Salem Media Group Inc (SALM) 2012 Q3 法說會逐字稿

Hello, and welcome to the Salem Communications Third Quarter 2012 Earnings Conference Call. Today's call is being recorded.

I would now like to turn the Conference over to Mr. Evan Masyr, Senior Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you. And thank you all for joining us today for Salem Communications' Third Quarter 2012 Earnings Call. As a reminder, if you get disconnected at any time, you can dial into area code 719-325-4804, or listen from our website, www.salem.cc.

Today we're joined remotely by our Chief Executive Officer, Edward Atsinger, who's traveling today. And in the room with me, I have Dave Santrella, President of our Radio Division; and David Evans, President of Interactive and Publishing.

We will begin in just a moment with our prepared remarks. And once we're done, the conference call operator will come back on the line to instruct you on how to submit questions.

Please be advised that statements made on this call that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

This Conference Call also contains non-GAAP financial measures within the meaning of Regulation G, specifically station operating income, EBITDA and adjusted EBITDA. In conformity with Regulation G, information required to accompany the disclosure of non-GAAP financial measures is available on the Investor Relations portion of the Company's website at salem.cc.

I would now like to turn the call over to Ed Atsinger.

Thanks, Evan. I hope you can all hear me well. Thanks for joining the call.

Let me begin my comments by focusing on what I think have been particularly important developments during the quarter. I think that this quarter, as much as any in recent memory, has been significant in terms of some really attractive acquisitions, both on the Internet side and on the broadcast side. And I'll try to detail why I think those are attractive.

But essentially, you'll see that they meet the quintessential test of tuck-in acquisitions, the content -- the target audience is right in the middle of our sweet spot. And the basis upon which we've acquired them will allow us to readily monetize the investment. So we're quite pleased with these acquisitions, and I think it was one of the standout developments in the quarter.

And then, operations were pretty much as one would expect. I mean, we gave guidance. Our operations for the quarter pretty much were within the guidance we gave, both on top line and in terms of expenses.

So let me talk first in more detail about the revenue, and then I'll give more color on the acquisitions. First of all, total revenue increased 4% for the quarter year-over-year as we delivered another good, strong quarter of solid top-line growth. Our Internet segment continues to be a strong growth driver as revenues there increased 17%, while broadcast revenue was up 2% and publishing revenue was essentially flat. Given that Miller Kaplan reports that industry revenue generally was flat for the quarter, our diversified business model continues to perform pretty well, even during these somewhat uncertain economic times.

The block programming business foundational to our Christian teaching talk format continues to grow and show its resilience -- it was up 3% for the quarter on the Christian teaching talk side. I think all in, with all of the formats, it maybe is a little closer to 2%.

As we anticipated, political revenue was strong this quarter, with more than $1.5 million in revenue compared to just over $100,000 in the same period last year. Maybe to put that in a little better perspective, let's look year-to-date. Year-to-date, we've booked $3.1 million. If you want to compare that with the last election year, which was 2010, we booked during the same period $2.4 million. So we're $700,000 above that.

Now, that was a midterm election -- one wouldn't necessarily expect it to be as productive as a general. However, it did represent the strongest political year in the history of the Company. So from that perspective, to exceed that is good news.

Now, we don't have all of the results booked yet for fourth quarter. But we suspect, when all of the dust settles and we get the numbers in, that we will meet or exceed the 2010 record-breaking performance. So we feel good about the political component this year.

Growing our Internet businesses organically and through acquisitions continues to be a strategic focus for Salem. 17% growth of our Internet segment for the second consecutive quarter is particularly gratifying. The acquisition of SermonSpice -- which is one of the first of the two Internet acquisitions that took place in the quarter, which we purchased for $3 million in late August -- added to our growth. However, it only contributed to one month. So excluding revenue from this acquisition, our Internet segment still experienced 14% organic growth for the quarter.

SermonSpice, by the way, was the number-two competitor to our WorshipHouseMedia, which we acquired in March of 2011. And now that we have both of these businesses under our ownership, we can provide churches an even wider assortment of media resources on a very cost-efficient basis.

Additionally, we recently acquired Godvine.com, which we purchased for $4.2 million on October 1st. And we expect that to further advance our Internet growth segment. Again, Godvine, from a target point of view, is right in the middle of our sweet spot. It's a leading source for Christian and family-friendly videos. And Godvine currently enjoys approximately 3.5 million monthly visitors and nearly 30 million monthly page views. Additionally, it has over 2.9 million Facebook fans. We're able to operate this site on our existing GodTube infrastructure and tuck it right into our existing operation, which minimizes expenses and makes it a very cost-efficient acquisition for Salem.

