Sinclair Inc (SBGI) 2015 Q3 法說會逐字稿

Greetings, and welcome to the Sinclair Broadcast Group's third-quarter 2015 earnings conference call.

(Operator Instructions)

It is now my pleasure to introduce your host, David Amy, Executive Vice President and Chief Operating Officer. Thank you, you may begin.

Thank you, Operator. And good morning everyone. Participating on the call with me today are David Smith, President and CEO; Steve Marks and Steve Pruett, Co-Chief Operating Officers of Sinclair's Television Group; Chris Ripley, Chief Financial Officer; and Lucy Rutishauser, Senior Vice President, Corporate Finance and Treasurer. Before we begin, Lucy will make our forward-looking statement disclaimer.

Thank you David. Good morning, everyone.

Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements, as a result of various important factors. Such factors have been set forth in the Company's most recent reports as filed with the SEC, and included in our third-quarter earnings release. The Company undertakes no obligation to update these forward-looking statements. The Company uses this website as a key source of company information, which can be accessed at www.sbgi.net.

In accordance with Reg [ap D], this call is being made available to the public. A webcast replay will be available on our website later today, and will remain available until our next quarterly earnings release.

Included on the call, will be a discussion of non-GAAP financial measures, specifically, television broadcast cash flow, EBITDA, free cash flow and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental details to assist the public in their analysis and valuation of our Company. A reconciliation of the non-GAAP financial measures to the GAAP measures, in our financial statement, is provided on our website under Investors Reports and Filings.

Thank you, Lucy.

Before we go through the results, let me review some of the more meaningful activities that have taken place since our last earnings call. In the past two months, we have closed on station acquisitions in Chattanooga, and entered into agreements to acquire stations in South Bend, Corpus Christi, and Lincoln, Nebraska, along with a sale of a station in Marquette. These transactions totaled $56 million and including just over $5 million of expected synergies, represent a combined 2015 and 2016 EBITDA multiple of approximately 3.7 times. In addition, they are expected to add approximately $10 million or $0.10 per share of annualized free cash flow. We expect these transactions to close at the end of 2015 or the beginning of 2016, subject to receipt of necessary approvals and the satisfaction of closing conditions.

With regards to our news content, we expanded news in nine markets during the third quarter; launched Connect to Congress, a multimedia initiative that enables members of Congress from Sinclair's news markets to communicate with their constituents on a regular basis; and in October, we debuted our Sunday morning national news show, Full Measure with Sharyl Attkisson, which is available on Sinclair stations and through streaming media on the web. We continue to expand our syndication rights on Ring of Honor Wrestling, and even entered into our first foreign television distribution arrangement in France. Our local sports division, American Sports Network, continues to add college conferences and sports rights to its schedule, including the addition of certain of the [Mid] American and American Athletic conference games through sublicense agreements with ESPN. In addition, for the coming season, ASN, added 30 hockey games, from top collegiate hockey conferences, as well as agreements to televise the Arizona Bowl and Dream Bowl college football games. To date, ASN has signed up and is producing games for 18 Division I conferences.

On October 31, we launched Comet, the first ever 24/7 science fiction multi-channel network, which features more than 1,500 hours of premium MGM content in over 60% of the country, reaching over 65 million homes. We also began rolling out our proprietary digital content and video management system, which allow us to break news faster on smart devices and to dynamically insert ads. So far, our CMS has been launched in 30 markets and is expected to be fully deployed in all of our news markets by the end of this year.

Last but not least, we are thrilled to announce that we reached a significant milestone in the adoption of the next generation broadcast platform when the ATSC approved the elevation of the entire physical layer of ATSC 3.0 to Candidate Standard status, clearing the way for the FCC to adopt new rules for the broadcast service. ATSC 3.0 is a very important technological advancement for allowing the television broadcast industry, with its more robust [and efficient delivery platform to better compete with other forms of media, technology] and telecommunications companies. In conjunction with the Candidate Standard status, our subsidiary, One Media, was granted special temporary authority by the FCC to operate an experimental facility in the Washington, DC, and Baltimore markets to implement a single frequency network, or SFM, using the base elements of the new ATSC 3.0 transmission standard. This test is designed to provide real-time assessment of quality of reception service using the new Internet protocol-based standard.

Chris will now take you through the third quarter results.

Thank you, David.

