Gray Media - Earnings Call - Q4 2018

Transcript

Speaker 0

Good morning. My name is Kelly, and I will be your conference operator today. At this time, would like to welcome everyone to the Gray Television's Fourth Quarter twenty eighteen Earnings Conference Call. Thank you. I would now like to turn the call over to Hilton Howell, Chairman and CEO of Gray Television.

Please go ahead, sir.

Speaker 1

Thank you so much, operator. Good morning, everybody. I'm Hilton Howell, the Chairman and CEO of Gray Television. Thank you so much for your time this morning and for joining our fourth quarter twenty eighteen earnings call. I am delighted to announce that we are joined for the first time by our President and Co CEO, Pat LaPlatney, who has joined us effective January 2 and who will be with us going forward.

As usual, we have our Chief Legal and Development Officer, Kevin Lasack and our Chief Financial Officer, Jim Ryan, both with us this morning. And I will ask Kevin to provide a quick disclaimer before we begin.

Speaker 2

Thank you, Hilton, and good morning, everyone. Certain matters discussed on this call may include forward looking statements regarding, among other things, future operating results. Those 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 filed with the SEC and included in today's earnings release.

The company undertakes no obligation to update these forward looking statements. Gray uses its website as a key source of company information. The website address is www.gray.tv. We also will post an updated investor deck to the website within the next two weeks. Included on the call will be a discussion of non GAAP financial measures and, in particular, broadcast cash flow, broadcast cash flow less corporate expenses, operating cash flow, free cash flow and certain leverage ratios.

These metrics are not meant to replace GAAP measurements but are provided as supplements to assist the public in their analysis and valuation of our company. We include reconciliations of the non GAAP financial measures to the GAAP measures in our financial statements that are available on our website. May I now return the call to Hilton?

Speaker 1

Thank you, Kevin. The big news, of course, is that Gray closed its acquisition of Raycom Media at the beginning of the year. The bad news is that we're just gonna be talking about Gray heritage at this point. But the even better news is before we discuss our transaction, the milestones that we hit in the fourth quarter were outstanding. Our revenue for the 2018 was $328,200,000 or plus 40% from the 2017.

Importantly, this was our all time best quarterly revenue set ever. Our net income for the quarter was $88,300,000 and was our second best fourth quarter net income. Our broadcast cash flow was $172,800,000 which was double that from the 2017. This was our all time best quarterly broadcast cash flow result. Our political advertising revenue was 83,200,000.0, which was about 5% higher than our political revenue in the 2014, which was the most recent non presidential election year after getting effect to stations acquired and divested between 2014 and 2018.

This was our highest fourth quarter political revenue in a nonresidential year ever. Our gross retransmission revenue for the fourth quarter was 93,000,000 and our net retrans revenue was 50,300,000.0. Both of these figures also set new quarterly records for us. For calendar year 2018, gross retransmission revenue was 355,400,000.0, and net retrans revenue was 190,400,000.0. Finally, as of 12/31/2018, our total leverage is found in our senior credit facility with 3.01 times on a trailing eight quarter basis after netting out our total non restricted cash balance of $667,000,000 In short, the 2018 was an excellent quarter once again across the board.

Given that performance and even before considering that we have nearly doubled our size with the Raycom acquisition, I believe that our stock remains deeply undervalued. On the heels of the fourth quarter momentum, we completed our acquisition of Raycom Medium on January 2 and made effective as of January 1 so that we could begin this year with a clean break from legacy Gray. As you know, upon closing, we own and operated television station stations and leading digital properties in 91 television markets from Alaska and Hawaii to Maine and Florida. This portfolio includes the first or second highest rated television stations in 85 markets. Collectively, our television station portfolio broadcast roughly 400 separate program streams.

Closing the Raycom deal was no easy feat, and I want to take a moment to acknowledge the literally heroic efforts that I witnessed in the 2018. Remember, we set the ambitious goal of completing multiple complex closings simultaneously in addition to the actual acquisition of Raycom. Those included financing transactions, the spin off of Raycom's newspaper and ad tech businesses, several television stations to four different broadcasters, and internal reorganization of both personnel and corporate subsidiaries. And we made all that happen over the holidays. Gray's shareholders were clearly well served by the extreme dedication, sacrifices, and professionalism of all the countless people who made this all look easy.

I want to publicly thank my colleague at Legacy Gray and Legacy Raycom as well as the many others at the divestiture buyers and the professionals assisting all these companies at the banks, law firms, and accounting firms that have been involved in these transactions. They were truly heroic. Our new scale will give Gray the opportunity to face the dynamic changes in our industry and local community with new vigor and added resources, A great example of the new opportunities before us is this morning's exciting announcement that Greta Van Sessro has joined Gray as our chief national political analyst. On a personal and professional basis, I'm thrilled with this. In this new role, she will provide our local newsrooms and 93 markets coast to coast with the expert, unbiased, professional coverage of national and international development that has been the hallmark of Greta and Sussman's distinguished journalism career.

