Nexstar Media Group Inc (NXST) 2015 Q1 法說會逐字稿

Good day and welcome to Nexstar Broadcasting Group's 2015 first-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 21a of the Securities and Exchange Act of 1934. The Company's future financial conditions and 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 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 in 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, and good morning, everyone. I'd like to thank you all today for joining today to discuss Nexstar's record first quarter results, our recently completed transaction and the upcoming launch of our new network-affiliated stations, all of which will drive continued growth in 2015 and beyond. As always, Tom Carter, our CFO, is with me this morning.

The record first quarter net revenue that we reported extends Nexstar's strong operating and financial momentum into 2015. And it's led to record first quarter BCF, EBITDA and free cash flow, all of which were well ahead of consensus expectations. We are well positioned to continue to grow all of our non-political revenue sources throughout 2015 and we expect this year to mark the Company's fourth consecutive year of record free cash flow as our platform expansion and revenue diversification efforts will more than replace the record levels of political revenue we generated in 2014.

In addition to our record Q1 results, we're pleased to announce this morning the creation of two new network affiliated stations within our portfolio. First in Lafayette, Louisiana, Nexstar's KLAF will launch on July 1 as the NBC affiliate serving Lafayette. Currently Lafayette doesn't have an end-market NBC affiliate. The station will be operated in conjunction with Nexstar's KADN, our FOX affiliate serving on that market. And at the same time on July 1, Nexstar's KYLE will launch a MyNetworkTV affiliate serving the Waco-Temple-Bryan, Texas market. KYLE will be operated in conjunction with Nexstar's KWKT, our FOX affiliate in Waco. Previously there was no stand-alone MyNetwork affiliate serving that market.

With the creation of the NBC affiliate in Lafayette and the MyNetworkTV affiliate in Waco, we stand to further optimize the value of our platform and portfolio through efficient reallocation of our existing spectrum existing assets. These actions will elevate advertising and retransmission consent revenue and create two new duopolies with no incremental M&A cost.

Reflecting these developments, we are increasing Nexstar's projected pro forma free cash flow during the 2015, 2016 cycle. We now expect to generate free cash flow of approximately $456 million, or an average pro forma free cash flow of approximately $7.30 per share, up from our prior estimate in late February of approximately $450 million, or average pro forma free cash flow of $7.25 per share. The gains will be weighted more towards 2016 when we have the full-year benefit of our new affiliated station.

Moving back now to Q1 of 2015, for the quarter, net revenue rose 52% as the benefit of recently completed accretive acquisitions and organic growth combined with the ongoing execution of our strategies leverage our local content and diversify our revenue sources more than offset a total of approximately $4 million of revenue from political advertising in the year ago period. Station revenue, excluding political advertising, grew 53.5%, reflecting 29.4% increase in core television ad revenue, 89.5% rise in retransmission consent revenues and a 207.7% growth of our digital media revenues.

Notably, our 52% first quarter net revenue increase highlights the progress of our revenue diversification strategies as, on a combined basis, retransmissions fee and digital media revenue totaled $85.9 million. That more than doubled the prior year period and accounted for more than 42.5% of our net revenue -- the highest ever contribution to our quarterly revenue mix. It also marked substantial growth from 30.9% of our revenues in the first quarter of 2014.

Nexstar's Q1 retransmission revenue growth reflects the successful renewals in late 2014 of agreements with over 200 MVPDs, representing about 40% of our subscriber base, including several major MVPDs. Digital media revenue growth was driven both by organic growth in our markets, as well as contributions from LAKANA, our newly formed digital services Company, and approximately two months of operations of Yashi, our leading online video demand site platform. With location-focused technology, we acquired Yashi in an accretive transaction this past February.

First quarter 2015 BCF and adjusted EBITDA grew 49.6% and 52.1%, respectively, inclusive of one-time expenses of approximately $1.9 million related to our Q1 capital market and acquisition activity. Most significantly, our first quarter 2015 free cash flow grew 70.1% over the record first quarter of 2014 levels and was over four times the first quarter 2013 levels the previous nonpolitical period for comparison.