Net broadcast revenues for the third quarter were $497 million, an increase of 11% or $49 million higher than third quarter 2014, and exceeding our guidance by over $10 million. On a pro forma basis, third quarter 2015 net broadcast revenues were 2% higher than pro forma third-quarter 2014, primarily due to higher re-trans fees and digital advertising that more than offset the absence of political revenues.

Television operating expenses in the third quarter, defined as station production and station SG&A expenses before barter, were $292 million, up 18% or $44 million from the third quarter last year. However, on a pro forma basis, third quarter 2015 television operating expenses were up 8% versus pro forma third-quarter 2014 expenses due to higher reverse re-trans, compensation expense, news expansions, and ASN production costs on more games. Excluding reverse re-trans and investments in ASN, news expansions, and the digital content management system, television operating expenses were up only 3% on a pro forma basis.

Corporate overhead for the quarter was $16 million, an increase of 7% versus the same period last year, primarily due to higher healthcare costs. For the year, corporate overhead is expected to be $60 million, including $11 million in stock-based compensations. Research and development costs related to One Media's work on the next-gen broadcast platform were $5 million in the third quarter. For the year, One Media's expenses are expected to be $16 million.

Broadcast cash flow was $186 million, or 1% higher than last year's third quarter BCF. The broadcast cash flow margin on net broadcast revenues was 37%. EBITDA was $171 million in the quarter, flat compared to the same period last year, but $14 million higher than our guidance. The EBITDA margin on total revenues was 31% for the quarter. Net interest expense for the quarter was $49 million, up $1 million versus third quarter last year on acquisition financings. Our weighted average cost of debt for the Company is approximately 5%.

Diluted earnings per share on $96 million weighted-average common shares was $0.45 in the quarter. We also generated $72 million of free cash flow in the quarter and converted 49% of our EBITDA into free cash during the trailing 12 months ended September 30, 2015. Our free cash flow yield is approximately 6%, and our dividend yield is 3%, based on our share price at the end of the quarter. Sorry, 16% dividend yields there.

And now Lucy will take you through the balance sheet and cash flow highlights.

Think you, Chris.

Capital expenditures in the third quarter were $25 million. For 2015, our CapEx estimate remains unchanged at $90 million. Cash programming payments in the third quarter were $27 million, and our full-year estimate remains unchanged at $109 million. Cash taxes paid in the third quarter were $31 million, and estimated to be approximately $107 million for the year. At September 30, total debt was $3.891 billion. Included in that amount was $150 million of non-guaranteed in VIE debt that we're required to consolidate on our books.

We ended the quarter with $119 million of cash on hand, and $483 million available on our revolver, for total liquidity of $602 million. During the quarter, we repurchased $21 million or 800,000 shares of our common stock. Including the $16 million quarterly dividend paid, we returned $37 million or 51% of our third-quarter free cash flow to our shareholders, and in addition, repaid $15 million of scheduled debt amortization.

Total net leverage through the holding company at quarter end was 4.6 times. Again, this excludes the VIE and non-guarantor debt, and is net of cash. The first lien indebtedness ratio was 2.15 times on a covenant of 4 times, and our two-year average net leverage at year end 2015 is expected to be approximately 4.7 times, assuming our current portfolio.

Now David Amy will take you through our operating performance.

For the third quarter, net broadcast revenues were up 11% versus the third quarter of 2014; with political revenues of $8 million as compared to $34 million in the third quarter of 2014. Pro forma core advertising revenues were up over 1%, and slightly better than our expectation discussed on our last quarter call.

Turning to our outlook for 2015: for the fourth quarter of 2015, we are expecting net broadcast revenues to be in a range of approximately $538 million to $547 million, down only 2% to 3%, as compared to fourth quarter of 2014, due to the absence of political revenues, which were $80 million in the fourth quarter of 2014, versus $10 million that's expected for the fourth quarter of 2015. On a pro forma basis, fourth-quarter core advertising revenues, excluding political, are estimated to be up low to mid single-digit percents versus the same period last year. For the year, pro forma net broadcast revenues are expected to be $2.010 billion to $2.019 billion versus $2.010 billion last year. Our pro forma core advertising for the year is expected to be up low single-digit percent.

On the expense side, we are forecasting TV production and SG&A expenses in the fourth quarter to be approximately $312 million versus $274 million in the fourth quarter of 2014. For the year, pro forma 2015 TV expenses are forecasted at $1.165 billion versus 2014 pro forma TV expenses of $1.071 billion. That's a 9% increase, but up only 3% when excluding reverse re-trans, a one-time-only pension plan termination expense in the fourth quarter, and investments in ASN, news expansion, and the rollout of our digital content management system.

