected in our fourth-quarter and full-year 2014 results, which include strong growth across all financial metrics, both in the quarter and full year, representing the highest levels in the Company's history of revenue, adjusted EBITDA and free cash flow. The combination of the 39.6% rise in fourth-quarter net revenue with the operating leverage in our model and the synergies realized through our efficient integration of our acquired entities, drove our fourth-quarter DCF EBITDA and free cash flow increases of 70.9%, 73.8%, and 116%, respectively.

For the quarter, free cash flow reached $65.2 million, bringing our 2014 total free cash flow to $159.7 million. And through the prudent management of our capital structure and our financing strategies, we still have just 30.8 million basic shares and 32 million fully diluted shares outstanding, meaning that we continue to build our recover of consistently delivering free cash growth per share.

Illustrating our long-term record of growth, driven by our operating disciplines and our select strategic accretive station acquisitions, the Company's two-year recorded free cash flow for 2013-2014 reached $244.7 million, exceeding our goals, and marking a 113% increase over the 2011-2012 free cash flow of $114.7 million. And as I indicated a moment ago, our recent activities have set the stage for further significant free cash flow growth. Our confidence that 2015 will be another record year of free cash flow is based on the recent completion of several very meaningful transactions, positive and stable television core revenue ad trends, contractual retransmission revenue growth, and our rapidly expanding digital media operations.

We believe that our operation and the recently closed transactions will generate approximately $80 million of incremental annual DCF in 2015. As noted a moment ago, our 2014 free cash flow was $159.7 million. So, it's very easy to understand our excitement about the new value we are creating for 2015 and beyond.

Looking to the 2015-2016 cycle, as noted in the press release earlier this morning, we project that, with the addition of the new stations, our recent digital media acquisitions, all in will generate free cash flow of approximately $450 million over the two-year cycle, and that averages out to approximately $7.25 per share per year.

Getting back to Q4, quarterly television ad revenues, inclusive of political advertising, grew 31.2% as Nexstar's spot management initiatives, including the allocation of inventory of political issue and pack advertisers, resulted in a 23-fold increase in political revenue over 2013 and positive core local and national spot revenue. We continue to project long-term GDP-like growth for our core, and have structured Nexstar's operating model to leverage our high-growth revenue sources including retran, digital media and political. Our Q4 financial growth again highlights the enormous value of this approach.

Reflecting our expanded platform and presence in states with high levels of political activity, our 2014 fourth-quarter political revenue rose 29% over the comparable 2012 fourth-quarter number. Nexstar is now firmly present in key political states with rampant political partisanship. And 2016 presidential elections without any incumbents, we expect to see political revenue growth to be an even bigger contributor going forward, with the likelihood we'll see some initial primary dollars later in 2015.

Looking at other categories of ad-supported revenue, first, our initiatives to bring new advertisers to television continue to build on our long-term success as new television ad revenue in Q4 was $7.6 million, marking a gain over last year and accounting for 9.8% of Q4 local revenue. Taking into consideration the political inventory allocation 4 of the top 10 categories were up. Auto finished flat but showed a low double-digit increase on a quarterly sequential basis. And our local auto dealer ad spend was up 4%. The 5 remaining top 10 categories finished slightly behind the prior year.

Nexstar's total gross revenue excluding political, grew an impressive 17.2% in the fourth quarter. That reflects a 64.6% rise in retransmission fee revenue to $44.1 million, as we recorded gains related to our 2013 renewals and escalators and the increased scale of our platform.

Digital media revenue jumped 114.9% to $14.2 million in the quarter, as we saw both organic growth and contributions from IBF and Enterprise Technology Group, the accretive acquisitions that were completed earlier in the year. Our intentionally staggered renewals of retransmission consent agreements, combined with the rapid growth of our digital media platform, resulted in a 74.5% year-over-year increase in total fourth-quarter retransmission fee and digital medial revenue, to a combined total of $58.4 million.

These higher-margin revenue streams complement and leverage our core local television operations and accounted for 30.3% of our 2014 fourth-quarter net revenue. That's up 24.2% from the comparable 2013 period and 18.4% over the 2012 fourth quarter, the last heavy political cycle.