With the successful integration of acquisitions like SermonSpice and Godvine.com complementing our organic growth, you can imagine that we're very optimistic about our continued expansion, the continued expansion of our digital platform -- both top line, but particularly bottom line. Indeed, we are seeing margin expansion in this division as operating income grew 23%.

As I mentioned earlier, our broadcast revenue grew 2% for the quarter. July and August were both up 4%. But September, even in this political year, was down slightly. This is consistent with, by the way, what we've heard from our colleagues across the radio industry.

October finished strong -- just to kind of show this pattern -- up almost 10%, while November and December are pacing at a much slower rate. Evan will have more to say about this when he discusses fourth quarter guidance in a few moments.

As we continue to plan for growth through key investments in talent and advertising, our expenses were up slightly over 5% this quarter from the same period last year. However, our expenses have gone down slightly each quarter this year, and we expect expenses to continue to decline as we anniversary some of these investments.

We might want to comment a bit on the investments. I think it's worth some additional commentary. Our investments particularly are two local morning programs that we launched over the past few months that are progressing very well for us. First, we launched the Heidi Harris Morning Show on KRLA in Los Angeles. Since launching the program in late April, we added two additional personalities -- Ben Shapiro and Brian Whitman -- to round the show out and enhance the show, which it has very substantially done. We feel the mix of these three personalities is working well now, and the ratings are starting to show it. Specifically, our ratings in our target demographic for this station -- men 35-64 -- has increased 50%; while local spot, not including political, increased 15%.

We also launched Mark Davis in Dallas on KSKY, our new stalk station in that market. And the response has been absolutely tremendous. Our ratings during morning drive have doubled since Mark took over in May. We've also seen meaningful improvements in every day part of the station who are benefitting from that morning surge that Mark has brought to the station in terms of cume and in terms of share. These improvements are already driving revenue on KSKY, as local spot excluding political was up 36% this quarter as compared to last year. And with every week, the ratings continue to get better.

Based on the revenue improvement and continued growth in ratings, we believe both of these investments will continue to pay significant future dividends. And in this time when platforms are almost ubiquitous, content, and having content that we control -- unique content, of course -- is increasingly important to us. So having talent both local and national plays right into our strategy for our news talk stations and some of the other platforms that we offer. We will look to identify and secure additional talent that we believe can produce similar rating results and revenue results as those opportunities present themselves.

I've said on previous calls that this environment is creating many unique M&A opportunities, and we have been looking at a lot of potential targets. Seems as though for every 10 or 15 you look at, maybe one will meet your criteria. But in addition to the two Internet acquisitions that I mentioned earlier -- SermonSpice and Godvine -- we've been busy on the broadcast side.

We entered into agreements to acquire various assets associated with WMUU FM in Greenville, South Carolina for a total consideration of $6 million. The assets of the radio station were acquired for $3 million -- $1 million at closing and $2 million in April 2014 -- which, by the way, is after our first opportunity to refinance our bonds. So that structure was put together to accommodate our refi opportunity.

Related to this transaction, we entered into a strategic and mutually beneficial marketing and consulting agreement with Bob Jones University, a longtime institution in the Greenville market with deep ties. Our $3 million contribution will be entirely in the form of advertising credit across the entire Salem platform. The inventory will be spread over a seven-year period, putting minimal demand on inventory and allowing us to secure the benefits of this arrangement using inexpensive currency and mainly airtime spread over a long period of time.

WMUU is a 100,000-watt FM station. It is one of the best signals in the market. We are going to begin operating the station in early December under an LMA agreement and will program it in our news talk format featuring our lineup of syndicated talent.

In addition to WMUU FM, we agreed to purchase WJKR FM in Columbus, Ohio for $4 million. On November 1st, we began operating this station with our news talk format under an LMA agreement. While we've been trying to years to get another station in Columbus, we had not found an opportunity to acquire one that would fit our value and our quality requirements. In WJKR, we have indeed found -- we believe that we found a station that meets both criteria, in terms of an excellent signal and at a price that we can monetize.

I might just remind you that when we talk about tuck-in acquisitions, again all of these represent -- most of these acquisitions represent great tuck-in opportunities. In terms of Columbus, we've been operating a standalone AM radio station for many years, since 1982, and have been trying to expand. This is the first good opportunity that we've found that makes sense and meets our criteria.