EBITDA in the fourth quarter, is expected to be approximately $196 million to $205 million. On a pro forma basis for the full year of 2015, EBITDA is expected to be $716 million to $724 million, as compared to $811 million, pro forma 2014 due to the absence of political revenues. Free cash flow in the fourth quarter is expected to be approximately $117 million to $123 million, and approximately $357 million or $3.77 per share for the entire year. We are increasing our expectations for combined free cash flow for 2015 and 2016 to be approximately $825 million to $900 million, or an average of $4.35 to $4.74 per share for the year.

So with that, I would like to open it up for questions.

(Operator Instructions)

Dan Kurnos, Benchmark Company.

Great. Thanks. Good morning. Congrats on a good quarter. A couple quick thoughts here. A lot of the upside had to have come particularly from re-trans. We would assume given the flow-through to profit. Just maybe a couple high-level thoughts here.

First, maybe can you talk about your expectations on re-trans? How it's been pacing versus your own expectations? Which obviously have seen upside from your other peers in the space.

And then secondly, you have obviously had a pretty big push into original programming and original content. How should we think about this flow-through? Understanding your paying out a lot of cash to shareholders. Historically, it's been a trial and limited outlay type of process. But I'm wondering if, with some of the improved profitability, if that could change on a go forward?

Dan, I will take the first part on the re-trans. Our guidance has been that we gave earlier this year for the next couple of years, which would be 2015 and 2016. Net team percent growth rate, so that would be after reverse. So we are still on track for that. We are still confirming our guidance for that, for 2016. Nothing has changed there.

For 2017, preliminarily, it looks like net re-trans would be single-digit percent growth. And the reason for that is really just timing. We only have one MVPD contract that comes up in 2017 and that's Charter.

On the content front, we already, today and historically have paid a significant amount of money for content. [Either] to syndicators or networks. And what you're seeing evolve from us is, for us to vertically integrate, and use our leverage to acquire ownership stakes in the content that we distribute. So from a capital deployment perspective, it's really not a significant shift in our investment strategy.

What the dollars that are being used for to gain ownership are small, relative to our total programming spend that's already been going out the door to run a business every day. And so, is just is a natural manifestation of when you get to our size, you want to avail yourself of this opportunities. I would not expect what we're doing on the content to really change our capital investment strategy.

Great. Maybe just one more on the proprietary CMS rollout. Can you give us any more granularity or a deeper sense of how you expect that to impact modernization once it's fully rolled out?

Sure. We expect the CMS will be fully deployed in our news stations by the end of the year. And the effect of the CMS is to create not only a better user experience, but also improve the speed and ease in which content can be ingested and deployed on multiple platforms. So, it really improves the efficiency of our newsrooms first and foremost.

It also should have the impact of increasing page views, and monetizeable items. Be it display or even video ads going into next year. We expect that to continue to provide good tail winds for our digital business.

Great. Thanks very much

I will add to that when Chris says expect, what we have seen so far is close to 10 times -- 10 fold increases in our UNIX and our page views, based on the new CMS. It's dramatic.

Marci Ryvicker, Wells Fargo.

Thanks. The Q3 core advertising came in better-than-expected. And it was marginally better, but it was still better. And Q4 has some nice acceleration from Q3. So just curious what's driving the change in the acceleration there? Is it a certain category or region or something turning around?

And then secondly, on the expenses for the Q4 revenue guide, it's a lot higher than what we are thinking, but expenses are also higher. Can you just walk us through what's core operating expenses, and what might be attributable to all these incremental investments that you're making? Thank you.

On the advertising side, Marci, we were positive on the auto category for third, which differed than the first couple of quarters. We're doing quite well in the fourth quarter as well. So, a very critical category obviously, that drives our revenues is performing better in the back half of the year. And that certainly speaks well for looking forward into 2016.

We do have other categories that were positive. The third and fourth quarter or expected fourth-quarter. Third quarter was service categories, medical, furniture and quite a few categories that we enjoyed increases in the quarter and expect the same in fourth. But I think the big story for fourth is the acceleration and pace of our automotive category, we are doing quite well in it.

Marci, on the operating expenses, our full-year corporate overhead is up a couple million dollars from the guidance we gave you last quarter. That's really the increased health care claims that we had the third quarter.