Looking quickly at our Q1 ad-supported TV categories, first our initiatives to bring new advertisers to TV continue to build on our long-term success as new-to-television ad revenue in Q1 was $6.9 million. That was a double-digit gain over last year's quarter and accounted for 8.1% of our Q1 [local]. 5 of our top 10 categories overall were up. The auto category was down slightly but if you eliminate the Olympic benefit of Q1 2014, advertising revenue from auto was flat in the first quarter. So an 8% increase in dollars on a quarterly sequential basis.

As I indicated a moment ago, our recent activities have set the stage for significant further free cash flow growth. Our confidence that 2015 will be another record year of record free cash flow is based on the completion in late 2014 and earlier this year of several meaningful transactions, our positive and stable television core revenue core ad trends, our contractual and highly visible retransmission revenue growth -- based on both renewals as well as escalators in existing contracts -- and our rapidly expanding digital media revenues. Also the incremental free cash flow we're deriving from the portfolio optimization strategies such as our new duopolies in Lafayette and Waco.

Our expanded scale in the very significant free cash flow being generated from our existing platform also allows us to complete significant value-building transactions without materially altering our leverage profile. Today's earnings release notes that we ended the first quarter with net leverage of approximately 4.34 times, slightly better than the December 31, 2014 level, even as we completed $275 million issuance of 6 1/4% -- I'm sorry, 6 1/8% notes in January, which funded the Las Vegas, Phoenix, and Yashi acquisitions.

Tom will review our capital structures in just a moment. But I want to mention that our strength in balance sheet provides us, not only with a lower cost of capital, but also additional flexibility, allowing us to continue to acquire other stations and digital media assets and accretive transactions. We will also be able to continue to delever and pay our second $0.19 quarterly dividend in 2015 later this month. For Nexstar, free cash flow was our primary performance (technical difficulty) as you know. And we believe that our very visible prospect to generate nearly $0.5 billion in free cash flow in the current two year cycle, 2015, 2016 -- that should be the principle point, we believe, to our current and prospective Nexstar investors.

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

Thanks, Perry, and good morning, everyone. I'll start with a review of Nexstar's Q1 income statement and balance sheet data, after which I'll provide an update on our capital structure and details relating to our recently closed transactions.

Net revenue for Q1 of 2015 increased 52% to $203.4 million over the same period in 2014. Core revenue increased 29.4% to $20.1 million. That was comprised of $84.5 million of local revenue and $35.6 million of national revenue, both up approximately 30%. Political revenue was down from $4 million in Q1 of 2014 to approximately $400,000 this last quarter. Retransmission fees grew 89.5% to $66.6 million. Digital media revenues grew 208% to $93.3 million as we recognize revenue from some of our recent acquisitions. All of this contributed to a 50% increase in broadcast cash flow to $75.7 million, adjusted EBITDA of $64 million and free cash flow being up 70% to $42.9 million.

On the same-station basis, net revenue was up 8.3%. Core advertising revenue, on a same-station basis, was up approximately 0.5% when factoring in one-time activity related to the Olympics in Q1 of 2014, which we evaluated at a 50% displacement rate, our increased Super Bowl revenue from NBC in Q1 of 2015, and the timing differences relating to a contractual advertiser between the first quarter of 2014 and the first quarter of 2015. We remain disciplined in managing our costs and in addressing our capital structure, leverage and cost of capital as compliments to our operating strategy and focus on driving free cash flow.

First quarter station direct operating expenses, net of trade expense, and SG&A expenses rose 67.9% and 40.2%, respectively, and included approximately $700,000 of transaction expenses related to the capital markets and transaction acquisition activity in the first quarter. The increases reflect higher variable costs relating to the higher local and national revenues and the operations of acquired stations and digital assets as we operated or provided services to approximately 107 stations in Q1 of 2014 compared to 93 stations a year ago. On a same-station basis, fixed cost, including -- I'm sorry, excluding affiliation expenses and sales expenses -- were up only a half of 1% versus Q1 of 2014 as we continue to aggressively manage controllable expenses.