Looking ahead, with distribution agreements representing approximately 60% of Nexstar's MVPD subscribers renewed in 2013 and 2014, and another 30% of those subscribers up for renewal in 2015, the ongoing growth from this revenue source in 2015 and beyond is highly visible to us. Similarly, digital media growth in 2015 will further benefit from our 2014 accretive acquisitions, as well as the recently completed acquisition earlier this quarter of Yashi. Yashi's targeted and programmatic video technology, combined with our existing digital offerings, further expands the innovative multi-platform marketing solutions that Nexstar is able to offer to local and national advertisers, agencies and other digital publishers.

And by adhering to our disciplined acquisition and integration criteria, we acquired a profitable and fast-growing online video advertising business at an attractive pro forma EBITDA multiple. For the year we booked $46.7 million in total digital media revenue. That's a 51.4% increase over 2013. And with Yashi we have expanded the digital business portfolio to over a $75 million annual run rate. We continue to target $100 million of digital media revenue and we believe it's safe to assume that that goal line is in sight.

Our focus on near- and long-term free cash flow growth as the driver of enhanced shareholder value remains the foundation of our playbook. And I'm proud to lead our talented teams, as we advance Nexstar's role as our the innovator of change committed to serving local markets and our shareholders.

Before I turn the call over to Tom for further detail on our financials and capital structure, I'll conclude by saying that 2015 is off to a good start. We continue to see attractive potential acquisition targets, have them in the pipeline, and the recent closing of significant transactions is very positive for our forward free cash flow, and our visibility remains excellent.

With that I'll turn the call over to Tom.

Thanks, Perry. And good morning everyone. I'll start with the year of Nexstar's Q4 income statement and balance sheet data, after which I will provide an update on our capital structure and details related to the pending transaction.

First of all, with regard to reported results, net revenue for Q4 of 2014 is $192.8 million, an almost 40% increase over Q4 of 2013 $138.1 million. Core revenue, which we define as local and national, was $108.3 million versus $107.9 million the previous year. Local revenue up 2.8% to $77.2 million, and national revenue was down 5.3% to $31.1 million.

Political revenue, as I'm sure everybody knows, was up meaningfully to $35.4 million for the fourth quarter of 2014 and $65 million-plus for the year. Retransmission fees were up 64.6% to $41.4 million from $26.8 million the previous year. Digital media revenues were up 115%, reflecting many of the acquisitions that we've made, to $14.2 million for the quarter.

Broadcast cash flow was up 70.9% to a record $94.5 million, as was a record fourth-quarter adjusted EBITDA of $86.6 million, which was up almost 74%. Free cash flow for the quarter was $65.2 million, up 116% from the prior year's $30.2 million.

Just one thing of note, in the fourth quarter, as previously mentioned, we closed on the Grant acquisition on December 1. Those stations contributed approximately $3.6 million in net revenue, $1.7 million in broadcast cash flow, and $300,000 in net income to the consolidated results for the quarter.

Local and national revenues were impacted by approximately 5% of our highest value-add inventory being allocated to political spots in the fourth quarter. On a same-station basis, net revenue was up 30.2%. Gross revenue, excluding political, was up 9.7% on a same-station basis. Core revenue was down 2.1%, retransmission fees were up 59% on a same-station basis, and digital media revenues were up 12% on a same-station basis, with broadcast cash flow increasing 61%.

Throughout Q4 and in 2014 we remained disciplined in managing costs and addressing our capital structure, our leverage and our cost of capital as complements to our operating strategy and focus and driving free cash flow. Fourth-quarter direct station operating expenses, net of trade expense, and SG&A expenses, rose 31.5% and 9.5%, respectively.

The increases reflect higher variable costs relating to the higher local and political revenues and the operations of acquired station and digital assets. On a same-station basis, fixed costs, excluding affiliation fees and sales expenses, were up 0.4% over Q4 of 2013 as we continue to aggressively manage our controllable expenses.

Nexstar's fourth-quarter corporate expenses were $8.9 million, which is slightly below what we had projected, and of which $6.8 million was cash flow corporate overhead which was, again, slightly less than forecasted. This compares to corporate expenses of $6 million a year ago and $0.5 million of which were non stock option expense. The increase reflects increased staffing and infrastructure to support our expanded platform, as well as a $1.6 million increase in non-cash stock comp expense.

Also during the quarter we incurred a like amount, $1.6 million, of unbudgeted corporate expenses related to legal and professional fees to restructure the transactions that have closed and to address recent regulatory changes. For 2015's first quarter, we project corporate overhead will approximate $11 million to $11.5 million, inclusive of transaction expenses, while cash corporate overhead will be in the $8 million to $8.5 million range. Corporate overhead for Q1 includes a fair amount of transaction expenses, as is expected, as it relates to the Grant, CCA, Phoenix, and Las Vegas closings, as well as the financing that was executed on earlier this month.