And then the TV operating expenses are up about $7 million, versus what we gave you for the full year last quarter. And $6 million of that is the pension termination costs. So, the TV operating expenses are really up minimally, versus what we gave prior.

That $6 million pension, that's a one-time event.

We take that out going forward?

Correct.

Just one follow-on to the auto question. Is it a certain brand or manufacturer? Or is it more broad-based? Because most of other companies that have reported haven't seen a huge turn in auto. Just curious what's different.

I think it's across all manufacturers quite frankly, I was looking at it again this morning. There is nothing that really sticks out one over the other. There is a degree of consistency. The numbers are not huge, but they are clearly better than what they were previously. We are looking in fourth quarter to [load] a mid single-digit increases in automotive.

Thank you so much.

Thank you.

Lance Vitanza, CRT Capital.

I wanted to ask two questions. The first just on the ratings performance of local news broadcast. Any update on the trends that you might be seeing there? And then secondly, on the regulatory front, I know you guys spend a lot of time on this. Is your sense -- has there been any change in the progress or the pace of progress on a communications act rewrite? Or anything that might give you a sense for prospects for any kind of a regulatory relief? But in particular the national ownership cap. Thanks.

I think on the news side, we quite often talk about the investments that we are making. We are expanding time periods. And obviously over the course of acquisitions, there were quite a few of our properties that needed significant investments. And we've made those investments, and we are seeing the results of those investments.

I will give you an example. In West Palm Beach, which we bought about three or four years ago, the CBS affiliate there. We are doing a bang up job. When we took that property over it was in distress. Now, it's clearly a significant number two competitor in the marketplace. And we have similar stories like that throughout our resume of television stations.

Our commitment to building the news product is second to none. And we are seeing the results. We are very pleased with that.

Yes. We are seeing clear -- in our morning news parts especially. Where the audiences are moving towards and we are seeing a real nice growth story in all of our morning newses. And as Steve mentioned, our investments, which we just put a new set in our Birmingham operations, our ABC affiliate there. And looks fabulous and we're looking to take over the number one spot in a couple of those [day parts].

We also made major investments in Seattle and Las Vegas. Both of those are a very positive momentum. Generally speaking, we have been able to consistently make positive advancements in ratings in our newses.

On the regulatory front, there is a rewrite of the act that's been circulated and talked about. And quite frankly, we all think that's what needs to be done. We don't have any visibility on when that would happen. It obviously could include very controversial issues, like [net] neutrality which could bog it down. We don't have any visibility to share with you there.

However, we have had a decent success on the regulatory front. And currently there is a JSA grandfathering rider, which is going through the appropriations process right now. Which we believe has a good chance of a getting through, given that budget deal was struck, I guess it was a couple weeks ago now. So, we're feeling good about prospects there. And how we have gone for pinpoint a relief on that issue. And the next issue is the [cap] for us to tackle. And we've already deployed resources there, and we are optimistic that if a rewrite is not going to happen, we can get pinpoint relaxation in the future.

Thanks for the update.

David Sever, Wells Fargo Securities.

Good morning everyone. Thanks for taking the questions. Maybe a confirmation question, and I apologize if I've missed this. Did you give a pro forma EBITDA year-over-year exchange for the fourth quarter?

Let me take that one, David. For Q3?

No, for the fourth quarter.

Q4 pro forma EBITDA $196 million to $205 million.

Is there a year-over-year change versus pro forma?

Q4 2014 pro forma EBITDA was $263 million.

Okay. Thank you. And on digital, I saw on the press release up 34%, and I just wanted to know if you can provide some clarification around that? How much of your net broadcast revenue is digital and is all that growth organic?

The pro forma number is running in that high teen percent on the growth for digital on a pro forma basis.

I would say yes, it's organic in terms of how we define digital versus time sales. It's not a digital it's not a shifting of time sales, from our TV stations over to a digital number. If that's what you mean by organic.

It is purely digital type of verticals that we have that the station [sells]. It's a combination of reaching out to the local advertiser in regards to their TV advertisement expense, plus how they need to reach their customers through digital means. It's incremental and additive to our line.

In fact, we are adding products at a very rapid rate, that really get us into the digital services slash digital agency services business. This is basically taking non-television revenue and managing for local advertisers who usually are also TV advertisers. But a completely separate [project] which is somewhere that I see our digital growth really benefiting in the coming few years.