Nexstar's first quarter corporate expenses were in line with the expectations we provided and reported in Q4 and came in at approximately $11.7 million, of which $8.8 million was cash corporate overhead. Included in that $8.8 million of cash corporate overhead were $1.2 million of cost associated with our significant acquisition and financing activities during the quarter. This compares to corporate expenses of $8.5 million a year ago, which included $1.6 million of noncash stock option expense. For the second quarter of 2015, we project corporate overhead of approximately $11 million, inclusive of stock comp, while cash corporate overhead will be in the $8 million range.

Also, as noted previously, there were other cash expenses in Q1 associated with the taxes on our acquired station divestitures. These gains did not run through our income statement due to their close in concurrent with the purchase. The associated taxes were not able to be offset by NOLs and an amount of approximating $5.9 million as noted on page 7 of this mornings press release were associated with those asset sales. The Company did not include the portion of taxes attributable to the asset divestitures in our calculation of operating free cash flow because of their transactional nature.

Turning to the balance sheet, I'll review the key items at 3-31-15. As Perry mentioned previously, total leverage was 4.34 times versus the total permitted leverage covenant of 6.75. First lien leverage was 2.03 versus a 4 covenant. Nexstar's outstanding debt as of 3-31-2015 consisted of first lien debt of $470 -- I'm sorry -- $743.4 million, comprised of $700 million term loans and $42 million outstanding under the resolver. The increase in the revolver borrowings net of the sale of the Evansville station was used for the CCA acquisition early in the quarter and, subsequently, paid down slightly by the bond issue later in Q1. Senior sub-debt at 6 7/8% amounted to $525 million outstanding and the recently issued 6 1/8% debt amounted to $275 million outstanding.

I'll quickly reconcile the Q1 capital structure changes. On January 2, we completed the $270 million CCA acquisition, which after deposits of $27 million was paid for with a $95 million revolver draw and $174 million of cash from operation, which was originally sourced under the term loan A. We then closed on the divestiture of the Evansville CBS and FOX affiliates, generating cash proceeds of approximately $27 million. On January 29, Nexstar and Marshall completed the sale, an issuance of $275 million of 6 1/8% notes due in 2022. And actually, Marshall did not participate in that issuances. It was just Nexstar. The notes were priced at par and are senior unsecured obligations of Nexstar Broadcasting Inc.

We used the net proceeds from the offering and the cash on hand to fund the acquisition of television stations in Las Vegas and Phoenix and for a total consideration of $213 million and for Yashi for $33 million and used the balance to pay related fees and a $29 million balance reduction on the revolver. The revolver borrowings were further reduced by $30 million during April 2015 from operating free cash flow. So the current outstanding on the revolver is approximately $12 million.

Total interest expense for Q1 was $19.3 million compared to $15.2 million in the same period the previous year. Cash interest similarly arose to $18.4 from $14.5 million related to our growth over the previous year in terms of acquisitions. As I mentioned before, shortly after quarter-end, we did reduce the facility -- or the amount outstanding on the revolver facility to $12 million. Looking at our current capital structure and Nexstar's weighted average, cost of borrowing has declined to approximately 5% from 5.75% at year-end 2013. Q1 CapEx of $6.9 million compared to $4 million in the previous year's quarter. For the full-year of 2015, budgeted CapEx is expected to be approximately $25 million, which will be inclusive of the required investments in the new affiliations in Waco and Lafayette.

I think our news this morning on the new network affiliated stations we are launching and across [certain tier] we are locking in with those network affiliation costs is incremental to the success we are achieving in our discipline operating and integration initiative. As it relates to management's focus on free cash flow, our formula remains unchanged in terms of building in the topline, maintaining close control on fixed and variable costs and optimizing the balance sheet.

This plan has supported our goals of generating significant free cash flow growth while allowing us to additionally pursue selective accretive acquisitions, pay dividends and reduce leverage and take any other actions that can enhance shareholder value. In summary, with new expectations for 2015, 2016 free cash flow of approximately $456 million, on average pro forma free cash flow of approximately $7.30 per share, per year, and our operations and balance sheet capital structure and cost of capital in great shape, we are on plan and look forward to solid returns in 2015 and beyond.