So we'll remain opportunistic with respect to acquisition targets. Each opportunity will be evaluated as it presents itself and is consistent with our objective to reduce debt and improve leverage. In that regard, I might add that on Tuesday of this week we gave notice of our intension to redeem another $4 million of our bonds at the stated price of $1.03. The redemption will take place on December 12th, and that will leave us with $213.5 million outstanding on the original issue of $300 million of bonded indebtedness.

So with that summary, let me turn the call over to Evan for a more detailed discussion of the quarter, and he'll give us guidance in more detail also for fourth quarter. Evan?

Great. Thank you, Ed.

For the third quarter, our total revenue increased 4%, to $56.7 million. Operating expenses on a recurring basis increased 6%, to $47.7 million, and adjusted EBITDA decreased 2%, to $13.0 million. If we were to exclude the growth from political revenue, our overall revenue increased 4% as well.

Net broadcast revenue increased 2%, to $45.9 million; and broadcast operating expenses increased 5%, to $30.6 million; resulting in $15.3 million or a 2% decline in station operating income. This decline in SOI is largely due to increased salaries primarily related to strategic talent acquisitions discussed by Ed earlier, and some increases in bad debt expense.

On a same-station basis, net broadcast revenue increased 2% and SOI declined 2%. These same-station results include broadcast revenue from 94 of our radio stations and our network operations, representing 99.6% of our net broadcast revenue.

I'll now review our results as far as revenue by format. Thirty-nine of our radio stations are programmed in our foundational Christian teaching and talk format. These stations contributed 36% of total revenue. And total revenue in this format was flat, while block programming, as Ed discussed earlier, was up 3%.

Revenue from our 11 contemporary Christian music stations contributed 19% of total revenue and had flat revenue for the quarter. Our 25 news talk stations had an increase of 6% in revenue for the quarter, and overall these stations contributed 11% of total revenue. The seven stations that we have programmed in Spanish language Christian teaching and talk grew revenue by 20%, and this format makes up 1% of our total revenue.

Finally on the radio side, as far as strategic formats -- we have 10 radio stations in a business talk format, and revenue from these stations was down 6%. This format contributes 2% of our total revenue.

Our network revenue increased 19% for the quarter and represents 9% of total revenue. Our publishing revenue remained consistent at $3 million, and represents 5% of total revenue. Revenue from our Internet businesses increased 17%, to $7.8 million; and our Internet revenue is 14% of total revenue.

As of September 30th, our total bond debt was $217.5 million. In addition, we had $29.4 million drawn on our bank revolver and $15 million due in loans from two of our directors. We also had $8.8 million in subordinated debt from another bank. This brings our total debt to $270.6 million at September 30th. Our leverage ratio at September 30th was 4.97, versus the compliance covenant, which is 6.25.

Now, I went back and reviewed our financial history. And this marks a fairly significant milestone for us, as our total leverage has not been below five times since June of 2000. This is further evidence that our strategy of focused and opportunistic acquisitions, along with a commitment to reducing our debt, is actually working. We will continue to work on getting our leverage down, as we would like to ultimately have our leverage under four times.

Now, keep in mind that we have an opportunity to significantly increase our free cash flow in about 13 months time, as our bonds become callable on December 15th of 2013. This increase in free cash flow should position us well to reach our goal of getting under four times in a relatively short timeframe.

For the fourth quarter of 2012, we're projecting total revenue to increase 3% to 5% over the fourth quarter of 2011 total revenue of $57.1 million. And we're also projecting operating expenses to increase 3% to 6% compared to fourth quarter 2011 operating expenses of $46.0 million.

That concludes our prepared remarks. And I'd like to now answer any questions you may have and turn the call back over to the operator.

(Operator Instructions) Eric Wold, B. Riley.

Couple questions -- one, the political ad spending came in nicely versus last year or last cycle, and (inaudible) done as well as 2008. What are your thoughts on kind of how it progressed and how it came in? I know it's still -- just kind of finished a couple days ago, but how it came in versus your expectations? And was there any kind of significant variance there?

The biggest piece of it obviously comes in in October and early November this week, because you had six days in November. So it's a little early to sort it all out. And I haven't looked at the numbers, but I think that it kind of came pretty much in terms of our expectations, what we expected. Maybe Evan or Dave Santrella can add a little additional color. A lot of it was generated by our national, by our network organization.