David I want to go back to one question. On the EBITDA change, just keep in mind that in Q4, we lose all the political that we had last year. So, when you exclude the political our EBITDA change is actually is up. This year.

Okay. That is helpful. The last question. The FCC was a quarter to required to issue this NPRM, around the totality of circumstances test. Just curious if you think they will tackle any of these questions in the next 12 months? Is there any action we should expect from the FCC beyond what they have already done?

We don't expect much to happen there in the near term on that particular issue.

David, just recall that NPRM, which really isn't an NPRM, it's a list of questions. And that was something that Congress has mandated the FCC to put out. So it wasn't something that they put out on their own initiative.

Okay. That's helpful. Thank you so much.

Thank you.

Tracy Young, Evercore.

I have one clarification, and then one question. I didn't see in the press release your current ownership reach. Could you just tell us that? And then also you've increase your free cash flow guidance, how should we think about that in terms of your capital allocation? Thank you.

The current ownership reach is 38%.

That's pro forma for all 10. (Inaudible).

And then in terms of you raise your free cash flow guidance. Could you just remind us how we should think about your capital allocation going forward?

Sure. Broadly speaking, we think about it in four buckets. The first being payments that we're already committed to which includes our $66 million dividend, and about $50 million of mandatory debt repaid. That's one bucket. And then we certainly look to increase our dividends over time in a steady, measured manner.

The second bucket is for acquisitions, station acquisitions which as you can see this year, has been a more quiet year for us, but we have put to work $56 million so far at extremely accretive levels. We will continue to do that. And then next up, is investments adjacencies, like content and cable. And then lastly is share purchases. And we look at everything on a return basis. So, we look to maximize our return on capital wherever it goes between those last three buckets. And, to the extent that we can't find higher returns and station acquisitions or investments and adjacencies, we will look to increase our share repurchases.

Okay. Thank you.

James Dix, Wedbush.

One housekeeping question. When you talk about core advertising growth how are you treating political? Are you pulling it out in its entirety?

That's correct.

Great. And we look at the mix of auto on your digital platforms versus your non-digital platforms, is there anything you can indicate in terms of just how big auto is on digital versus your core business? Which I assume it's still well over 20% for your core broadcast. I'm wondering whether you're seeing something similar in the digital side? Or something different?

We see auto in digital as an area that is going to provide us an opportunity to really grow our digital business in the future. As we have developed products that are targeted specifically at dealers. To answer your first question, I think currently digital lags linear TV slightly in terms of the makeup. But we are very excited about advancements we've been able to make in the digital area. Specifically targeted at dealers and dealer associations.

Would auto still be a double-digit?

Yes.

Okay. Great. My last one is just on the update in terms of the other potential catalyst for spectrum, mainly the ascent of auction. Is there any update you have in terms of how your thinking about participating? And potential ranges of valuation for people should be thinking about for you in terms of that participation? Thanks.

We're not updating any of the numbers that we previously talked about as it relates to the auction. We think the analysis that we did last quarter that indicated approximately $2 billion of proceeds with a 3% or less BCF hit is a reasonable estimate based on publicly available information. We have since that time we've hired advisors we have a full nationwide simulation up and running and we have an auction team running 24/7 right now talking to multiple parties on channel shares so we can optimize our outcome.

And as you know, as I think most of you know, there are a lot of unknowns that go into the auction including the participation of all the other broadcasters, including the [ultimate clearing target] and including the ultimate [forward] proceeds being satisfied the clearing target. So, I point all that out just so that everyone understands that for us to give you any more guidance on the auction, I think it's probably not prudent at this time, given the unknowns. We are in place to participate and optimize our spectrum portfolio versus our future ATSC 3 data opportunities. And I think in closing, I would say that we expect, when we look at the opportunities available to Sinclair given the breadth of our portfolio over 81 markets now. And the number of double, multi-market stations that we have -- multi-station markets that affords us, I think an incredible opportunity to participate here and do well.

Great. That's very helpful. Thank you.

Alexia Quadrani, JPMorgan.

Hi thank you. (Inaudible) back to your commentary earlier on advertising. I can see FOX is having a bit better performance [on its] network this season. Are you seeing any positive impact to your ad trends from that?

And then I just wanted to go back to your commentary on auto advertising. We've seen, I think the October numbers came out yesterday. With some of the highest sales we've seen in 10 years. And it looks like incentives are up significantly as well. In your history, obviously dealing significantly with the auto industry, how much of this is a leading indicator, in the sense that we should see very healthy auto spending for quite some time given some of these numbers?