Additionally, we anticipate having transaction expenses in 2015 associated with taxes on the required station divestitures of the properties that we purchased. As currently contemplated, the gains in taxes will not run through the income statement due to the divestitures occurring concurrent with the purchase. The taxes, which were not able to be offset by our NOLS, amount to approximately $25 million and will be reported as part of the supplemental data presented on the statement of cash throws. The Company will not be including that portion of cash taxes attributable to the asset divestitures in our calculation of free cash flow due to their nonrecurring and transactional nature.

Turning to the balance sheet, I'll review the key items as of 12/31/14. Net leverage was 4.4 times based on the covenant calculation versus a permitted covenant leverage of 6.75. The first lane leverage was 2.41 versus a covenant of 4.0.

Actual total leverage was approximately 4 times as the amount of cash that we're able to net in calculating the leverage ratio for compliance purposes is limited to $75 million, whereas we actually had $174 million in available cash consolidated on our balance sheet as of 12/31/14. If you remember, two days after that was the date that we closed CCA, so we had pre-funded a large number of the CCA transaction at year end, even though we couldn't net that for covenant purposes.

Nexstar's outstanding debt as of 12/31/14 consisted of first lien debt of $710 million, comprised of roughly $5 million outstanding on the revolver and $705 million in term loans. We did borrow $143 million during the quarter as we funded the $80 million Grant transaction, and, as I mentioned before, pre-funded a fair amount of the CCA acquisition. At year end, the 6-7/8% notes had an outstanding balance for GAAP purposes of $525.6 million.

Total debt at 12/31 was $1.236 million [sic -- billion]. And as I mentioned before, we showed $132 million of cash on the balance sheet and we had $43 million of restricted cash not shown as cash on the balance sheet but was available to fund the CCA acquisition shortly thereafter.

There were several capital structure changes in the quarter that I want to talk about. Most recently, on January 2, we closed $270 million on the CCA transaction. We applied $27 million of deposits along with a $95 million draw on our revolver and the $174 million of cash that I mentioned previously.

Then, when we closed on that acquisition, the same day we turned around and divested the CBS affiliate in Evansville for $27 million. And on January 29, we completed the sale and the issuance of $275 million of 6-1/8% senior notes due in 2022. The notes were priced at par, and our senior unsecured obligations pari-passu with the other senior notes to 6-7/8%.

We used the net proceeds of that offering and cash on hand to fund the acquisitions of the television stations in Las Vegas and Phoenix for a total consideration of $213 million, and Yashi for $33 million, and to pay related fees and expenses. The $29 million balance of the net proceeds was used to reduce the revolver. Reflecting these recent transactions and the 6-1/8% note issuance, we presently have approximately $41 million outstanding on our revolver and $705 million borrowed on the term loans.

Back to Q4, total interest expense was $15.9 million, which was essentially flat with the same period in 2013. Cash interest fell slightly but was essentially at $15.2 million in both Q4 of 2014 and Q4 of 2013.

Looking at the current capital structure, Nexstar's weighted average cost of borrowing has declined to slightly in excess of 5% from quarter-end 9/30 levels of approximately 5.25%. That's due to the draw down in the term loan A, for the large part.

Nexstar's Q4 CapEx of $6.5 million compared with Q4 2013 CapEx of about $14.4 million. Full-year CapEx was $20.3 million, essentially on our forecast of a $20 million CapEx. For the full year of 2015, we are budgeting CapEx of approximately $24 million inclusive of upgrades in the fixed assets for acquired stations, their building and studio projects, as well as HD news upgrades.

We're not tired of saying that our results continue to demonstrate we are successfully managing our broadcast and digital media M&A and integration activities, the top line, fixed and variable costs, and the balance sheet for cash, while taking action on additional selective accretive acquisitions and other actions that enhance shareholder value. And just to reiterate, we are on track to deliver the synergies originally anticipated on our recent acquisitions.

The combination of our operating successes and the accretive station transactions has positioned Nexstar to return capital to shareholders through cash dividends, while reducing leverage throughout 2015. Tomorrow we will pay the first quarterly cash dividend for 2015 of $0.19 per share on our class A common stock following the Board's authorization last month to increase the quarterly dividend by 26.7%.