While I cannot provide details today, we can confirm that Greta also has two nationally syndicated shows in development with Gray. Over her long career on cable news channels, Gray has distinguished Greta has distinguished herself as a journalist first. She is known for her knowledge, experience, and unbiased approach to the controversial issues of the day. As such, we have found a trusted, respected expert on national and international affairs to complement the trusted, respected professionals in our local newsrooms and cities and towns across this country. Her decision to join Gray from among all the many other quality news operations out there reaffirms that our investments in quality, local journalism, and service to local communities does, in fact, pay off.

At this point, I'm very happy to introduce Gray's shareholders to our new president and co CEO, Pat LaPlatinum.

Speaker 3

Thank you, Hilton, and good morning, everyone. I'd like to echo Hilton's comments regarding the extraordinary effort on the part of all of Gray employees and our professional partners to close the agreements. Tremendous amount of work has been accomplished in a remarkably short amount of time. We amended our agreements with both Nielsen and Comscore resulting in significant cost savings for the company. As of today, we are now handling all national business in house, which will provide our stations with revenue upside and put a huge dent in our cost of sales.

Jim will talk in greater detail about the synergy effort, but I can tell you that we are well on our way towards the stated goals. We're also moving forward on revenue development efforts in a number of areas and expect to see progress throughout 02/2019. Again, Jim will cover the the numbers in detail, but q one has been okay with March showing an uptick. We have a sizable Olympic revenue number from February 2018 because of our large NBC footprint, and that has impacted our comps in first quarter. It's early, but we are hoping that the momentum for March swings in the second quarter.

With that, I'll turn it over to Kevin for his update.

Speaker 2

Good morning again. We all certainly kept pretty busy in the fourth quarter, not just with the Raycom and related transactions, but also our core business, political coverage, and political sales. As luck would have it, Gray had very few retransmission consent agreements expiring at the 2018. Accounted for roughly 1% of our total subs. Still, as usual, we concluded those renewals on very satisfactory terms without any disruption.

Going forward, we anticipate having about 22% of our MVPD subs under contract expiring around the 2019 with 56% of subs under contract expiring around the 2020 and the balance expiring again at the 2021. You saw in our release today that we are also guiding to a 22% increase in gross retransmission consent for this quarter and 20% for the year. I'll also note that while we had some delay in reports on OTT subs, it appears we have crossed 1,250,000 OTT subs around the first of this year. Those falling gray for the past few years know that most of our network affiliation agreements have been scheduled to expire at some point in 2019. In the 2017, we announced that we had extended the terms of all of our affiliation agreements with CVS regardless of expiration date.

Similar similar way we announced in the 2018 that we had extended the terms of all of our affiliation agreements with NBC, which have been expired scheduled to expire at year end twenty eighteen. Shortly after closing the rate on transaction, we announced that we had extended the terms of all of our affiliation agreements with ABC for all of our legacy a b Gray and all of our legacy rate compensation. Most of those contracts have been scheduled to expire at year end twenty eighteen. This morning's release announces that we also recently extended the terms of all legacy rate compensation agreements with CBS. So we're off to a very good start.

We have one major network of expiring affiliation agreements this year, and that negotiation, of course, is already underway. Turning to m and a, we have said consistently for many years that we look at all number one and strong number two ranked television stations offered for sale regardless of market size. The rate con transaction has not sent us to the sidelines. Indeed, we recently entered into an agreement to acquire United Communications Television stations in Watertown, New York and Mankato, Minnesota for $45,000,000. These are terrific stations that will fit very well into our portfolio of similar stations with tremendous records of service to the local community.

Moreover, we anticipate that the transaction will be at least leverage neutral, and if certain opportunities can be executed as we hope and expect, United's acquisition can be a deleveraging transaction for us. We are continuing to look at opportunities to grow the company through more small tuck in transactions like United, potentially larger acquisitions of high quality stations, and some non broadcast yet complementary ventures. In all cases, we will continue to be guided by our public commitment to grow the company prudently within the limits of our balance sheet. Thank you for your time. I'll now turn the call over to Jim Lyon.

Speaker 4

Thank you, Kevin. Good morning, everyone. As Hilton already said, fourth quarter and full year 'eighteen, we're very pleased with. Obviously, 'eighteen was a record setting political year for us, and we think that bodes very well for 2020. Turning to our first quarter guidance, I'm gonna focus my comments on a combined historical information that we put out for Q1.

I'll also point out that in the eight k that was filed a little earlier this morning, there is an exhibit where certain select combined historical revenues and certain select operating expenses for $2,018.17, and 16 have been published by quarter, so that should help everybody with their modeling. Now remind everybody that combined historical does not include expected synergies of any transaction. It is merely the combination of the historical records, adding in acquisitions and subtracting out divestitures. Also, our guidance for q one does not include the two United stations that we will begin operating tomorrow under a preclosing LMA. Those stations, while they're great stations, very powerful in their local markets, we're delighted to be acquiring them, are not material to the quarter or to any any of great full year operations.