Now, they generate it for -- their sales organization generates it, and it becomes part of national sales for our local stations. So it's reflected at the local station level. But it takes us a little while to sort through all the numbers.

But either Evan or Dave, you have any further color you can provide?

Yes, we don't have exact numbers on it yet, Eric. It did come in -- as Ed said, it came in about where we expected. It seems like a fair amount of it did come in on the network side. There was a lot of political advertising that came either network or ended up in the national spot buckets; less so on the local side.

Okay.

And then, a general question, I guess, across all platforms -- what are you seeing in terms of the ad pricing environment over the next few quarters?

From a radio perspective, I would say that the ad pricing environment right now is pretty tepid. Really, more now than I think probably ever, in at least my 30 years of experience in radio, you look at pricing almost on a day-to-day basis. Because you can suddenly have a hot week, and there seems like there's a lot of demand. And then you can go a little quieter in the following week. And so we really have to price things -- we pay more attention to inventory than we ever have, and price based on some unique yield management models.

Okay.

One more, and then a couple of just really short ones -- I know you acquisition of SermonSpice in there for one month -- with the two acquisitions made, one was made the start of October -- what should we think about in terms of combined -- if you want to give individual, but combined revenues on an annual basis from those two Internet acquisitions?

So Evan, either you or Dave needs to take that question. And it's somewhat theoretical, so maybe Dave wants to take it.

On an annualized basis, SermonSpice is in the revenue range of $1.5 million to $2 million. Godvine will be somewhere in the range of $1 million to $1.5 million.

Perfect.

And then, final two questions, just small P&L ones -- one, corporate expenses have come down nicely this year, Q1 through Q3, a couple hundred grand a quarter, or from the start of the year. [Should I read a] level that you think is good going forward? Or should we -- is there room to dig that down even further? I know you've been making hires. Or is that likely to trend back up?

I don't necessarily see us adding anything with respect to corporate expense new hires at this point. So kind of the run rate you see now should be pretty consistent. The only thing that could potentially move that, which we disclosed separately in the earnings release, would be any stock-based compensation. Because that has a little bit more of a variable component, little bit harder to predict depending on Board's actions. But otherwise, I think corporate expenses is at about a level that you should see kind of continuing.

Okay.

And lastly, tax rate -- any comments there with the -- and if you said in the opening comments, I apologize, I might've missed it -- but giving the benefit this quarter versus what should we expect going forward?

Yes. First of all, with respect to the tax revision -- we went through with our auditors, and then we also have a tax firm that helps us, analyzing some of our valuation reserves. And so we wound up releasing a portion of a reserve relating to some state income taxes for where the statute had expired. We've reevaluated the position for the reserve and really determined that we won't have to add anything to it. So we'll see the tax rate probably go down for a little while.

But as I've mentioned on previous calls, the way I would suggest people look at it, really, is the fact that we pay $400,000 or $500,000 a year in taxes, cash taxes; and probably won't be paying taxes for at least another probably seven years or so.

Okay. But in terms of a book tax rate for the P&L?

Somewhere in the 35% range, I'd say, would be kind of normalized.

Okay. Thank you, guys.

Thank you.

Barry Lucas, Gabelli & Company.

A couple of items, and this would be either for Ed or for Dave. When I look at these tuck-in of bolt-ons on the Internet space -- do you have a goal or an objective, either in absolute dollars or in percentage of total revenues, where you would be happy to see the kind of digital contribution?

Well, internally, we've discussed -- this is a topic of continuous discussion. But in general, there's always been a consensus that we want to see this component of our business grow. And we set intermediate targets and then longer-range targets. I think that somewhere between intermediate and longer range, we'd like to see this -- well, I'd say, a bit longer range -- we'd like it to represent about a third of our total revenue, and grow it from there. But a third is the sort of target now that we continue to look at. And we want to do it both organically and with the right kinds of strategic tuck-in acquisitions. And we're making good progress on that front. But that seems to be where we need to go.

A third, Barry, would be the combo -- the Internet plus publishing.

Okay. So we're talking, ballpark, a little bit of growth. So something on the order of $80 million, give or take, between the two. And today, you're roughly in the -- half that, again, give or take. So --

Yes, Internet plus publishing today is about 20% of revenue. So we'd need to go from 20% to 33% over a three- to five-year range [from this] --

Right. And I would assume that most of that -- even though you have found some things on the print side from time to time, most of that is going to come digitally.