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

Thank you, Tom.

Looking ahead, we continue to see GDP-like growth for our core ad revenue. And as such, we've structured Nexstar's operating model to leverage our high-growth revenue sources, including digital media, retrans and political. With distribution agreements representing an excess of 80% of Nexstar's MVPD subscribers up for renewal in 2015 and 2016, the ongoing growth from this revenue source in 2015 and beyond is highly visible.

Similarly, digital media revenue growth in 2015 will further benefit from projected double-digit organic growth as well as our recent accretive acquisitions. And those of you who have followed our activity for the past several years know that Nexstar is established in the key political markets and we expect to see political revenue growth as an even bigger contributor going forward with the likelihood that we'll see some presidential primary dollars even later this year.

Our focus on near and long-term free cash flow growth as the driver of enhanced shareholder value remains the foundation of our playbook. We continue to see attractive potential acquisition targets and we have headroom for expansion from the standpoint of our current 18% US television household reach compared to the currently mandated 39% cap. We are confident that 2015 will see another period of record financial results as Nexstar benefits from our expanded scale, our new operating efficiencies and the synergies related to recently competed acquisitions as well as the renewal of significant number of retransmission consent agreement and the expansion of our digital media subsidiaries.

With the free cash flow generated from our current operations, we believe that Nexstar's net leverage, absent additional strategic M&A activity, will remain in the mid-4 times range at the end of this year and decline to the low 3 times range by the end of 2016. With that, I'd like to thank you, again, for joining us today and so let's open the call, now, to Q&A to address your specific areas of interest. Operator?

(Operator Instructions)

We'll take our first question from Aaron Watts with Deutsche Bank.

Hi, guys. Thanks. I'm curious what you're seeing in terms of the core ad environment. I think you talked about excluding kind of a lot of noise -- up a little bit in the first quarter. How is it feeling in the second quarter relative to that?

Well from a core ad revenue perspective, April finished with a low single-digit growth over the prior year and core digital revenue was up double digits, as expected. And at this point, Q2 is pacing ahead of where we finished in Q1. So we're not seeing any slowdown in our core business and, as we say, kind of GDP growth as expected.

Okay. And, Perry, any weakness in your Texas markets? Heard mixed things from others. You obviously have a large presence there. Curious what you're what you're seeing.

No, we are not seeing weakness in our Texas markets. And following up on that yesterday afternoon, we looked around and called around. And they're performing at or above the rest of the portfolio. So no material difference in either direction in the state of Texas for us.

All right, great. Last one for me, a little bigger picture. But heard some comments on the spectrum auction from some of your contemporaries and varying views on participation on that. But just with that in the backdrop, how are you thinking about M&A opportunities going forward with that auction still looming out there? Are you finding it more difficult to kind of proceed with those opportunities? Are there fewer of them? Just your sense of the environment ahead of that.

I think we've been pretty consistent saying we're involved in kind of the one-off discussions that probably total somewhere in the $100 million to $100 million-plus range. And we're involved in more strategic discussions that are in various stages of development. But no one, at this point, is asking for a spectrum put or anything like that. I think people realize there are a lot of moving parts in the spectrum auction and so much yet to be written, even around the auction rules. And that if someone needs to sell for state purposes or for sharable contribution purposes or for portfolio diversification, they're not pinning their hopes on the [if-com] of the spectrum option and business is getting done. So we've not seen that affect the conversations that we're in just generally. As we get closer to the auction, that may change. But at this point, I would say it's not a factor.

Is it a little bit -- does it make the hurdle a little bit higher for something of a little bit larger scale, you think?

Again, I think people in the broadcast business that have a going concern business probably realize the fundamentals of that. And again, if you're talking about a public company and someone to -- two public companies to merge, you kind of have an option on the spectrum anyway because nobody is really going away. So I'm not sure that -- again, it has not affected discussions that are going on today and discussions are still going on. So from our perspective, until we know more, it's hard to have anything other than a hypothetical view. And there are competing hypothetical views of the spectrum auction and how it will play out. But we don't have enough information to have anything other than a hypothetical view at this point.