Importantly we believe the total amount of capital allocation per dividend for 2015 of approximately $23.7 million relative to our projected free cash flow continues to afford the Company the liquidity and financial flexibility to further expand our marketing solutions platform through additional accretive station and digital media acquisitions, while maintaining leverage and pursuing other initiatives that enhance long-term shareholder value.

In summary, with expectations for 2015-2016 of free cash flow of approximately $450 million for the 24-month period, and our balance sheet, capital structure and cost of capital in great shape, we are well positioned to pursue additional accretive value-creating transactions, and return capital to shareholders, while simultaneously keeping our leverage at a modest level.

That concludes the financial review for the call, and now I'll turn the call back over to Perry for some closing remarks before Q&A.

Thanks very much Tom. I would like to take just a moment to acknowledge all of my colleagues in the Nexstar nation who continue to advance our organization-wide commitment to serving the local markets where we operate, with great local news, events and other local programming, while making appropriate process and operating adjustments to ensure that we remain the most efficient and competitive diversified media company in our market.

Our teams consistently leverage our localism to bring new entertainment, information, services and value to our customers and our advertisers through Nexstar's traditional media, our digital and mobile media platforms. And their dedication is reflected in our strong operating results and the strong standing we have in our local communities where we operate.

Nexstar's consistency in driving record results are the direct result of our disciplined approach to the operation of our core television broadcast operations, our commitment to revenue diversification initiatives, and the success that we have achieving in identifying, efficiently financing, and integrating selective station accretive acquisitions.

Our recently completed transactions bring further diversification scale to our operating base, and also very significant incremental free cash flow, which has positioned us well to further address our debt and leverage as the year goes on. With significant and growing free cash flow generation, a solid capital position and great visibility on 2015 growth drivers, Tom and I are both confident that our free cash flow growth story will remain among the most impressive in the industry.

With that, I would like to thank you again for taking time out to join us today. And now let's open the call to Q&A to address your specific areas of interest. Operator?

(Operator Instructions)

James Dix with Wedbush Securities.

A couple things. First, in terms of the advertising business, how does first quarter look in terms of your pacing, to the extent you can clear out the impact of political and Olympics? And how does that compare to the November/December core pace, once you move past that political displacement?

And then, secondly, just in terms of M&A, do you think the spectrum auction and how various parties are approaching it is having any impact on the pace of opportunities that you're seeing out there? Is it slowing it down at all? And then I had just one housekeeping question as a follow-up. Thanks.

Okay. Thank you, James. First of all, as Tom mentioned, approximately 5% of our total inventory in Q4 was allocated to political advertisers. Tom also reported our core ad revenue in Q4 was down about 2%. But that was at 95% of inventory utilization compared to the prior year, which is pretty typical in a fourth quarter of a political year. December, with virtually no political, was our best core revenue month of the back half of the year.

As it relates to first quarter, there are a couple of moving parts. We would take out the incremental Olympic revenues at 50%, because we believe it to be 50% incremental, add back the performance of our NBC affiliates over our Fox affiliates for Super Bowl 2015 versus 2014. And then if you remember, back when we reported Q1 of 2014, we had an 11% growth in national, which was driven primarily by an annual advertiser pulling forward second-quarter commitments into first quarter. And we, I think, said at the time that that would be atypical. And they are placing their spending for the first quarter of this year at a more normalized rate.

When you take those three pieces, adjusted core growth would be up about 2%. So, that's thematically what we see, and that's pretty much what December looked like, without an influence of political.

As it relates to acquisitions, we have a couple of tuck-in acquisition conversations going on right now in our pipeline. These are not people that are waiting for a spectrum auction or looking to bet the ranch on spectrum auctions.

So I would say there are those that bought stations specifically to ante into the spectrum auctions, and I think those folks, that is their business plan. But I don't think other folks are distracted by the Greenhill report or flash numbers from the FCC. That's a long road to go down, and most going concern broadcasters are not going to have a tremendous amount of interest in participating in the spectrum auction. So our conversations continue apace.

Great. And just the one housekeeping thing. I don't know, Tom, whether you have any color on just your pro forma figures for 2014 on revenue and EBITDA, and free cash flow, just as we're tuning up our models for going forward?

I don't have anything at my fingertips to do that, but I can try and give you some help. I think -- what I have done, obviously, is give you Q4 same-station growth, and so you can back into what those numbers were in previous years. But I can try and give you some guidance on that, I just don't have the numbers here.