What does it take to get there? What does the pipeline look like, David? And what do you have to pay to kind of get to that level of revenues, in broad-brush terms? I know it'd be very tough to nail that down.

The pipeline of big acquisitions, frankly, is modest. There's a larger pipeline of smaller acquisitions. I think we're going to have to rely quite a bit on organic growth -- growing page views, growing visits, growing unique visitors. So it's certainly going to be a combination of organic plus acquisition.

In terms of the metrics we look at -- my benchmark for deals is -- we're putting together projections that, assuming we hit those projections on the nose, would deliver a 20%-plus ROI. So when you think about that in terms of an EBITDA multiple, to get that kind of ROI, you're looking at five multiple type acquisitions. And when we've found deals like that, we've pulled the trigger on them. If the deals are above that, we've tended to bid a little less, and the deals haven't happened.

Helpful, David, thank you.

Just maybe switching gears to the radio side -- just trying to get some color on the business. Because we're looking at kind of low single digits in terms of growth. And you've described some either new talent or new shows that are ramping up very quickly, at least from a ratings standpoint. And this may not be fair, but if you had to think about -- or do you think about kind of a -- not a same-station but a same-format basis -- what the revenues look like?

What do you mean --

Well, if you're -- I guess what I'm trying to get at, Ed, is -- you're clearly investing in talent with new on-air personalities or new shows. And expenses are running up a little bit ahead of the revenue growth. So I guess what I'm trying to get a feel for is, if you didn't have those new shows, what would the revenue and expense component kind of look like?

It would -- at this stage in the game, the expenses are probably trumping the revenue. But the revenue is on target. And as David said, when he does his acquisition on the Internet side, he looks at a five multiple, but he doesn't get there year one. Typically, we have a timeframe where we get there pretty quickly. Year two, we expect to hit the 20% and beyond.

But let me just say this -- it's a much more complex strategy. If we look at the news talk side, which we think does offer substantial opportunity for growth, for a couple of reasons -- first of all, we've got three initiatives that are at work that are helping us drive that business. One, we control that content. So we're a major syndicator of content. And as the platform becomes more agnostic in terms of how people deliver content, the old phrase "content is king" is going to take on a new meaning. So we like the fact that we own and we control unique content, both at a nationally syndicated level and also at a local level.

And the upside opportunity -- if you want to do an analysis, and just take a look at the major groups, look at some of their key radio stations in the top markets they're in, and look what they contribute to their bottom line -- take KFI in Los Angeles, for example; or take WLS in New York -- take a look at what they contribute. When they hit the numbers, when they begin to get on a roll, and they establish themselves as a bit of a heritage station, the upside potential is enormous, very attractive.

Now, you can't get there if everybody -- if it were easy, everybody would do it. But we can make progress. And we've seen progress doing it. And part of the path of doing that in the key markets as you get momentum is to find the right kind of talent to enhance that overall lineup.

So we have the nationally syndicated talent we control. In critical markets, we'd like to have drive-time local talent, so it's live local and gives us a whole different component, not only to build local revenue but to drive ratings with local presence, local promotion, in-market promotion. So that's all part of our strategy.

Now, the other thing that we've done in this regard, with regard to these acquisitions -- the Greenville, South Carolina is a tremendous opportunity for us -- great market. We have lots of assets in that market. Greg Anderson, who heads our Salem National, was president of Multimedia Radio Division for many years, headquartered in Greenville; and operated a group of stations that were the leading news talk stations.

Mike Gallagher, who we syndicate -- one of our talent -- was in that market for many, many years as a top-rated personality. He still is top-rated, even though now we syndicate him. He will come and join our -- he lived in Greenville for many years; has a big following there. Kate Hudson, who manages our Vista Radio reps, is headquartered in Greenville. And we have long ties with the university that is associated with this radio station. And we have a consulting arrangement that will be very beneficial.

We like the fact that we're moving to great FM facilities. This gives us a new dimension in markets where we have a competitive advantage. We can have real opportunity in this market to be dominant, because we have the best signal in this format by far. The major competitor is an AM station with coverage that's significantly inferior.

Same thing is true in Columbus, Ohio. You have really one major competitor there in the news talk format -- Clear Channel. Our station is a better signal at night. It's an FM, first of all. With daytime, it's not as good, but it covers the whole market -- the competitor signal covers a much broader area -- nighttime, it's better. So it's a great opportunity to develop this format further.