I understand. All right. Great. Thank you.

Our next question comes from James Dix with Wedbush Securities.

Good morning, gentlemen. A couple things. I guess first, are you seeing much variance in growth by affiliation type? Obviously FOX has had some strong ratings recovery with Empire but now that's rolling off the air. So I've heard -- we've heard various things about some of the ad trends at the various affiliation types. I'm curious what you're seeing with that.

And then second, just in terms of your digital growth, especially with your acquisitions rolling in, roughly how -- what are the biggest chunks of that digital revenue in terms of online video advertising sales, display advising, other types of sales? And then I just wanted to follow up on the use of free cash flow. Thanks.

Sure. I'll start with affiliations. It's good to have a portfolio because as some networks -- it's a zero sum game, basically. Right? So our CW stations are performing ahead of expectations substantially. However, CW and MyNet represents less than 10% of our portfolio. FOX stations are slightly underperforming the big-three currently. And the FOX stations represent a smaller percent of revenue in our portfolio than each of the big-three's individually. I would say ABC, CBS and NBC are all performing kind of on top of each other. And if anything, FOX might be performing slightly behind.

Your question on digital, if you look at the number that's reported and look at that as kind of a run rate, I think it's fair to say that approximately half of that revenue is generated in digital advertising or agency services sales in our local marketplaces. So kind of at the TV station, at the local market level. And half of it is external revenue that Yashi and Lakana generate from companies outside the Nexstar portfolio. Both are growing at double digit growth levels, both the external services revenue as well as our internal -- digital -- organic revenue, I guess I would say -- manufactured and generated at the local market level. So I don't know how much of it -- Yashi is programmatic digital video entirely. Lakana is agency services, CMS and other things on top of that. And then it's ad-supported revenue at the local station level, probably 95% and 5% today as agency services provided by our Companies that we sell through into the local market places. And within those various buckets, you've got typical banner ads, you have video pre-rolls. We build a lot of hyper local content verticals, whether it's experts category, or just marrying people that are into plants and gardening with advertisers that are landscape architects and things like that. So it's a very, very local business and at the individual market level.

So I hope that's responsive to your question. But our digital business on an all-in basis has a lot of individual components to it. And I'm happy to report that both the ad sales, as well as the services revenue and the programmatic video, are growing at double-digit rates with the digital programmatic video growing at the highest double digit rates of them all.

Okay. That's very helpful, actually. And then just -- the follow-up on plans for use of free cash flow, as you look down the road, you're looking at M&A opportunities. You certainly indicated that those tend to be the highest investment uses of free cash flow when they're available. But I'm just wondering over the next couple years, given the visibility that you have in the free cash flow and the potential for your leverage to come down, whether you have any thoughts on potentially doing other things like more share repurchases or maybe dividends, things like that. Thanks.

Sure. And this is Tom. And I'll take that question.

Hi, Tom.

It all comes back really to accretive M&A. And we're a believer in the [investoral] logic of that, both on a one-off transaction as well as scale combinations of transformative transaction. So every dollar that we pay down gives us availability to do those accreted M&As. In the meantime, as I mentioned, we paid down $30 million so far this year. And we'll pay down some more before the end of the second quarter. So the free cash flow goes to pay down the revolver. And then, in our way of thinking, will be used and redrawn at some point to do accretive M&A. If the accretive M&A doesn't happen for whatever reason, valuation issues or otherwise, then clearly we believe our leverage at year-end 2016, absent any other meaningful transactions, will be something approximating three times. And if that's in fact the case, we don't plan on staying at three times for very long because I think we would use some of the free cash flow to return to shareholders rather than pay down debt. But all of that is assuming that no M&A happens in the interim.

So I think it's kind of a multi-variable equation. Really, it's focused on M&A and reinvesting at excellent return on capital rates in M&A. And then if that doesn't happen, obviously, we don't have an aspiration to be an investment grade Company. And so being at three times leverage really doesn't benefit anybody greatly from that perspective. So it's really -- it's a flexible process and a flexible place we put ourselves in. But we think M&A can be meaningful, especially in light of the fact that every dollar we can use to pay for transactions with debt is a dollar less that we would have to do in terms of equity issuance in a meaningful M&A transaction.