Great. Okay. Thank you.

And we will take our next question from Marci Ryvicker with Wells Fargo.

Thanks. Your guidance for free cash flow suggests a really nice bump up. Can you talk about where the growth is coming from? Is it primarily retrans, is it political, is it expense control? Any color there would be great. And then as a follow up to that, are you anticipating your EBITDA to free cash flow conversion to basically stay relatively stable?

Sure. A couple of things. Obviously, I think the biggest growth drivers in the switch from 2014/2015 to 2015/2016 are continued growth in net retrans, which we believe to be a double-digit grower in both of those years, and, quite honestly, double-digit grower beyond that. And then the switchover from a non-presidential year to a presidential year.

I would also tell you that having a major presence in Iowa and a major presence now in Las Vegas, which we anticipate to be a very active political market in 2016, makes a big difference in those numbers. I think, just for modeling purposes, our 2012 number -- and this is just reported numbers -- were $45 million or $46 million in political, and I think we're going to see that double or more in 2016. Is that helpful?

Yes. And then the EBITDA to free cash flow conversion, do you expect that to stay relatively stable?

I would think that it would increase over time because the cost of our debt continues to decline. And, quite honestly, as our leverage declines, less of our EBITDA is going to go to interest expense than it has historically. That will be partially offset by -- we will start to become a partial cash taxpayer on operating income in 2016, not to a large degree, and then greater in 2017, and then a full cash taxpayer in 2018. So, that will soak up some of the EBITDA, but not necessarily in the 2015/2016 timeframe.

Got it. And then do you have a good corporate overhead number for the year or run rate per quarter, either way?

I would say the overall is probably $40 million or slightly higher. We do have a lot of corporate expenses. The $11 million is not going to be representative of the entire year, because there are quite a few corporate expenses in Q1, just because of the activity we had at the end of the year, and obviously in January and February, not only from an M&A perspective, but also from a financing perspective.

And then the only other additional new bit of information there was the options and restricted stock count did go up slightly in the fourth quarter, so our noncash will be slightly higher than you saw in 2014. I would say it's low $40 millions, all in.

Great. And happy birthday, Perry. Thank you.

The other comment I would add is the digital acquisitions that we have made are also growth drivers for the Company, have made deals with some outside publishers, and Yashi has strong organic growth characteristics. So probably in that 2014-2015 guide you didn't have a run rate of approximately $75 million on the digital line, which is a good proxy for 2015 on a run rate basis.

Got it. Thanks.

(Operator Instructions)

We will take our next question from Aaron Watts with Deutsche Bank.

Hi, guys, a couple questions from me. Tom, I think you mentioned that you always are keeping an eye on the M&A pipeline. But just given where you guys stand in terms of footprint versus some of your peers who are bumping up against the current caps, would it benefit Nexstar to have another transformative transaction to boost your scale up?

Aaron, I would say we wouldn't do a transaction just for scale's sake. But you're right, at 18% of the US, we could double the Company -- more than double the Company in geographic reach, without bumping up against the cap. There are several companies out there that have similar-sized profiles to us. So if the transaction were beneficial to Nexstar's shareholders, and the by-product of that was significant additional scale, then we would be most interested in that.

Okay. And maybe somewhat tied to that thought, Tom, you talked about where you see leverage going, absent any strategic moves. In your mind, where would you like leverage to live? Is it closer to the 3.5, is it closer to 4.5? What's the right context for Nexstar going forward?

I would say on a blended two-year basis, it's probably in the 4 times range. So 4.5-ish on an odd year, and 3.5 on an even year. And that may change slightly, but somewhere in the low 4s.

Okay. And last one from me, just more bigger picture, but as there is more and more talked about how the prime time and cable network viewership is being impacted by fragmentation of viewers, curious what you think the impact could be for the local broadcaster, including Nexstar? And as an addendum to that, how can you benefit from some of the increased over-the-top options that viewers are going to have? Thanks.

Sure. We obviously are not Nielsen subscribers, so we don't spend a lot of time dwelling on or speaking to the numbers. But I would tell you that, by and large, I think the block of audience is primarily a national cable network, and not so much broadcast network. I think that the broadcaster networks -- again, it's a business of hits, and you see in a good programming, original programming, live programming, continuing to generate huge audiences.