So it's a question of these nice tuck-in acquisitions with some significantly improved facilities with increased expansion on talent. And it all kind of works together. And if you put one piece on hold while you're working the strategy on the other, it's really pennywise and pound-foolish.

So we feel pretty good about the strategy, and we think it will bear very tangible dividends. And the upside potential -- if we can connect in Dallas, for example -- because Mark Davis was an icon in that market; he's brought tremendous audience with him -- not only has his audience, his cume, more than doubled the time we've had him there; in fact, it's substantially beyond that. But we've seen this benefit across the rest of the day part. So the program that follows him and the program that follows the program that follows him -- all of these are benefitting from a bounce, when you kind of get some traction and break into a new version cume for our station.

Probably a longer answer than you wanted, but why not?

Thanks, Ed. By the way, great pedigree in Greenville from Multimedia, Walter Bartlett and Bob Hamby, and the rest of those folks -- fondly remembered around here.

Last area I had for you, particularly -- any further thoughts you'd care to share on the dividend, either regular -- and how that might progress in 2013, or even as we run out the string here at the end of '12 on a special?

Well, I'd say this -- that when the Board approved this recurrent dividend, they set it at a number that represented at the time about 15% of our free cash flow. We're working on budgets for 2013; we're not done with them yet. But we usually get pretty close on our budgets. And based upon what they produce in terms of free cash flow -- if the Board elects to stay with the 15% benchmark, and 15% of the projected cash flow for '13 is bigger than what it has been when the set the dividend, I would not at all be surprised to see the Board increase the dividend but maintain the same percentage. They might even increase the percentage. I mean, I think generally speaking, it's going to be dependent upon the performance.

And I would suspect that as the cash flow increases, the Board is going to be inclined, based upon the discussions, to increase that dividend. Certainly there's no talk of not going forward with the dividend. The talk will be to benchmark it to that 15% for now.

Great. Thanks so much for all the color, Ed.

[Don Gersel], DG Capital.

Good quarter, guys.

Quick question on -- just seeing some operating leverage -- if you could just spend a little bit more time on that? You spoke about hiring some people over the past few quarters. And when do you think your revenue is going to go up more than your expenses?

Well, hopefully we'll see some of that next year, in 2013. I don't know where revenues -- Even can comment on tracking where it is right now. To get top talent, you get what you pay for. So we were ready to pay the right value for what we got. And we're confident it will produce dividends. But I would say we'll start to see some very substantial continued increase in revenue next year.

Great.

Good job. And we'll be in touch. Thank you.

Yes.

(Operator Instructions) David Hebert, Wells Fargo Securities.

Just wanted to ask about the basket you have available for the [one on three] call redemption. How much is available for 2013?

Okay. The way the basket works is we're allowed $30 million in any 12-month period. So with us doing $4 million on December 12th, that leaves us the ability to do -- although we probably won't have the capital to do it -- but $26 million in June. Assuming we do something less than that, we could pick up the remainder of the $30 million the following December.

So we have basically two more shots at it. After this December, we'll do a redemption in June, and we'll have the ability to do another redemption in December, just before the bonds are callable.

Great.

And then, your leverage definition out of the credit facility -- does that exclude the subordinated debt (technical difficulty) [straight up]?

It includes all debt.

Okay.

And then, if you could just comment on the block programming environment at this point -- how do you see that playing out over the next couple of quarters?

You kind of bubbled out there. Can you ask that question again, please?

Right. If you could comment on the outlook, or how block programming feels right now?

We're optimistic about block programming going forward, both with our existing client base and other clients that we continue -- other partners that we continue to pursue.

Okay.

And we're still in the process. Right now, this is the process where we finalize rates for 2013. I don't think that process is complete yet, but we're in the midst of it. And we'll obviously have more information on our next call. But at this point, I think we're all reasonably optimistic that we'll continue to make progress.

Okay. Great.

Yes. There's always a little bit of churn, but not much. And some of the churn is on secondary releases as opposed to primary. So you always have a few moving parts. But on balance, it should be positive.

Okay. Thank you very much.

There are no further questions left in our queue. Mr. Atsinger, I'll turn the call back over to you for any closing comments.

Operator, thank you. And thanks to all of you for joining us, and thanks for the good questions. It's always stimulating, it always helps us think about our business and how we can be better and more efficient. So again, thank you. And look forward to visiting with you again on our next quarterly call.

Thank you.

Ladies and gentlemen, this does conclude today's Conference. We appreciate your participation.