Great. That's very helpful. Thank you.

We'll take our next question from Marci Ryvicker from Wells Fargo.

Thanks. I just have one. If, Perry and Tom, you saw or had a target in mind that you really, really wanted from an M&A perspective, would you consider going hostile if you had to?

Well that's a hard question to answer generically or in a public forum even. But I said that given the long [tail] approval process, our Board has not -- through the FCC and other regulatory agencies -- our Board has not shown a propensity when the question has been a asked historically and recently to go into a hostile type of an environment. Once you've done that, you can't take it back. And that then becomes maybe the last deal that you do or attempt to do. So I don't see us going into any kind of a hostile environment per se.

I think down the road, can you outline the benefits of potential combinations or things like that? And we're pretty democratic. Our shareholders all have the same one vote that Tom and I and other shareholders do. So I think that those are things that you could potentially demonstrate to the marketplace and let the shareholders decide. But I don't see us being an aggressor in a hostile way any time in my tenure and in the near future.

Got it. And then I do have a fundamental question. Just in terms of local news, it does sound like local news has become healthier. Any commentary or color around your portfolio with regard to local news?

Well we continue to expand the amount of local news we do in our marketplaces. And I think that's a testament to we wouldn't deploy those resources there if we didn't think there would be return on that investment. For example, we just expanded our local news in Champagne, Illinois, in the quarter -- added another 2.5 hours a week in a high-profile time period. I think as we move forward, we see opportunities to do that in some of our newly acquired stations, both in CCA and in Las Vegas. And so we believe in local news. And I think we said before that if you've got a player in local news in the marketplace, local news revenue can represent up to 55% of the ad-supported revenue to the TV station. And that dwarfs any other revenue source, whether it be network or sports or syndication or anything like that. And so, yes, we think that the demand for local news, particularly as we move now closer to a political period and even the soft money that's trying to condition the primary voters before the election period and those kinds of things, they are voracious consumers of local news. And so -- and in particularly in midsized markets where you may only have three or four local voices, we think local news is our calling card.

Got it. Thank you very much.

(Operator Instructions)

And we'll take our next question from Davis Hebert with Wells Fargo Securities.

Good morning, everyone. Thanks for taking the questions. I wanted to ask you a question about the local market level. On the call yesterday, Lamar's CEO, Sean Reilly, mentioned seeing a pretty robust environment from the local perspective. And he said he felt it was a recovery more on Main Street, not necessarily Madison Avenue. Just curious if you're seeing that sort of robust activity at the local market level.

I think, again, we feel that the medium-sized market -- a lot of the headlines are written in New York about New York. And we talked to major market operators that are seeing challenging macro environments, vis-a-vis advertising, perhaps at the television station level in the most major markets. And quite frankly, we're not seeing that. Robust may be too strong a word when you're predicting GDP type growth. But we're seeing stability and growth and we continue to believe and continue to deliver, kind of absent special events and extraneous activities, the low to mid-single digits here in terms of core advertising growth.

And again, we believe in developing new-to-television revenues. That helps to drive some of our growth and our account executives and local market managers and sales managers are all incented to do that, rather than just handling advertising agencies and existing accounts. So -- and again, I would say it's a stable and growing revenue source for us that we're very close to those accounts and businesses and feel that the local revenue is more sticky than the national revenue. So I guess if you wanted to contrast it in Main Street versus Madison Avenue, we've always been on Main Street. So our views really haven't changed in terms of the stability and growth characteristics of local market advertisers.

Okay. That's helpful. And then running some math on the digital commentary, I think you've talked about the digital business being a $75 million a year run rate. Then if I look at the Q1 results, it was a little under $20 million, which I guess would imply an $80 million run rate. Is that the right way to look at it? Or is there some seasonality factors there? Just curious if you're performing better than expectations on the digital side.