We look at prime time contributing approximately 20% of our local revenues. And, yes, there is some time shifting there, and some viewing on non-measured devices which may lead to recorded rating declines the way the antiquated measurement system keeps score. But most of our big three network affiliates make 50% of their revenue from their local news products, so we're more concerned of how that 10 o'clock lead-in affects our 11 o'clock news, because the networks are going to take care of their own business.

So it is not, and we have not seen declines in local news numbers like you would see declines in national cable, prime time numbers. That's just not what we're seeing. It still is appointment television in mid-sized markets and viewed primarily live.

I think the business model remains in tact. Obviously, we are spending a lot of time on -- we believe we need to serve the consumer the way the consumer wants to be served. And if they're paying for the signal, they should be able to view it on any device that they own, any place that they own it and are using it. And so we believe that continued push down the road of TV Everywhere and other things like that, is the right thing to do.

I continue to believe that over-the-top has to do with household formation, economics, and non-paying subscribers more than any secular trend. I do think you'll see this nibble-nibble around the edges of 1%, 2% kind of thing, but we are in discussions. In fact, I'm one of the ownership groups that was asked to negotiate with CBS, the affiliate contract for their all-access product. Those discussions are ongoing and often, and I think we are getting closer to the point where there will be a couple of core affiliates who participate in that.

I think other networks have taken different approaches, and in some of those we participate financially, and in some we don't, but we have not seen a dramatic change in our non-ADF footprint. It remains around 12% to 13% of our homes view us without the aid of a pay service. And that number hasn't moved dramatically in a dozen years, so I don't think it's -- much is written about it, I'm not sure there's a whole lot there in terms of a real trend.

I think that the economy continues to improve, new household formation. Those numbers expand and contract economically. When a kid finishes college and moves out of their apartment back home, because they are looking for a job, and Tom and I both had those, that's one less TV household and one less pay-TV household, temporarily. So, I think there's a lot more of that going on than there is a dramatic movement to cut the cord.

I appreciate the thoughts and happy birthday. 38's a big one.

The 19th anniversary of my 38th.

Thanks, guys.

(Operator Instructions)

We will take our next question from Tracy Young with Evercore.

Yes, happy birthday. Just two questions, if I could. One's related to CCA, if you could just remind us what the incremental revenues and expenses were related to that acquisition? And then in terms of free cash flow, should we be thinking about potential digital acquisitions? Is there something you would want to buy on the digital side, or something else we should be thinking about in terms of your free cash flow generation? Thanks.

Sure. As I mentioned Tracy, we have a couple of TV station acquisition discussions in the pipeline. I would characterize those as tuck-under and bolt-on in nature. Those will always continue.

We do spend a lot of time, and Tom O'Brien, who heads up our digital efforts, spends the vast majority of his time running around the country looking at promising technologies, talking to entrepreneurs, and trying to find something that would fit in terms of our local go-to-market strategy, additional capabilities that we could use to serve local advertisers. And if there's an added benefit of being able to white label those products to other publishers, like we do with IB, ETG and soon to be Yashi, that's an added benefit as well.

And, again, filtering that down through something that is, on a pro forma basis, accretive to the Company. It's a big funnel at the top, and obviously it gets very narrow at the bottom as the things that pass all of those tests. But that's really Tom's full-time job, and I probably dedicate 20% of my time to acquisitions in the digital space, looking to continue to grow that footprint, because obviously that revenue line is growing at rates much faster than the core television revenue line.

And with regard to CCA, I think what we have historically said was at the time of acquisition, the first year's revenue and cash flow was going to be $100 million and $50 million. Now, that first year, if you remember, was 2014, because it took us 21 months to actually get that thing closed. So 2015 will be slightly less than $100 million because it doesn't have political, and slightly less than $50 million because of the lack of political in 2015.

Thank you.

Tracy, I think that we'd said earlier that if you add all of the acquisitions, which would be Grant as well as CCA, Las Vegas, and Phoenix, combined, it should be about $80 million of incremental DCF in 2015.

That's correct.

Thanks a lot.

(Operator Instructions)

And it appears there are no further questions at this time. Mr. Perry Sook, I would like to turn the conference back over to you for any additional or closing remarks, sir.

All right. I just want to thank everyone for joining us today. As I said, I know it's a busy morning, with a lot of companies reporting. Thank you for your time and interest, and we look forward to reporting back to you in about 90 days with the results of our 2015 first quarter. Have a great afternoon.

And that does conclude today's conference. Ladies and gentlemen, I would like to thank you for your participation. You may now disconnect.