I think we're pleased we moved the needle a little bit in third quarter with specifically the Fox network, was a little better in the third than second. We anticipated that, and it was a pinch better.

Empire, for all intensive purposes really is debuted in the fourth quarter. Although the first episode may have aired in September. And the ratings were obviously still extremely significant. And we're expecting a little bit better performance from Fox in fourth. But there is still an issue. They are still struggling in terms of their overall performance. But certainly that show certainly helps the performance, and we are seeing the results of that so far.

In terms of the car advertising, as I mentioned, what's encouraging for us is the back half of the year is positive. And fourth quarter is significantly better than third. We're cautiously optimistic going into 2016 that trend will continue. So the back six months of this year has been very good for us on the automotive category.

Thank you.

Thank you.

Barry Lucas, Gabelli & Company.

Thank you and good morning. Two areas. I was hoping given your station locations in Iowa, you could provide a little bit more color on what you're seeing in political? And I want to come back to ATSC 3.0 if we may?

I like what I'm seeing in political. Actually, our fourth-quarter number is already are better than what we had budgeted for. Every dollar that we place between now and the end of the year for fourth-quarter is gravy.

So, the dollars are coming in and we expected them to come in, and we're not disappointed. I think it bodes well going into 2016. We've made every political number throughout the 2015, and most quarters better than what we anticipated. And quite frankly, in fourth, the quarter that we're in right now, it's clearly better than what we anticipated. I think that speaks very well.

We are starting to see the Iowa race heat up. Dollars are coming in as we speak, and we're counting them. It looks like a very robust political quarter for us. Much better than what we had anticipated.

Great. Thanks Steve. And if I can drill down a bit more on ATSC 3.0 now. It is a Candidate Standard. So bureaucratically what comes next? How does the rollout proceed? And can we talk a little bit about (inaudible) and timeframe for that as well? Including what it will cost.

The next step, Barry, typically our people take what's been adopted as a Candidate Standard and they start testing it to see if it does everything that it is supposed to do. And we are obviously involved in that process. And we will be doing a full-blown demonstration at the CES in January as well as giving a larger demonstration in Las Vegas at the NAB in April of next year.

We will also be doing the first ever in this country, a single frequency network. Where we're going to couple Baltimore and Washington together to a really serious, large-scale long-term businesses development opportunity. So we're very happy that the 3.0 is now through the window if you will, of the ATSC political process and technical process. And what happens now is, the industry sometime in the immediate future will get behind the standard, and we will approach the FCC and say, we are ready to make a change, and start that process.

So, I think over the next six to eight months you're going to see some rapid movement. So a much clearer understanding in terms of what the capability of future platforms is going to be. And people will start talking about business models [and one thing or another]. So it's all good.

Great. Thank you.

(Operator Instructions)

David Bank, RBC Capital Markets.

Thanks. You announced a partnership with Visible World, to improve the monetization of your inventory and the efficiency of the platform, almost 6 months ago. Can you talk about the progress on that venture? And how it's impacting your monetization. And whether or not it's getting broader traction, generally across the industry?

Sure. What's going on with that venture right now is [Ox Mix] Media group is being formed as a separate entity for Visible World as a vendor to Ox Mix and a minority owner. That formation is underway. We are in discussions with multiple other broadcasters to join Ox Mix to make this platform more national in scope.

The technology that will power the network and automate the sales placement and reconciliation process is being developed as we speak by Visible World, and expect that to be ready here at the end of this year, or the beginning of next. That's an important step, because this is an incredibly laborious process to place ads across multiple stations. We are actually doing it on a manual basis today, for our own network and it's not a big number, but it is producing sales for us and it is accretive. We are encouraged by our internal efforts to sell on a network basis. And Ox Mix when its formation is complete, and the technology is in place, which will be next year it should start to take effect.

Thanks.

[John Que], Wells Fargo.

Can you confirm that digital is included in your core advertising commentary and if it is, would you be able to break out the core pacing from digital in Q3 and Q4? Thanks.

It is included, John but we don't break that out because there's too many of the deals that are sold now as package deals across our linear and the digital assets.

Okay. Thank you.

Mr. Amy, it appears we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thank you operator. And thank you everyone. We are glad that you participated on our earnings call this morning and as always, if anyone has any additional questions, feel free to contact us.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.