I think there is some seasonality, but quite honestly, their seasonality is not materially different than television. So I think you'll see an upswing in Q4 relative to that. Also keep in mind that that $19.3 million only included 2 months of Yashi. So there wasn't three months of the digital video programmatic in that. So I think you're going to see -- longwinded answer, yes, it's over $80 million on a run rate currently. And we expect it by year-end to be nearing $100 million in run rate.

Okay. That's helpful. And then on the leverage side, in calculating LTM pro forma EBITDA, I get around $344 million. Just wanted to clarify if that's -- if I'm in the ball park there.

We haven't commented on pro forma EBITDA. So I can neither confirm nor deny.

(laughter) All right. Last question. Your bond that you issued recently on the 6 1/8 have performed pretty well. Just curious how you're thinking about 6 7/8 bonds that will become callable later this year, especially in relating to the different covenant packages between the two.

We're not overall concerned with the 6 7/8 covenant package. It gives us enough flexibility to operate our business. Quite honestly, the first stated call is in November of this year of the 6 7/8. I think we will know -- we'll have a lot more information over the next six months about what the M&A environment looks like. Our perfect scenario would be to leave those in place and issue more debt and do an accretive M&A trade. If that doesn't happen, then we have the opportunity, because of our relatively light first lien leverage at 2 times relative to a 4 times covenant, we could go back in and issue more first lien debt to help us offset any costs in buying in or calling the 6 7/8. I just don't think that that's the trade we want to do right now given some of the possibilities that we see in front of us from an M&A perspective in the next six months. But I think as we move closer to the call date and as we get more information on potential M&A and the likelihood of something in the reasonable near future, then we can make a more informed decision.

Okay. And then if I could follow up on a comment you made earlier, Tom, around the three times leverage, I may have missed the timeframe by which you could achieve that.

Three times by the end of 2016.

Okay, got it. Thank you.

And I think that's consistent with what we've said before.

We'll take our next question from Tracy Young with Evercore.

Hi. I've got a couple. I'm sorry if I missed this but did you give 2Q same-station revenue growth, how auto did in Q1, and core expense growth for Q2?

We did not. But we think that core same-station will be similar to what it has been and will be, which is low single digits.

And as to Q1, Tracy, we did say that auto as a category, all-in, was down slightly. But if you take out the auto advertising increments that went to the Olympics, we were actually flat for the quarter.

Okay. Did you have a music license benefit in Q1?

Yes.

And how much was that?

It was approximately $1 million.

About $1 million? Okay. And then lastly, you announced these two affiliation agreements in Lafayette and Waco. Are there more markets? Generally, are there more markets where you could do this kind of addition of a network?

Potentially. We're not in the business of trying to take other people's affiliations or anything like that. These were just opportunities. It's a play we ran in Champagne, Illinois, and in Northwest Arkansas where we had two stations, one kind of virtually a translator of the other, where we were able to multiplex to get the signals around the geographic constraints of the marketplace. But also be able to launch a separate call letter, which qualifies as a separate station under our distribution agreement. Gives our people an additional set of inventory to sell. And so there are a couple of opportunities like that, but nothing we're close to announcing right now.

And keep in mind, these aren't things that you just walk down the sidewalk and pick up off the ground. You have to manufacture these. So it's something that takes a little time. It's a multi-variable equation in terms of having to deal with the network as well. So these things do take some time. And the development period is not unlike an M&A deal in that it takes months or quarters to kind of develop.

Okay. Thank you.

We'll take our next question from John Kornreich with JK Media.

Yes, hi. Would you care to reaffirm my -- I think you once affirmed this -- so I'll say reaffirm -- your outlook for double-digit net retrans growth in the next, quote unquote, few years?

That has not changed. So, yes, we will reaffirm that.

Okay. And I missed it. So real quickly, you said how many MVPD deals come up this year versus 2016?

What I said in 2015 and 2016 -- this year and next year in excess of 80% of our subscribers will be repriced.

Okay, thanks.

And that was up against approximately 40% in 2014. And that adds up to more than 100% because not every deal is a three year deal.

Thank you.

Thank you, John.

(Operator Instructions)

And we'll take our next question from Michael Kupinski with Noble Financial.

Thanks. Tom, I think on the -- in terms of the debt leverage question, I think your three times would imply a half a turn lower than what you indicated in the first quarter. I think you were saying 3.5. Are you just indicating a range of 3? You're not really changing your guidance there?

I'm sorry, for --

For 2016. I think you said it's three times. And I think in the first quarter, you did say 3.5 times. So you're not really indicating a half a turn lower are you? Or are you just implying a range?

I think it's within the variable. But it's going to be closer to 3 times than 3.5.

Okay. And at the NAB, I think, obviously, one of the key components coming out of the NAB is about -- it was talking about programmatic buying. And I was wondering if you're seeing anything of significance in that to date, and if that's something that you play to embrace?

It is something that we would plan to embrace. We have not seen anything of significance to date on the PV station side. Obviously we're into digital programmatic in a big way. That's what Yashi is all about. We see opportunities to grow that business rather dramatically, both organically and then within our portfolio. But we think that any -- and programmatic can be defined a lot of ways. I think if we can make our business more efficient to do business with, not from a [CPM] perspective but from the buying and paying of invoices and automate that process, I think that will be a huge step forward in getting dollars to increasingly flow to the medium. There's no one that I know disputes the value proposition of broadcast television advertising. It's just people at the agency level regard it as an expensive medium to do business with. And I think if we can help to automate the back office processes of placing orders and then paying orders, I think if our industry can do that, then I think you'll see a period of sustained growth that may be greater than GDP just because everyone realizes the value proposition.

Thanks. And quite a few broadcasters are actually looking at nontraditional revenues, NTRs in their local. And I was wondering in your local advertising at this point, do you have any significant NTRs in there now? Or do you plan to have other NTRs like lighter than some things like that, that might be significant in that as a contributor?

Well I think every quarter you can go back for half a dozen years, we report on the amount of new-to-television revenue that we have generated in the quarter and as a percent of our total local. And NTRs or co-op or anything like that is used as a lever. Because when you go talk to an individual car dealer, he doesn't have an ad budget for the various buckets. He has one ad-budget and the best ideas get the money. Whether it's digital or television or billboard or radio or cars.com.

And so, I think at the local market level, you've got to have the best ideas. And you go into that business, not to talk about your business and your ratings, but you go in to talk about that business and how you can help them sell 20 more pickup trucks by Memorial Day at the end of the month. And if that works, you get invited back the next month. So ideas are the currency and I would say we all the time, pull all the levers to get the -- to earn the largest share of market of the local businesses that we do business with.

And how much of the percent of NTRs account for your local advertising at this point?

Well I'm not sure how you're defining NTRs. But I would say that nontraditional revenue, which is the definition of NTR -- I don't know that we even track that. It's a tool as opposed to a means to an end. And I'm glad if other people are discovering it, but I think it's been a normal course operation for us since the Company was founded 19 years ago.

Okay, fair enough. Thank you

(Operator Instructions)

And it appears there are no further questions at this time.

Alright. Before we go, I just want to take a moment to recognize our senior management team and our operators, some of which are sitting around the table here today. The Q1 results that we posted were against the background of closing on 17 stations from CCA, closing our Phoenix, Las Vegas and Yashi acquisitions. And as you know, that involves on the day one of ownership, a new financial system, new accounting systems, new traffic system, onboarding of hundreds of employees. And I'm happy to report, not only the results were against that backdrop, but all of that was done in first quarter. All of those integrations are ahead of schedule. All of the synergies are also ahead of expectations. And the good news is, that's all in the rear-view mirror. So as we move throughout the rest of this year and next year, the acquisition and integration has been done. And we are now hyper focused and laser focused on operations and maximizing the return on the investments that we've made.

So I look forward to reporting our second quarter results 90 days from now. And I think you'll see the benefit of that activity and the integration behind us because now we're just focused on running the business. So thank you all for joining us today. And we look forward to getting together to report our second quarter results three months from now.

Thank you for your participation. This does conclude today's call.