Our core local and national is expected to be down in the mid single digit range. But as Pat mentioned a a moment ago, we had 12,700,000.0 of total local and national revenue in the Winter Olympics last year, which we're going again. And in that 12,700,000.0, we had 3,600,000.0 of auto related advertising. So it clearly, is a significant event for us in '18, which does affect comparability a little bit for our nineteen q one. However, if you exclude the Olympics, we would expect our core local and national to be approximately flat in q one eighteen.

We're very pleased with the anticipated growth in retrans revenue of a low 20% range. Remember that legacy gray legacy gray, as Kevin just said, had very few MBPD subs to renegotiate. And we've commented before that the GRAY's MVP contract, the annual escalator, is generally a low double digit percentage. So we are very pleased that our overall retransmission growth in q one will be up 22 to 23% gross revenue retrans revenue, and that obviously is reflecting the synergies of grades after acquired clauses for the legacy rate compensation. We are reaffirming our previously announced net retrans synergy of at least $15,000,000 for the entire year.

Our broadcast expenses in q one have two significant components. First, there's 33 to 34,000,000 in nonrecurring expenses associated with the rate comp transaction, including 27,600,000.0 of expense to terminate the national rep firm and about 5,300,000.0 of of severance or other compensation related expense in the broadcast expense line. The second, as Kevin mentioned, our NBC agreements repriced under the new agreement effective January 1, retrans is expected to grow quarter over quarter, 19 to $20,000,000. If you exclude both of those items, then our broadcast operating expense in q one, it would be essentially flat to q one eighteen on a combined historical basis. Similarly, our corporate expenses in '19 are impacted by transaction related expenses of 29 to $30,000,000.

Again, that is m and a advisory fees, legal and accounting fees, severance, and other transaction related compensation, which is would be nonrecurring. If you exclude those nonrecurring charges, again, our our corporate expense would be approximately flat to 18 on a combined historical basis. I'd like to give some updates on pro form a leverage for 18. We have not yet completed the preparation and audit of the carve out statements for ratecom for the year ended 12/31/2018. Therefore, my following comments are on a preliminary basis based on internal forecast and do not reflect the audited statement.

That being said, outstanding debt post closing was 3,970,000,000.00 as of 12/31/2018 or would have been. We estimate our cash on hand, as of closing would have been about $200,000,000. On a trailing eight quarter basis as of 12/31/2018, our operating cash flow is defined in our senior credit facility. We estimate would have been in a range of 780,000,000 to 795,000,000. That's higher than when we announced the deal last June.

And, obviously, that has, in part, reflects some very, very strong political we saw in the second half of the year of '18. On a trailing twelve month basis, the operating cash flow would be in a range of approximately 880 to $900,000,000. Those cash flow estimates do include the impact of the $80,000,000 of synergies we announced at, when we announced the deal, and I'll update you on the synergies in a moment. Put these results in perspective, if you look to our November investor presentation that is on our website, our operating cash flow, combined historical with synergies for '16 was approximately $8.00 3,000,000, and seventeen was about 686,000,000. Our leverage ratio at twelve thirty one, we're currently estimating would have been somewhere between four eight 4.85 times and 4.75 times.

If you recall when we announced the deal, we said we would be approximately five times, and that announcement was last June. When we closed the deal in January, we said we'd be between five and four seventy five. And, clearly, our expectation would be towards the lower end of the range, closer to four seventy five. And, again, that leverage ratio would reflect the synergy number. We currently estimate free cash at December 31 would have been a range of 500,000,000 to 525,000,000.

Again, if you go back to our investor deck for November, it's on our website, 2016 free cash was estimated at about 401,000,000, and 2,017 free cash was about 300,000,000. So we're very, very pleased at where we are at the outset of 02/2019. Our common stock post closing is, approximately 100,000,000 shares outstanding for both the GTN and the GTNA on a combined basis. Now let me update you on our synergies. We had said at the outset that we expected $80,000,000 of synergies.

To date, eight weeks in post closing, we are at 61,000,000 that's been essentially locked in. That 61,000,000 represents 22,000,000 of payroll and benefits. We have already either eliminated or have scheduled to eliminate a 135 positions across the entire combined company. Also, given changes to our benefit plan, we will have an additional approximately 4,000,000 of save 4,000,000 of cash savings from benefit plan changes. For contractual arrangements, we have savings of 18 to $20,000,000.

That would reflect the annual run rate of the former National Rep Commission, and it would reflect the the savings and renegotiating the Nielsen and Comscore agreement on very favorable pricing terms to Gray. Our net retrans, we're very comfortable that we'll have a net retrans uplift of at least 15,000,000. In addition, the legacy RACOM aircraft, unit has been closed down, saving approximately $2,000,000,000 a year, and the planes have been sold with net proceeds of approximately 2,700,000.0. So I I would say that, first of all, those expenses, those savings, those synergies will all be, realized ratably as we go through the year. We, I think, are off to a very good start at 61,000,000, about 75% of our goal.

There will be other opportunities for us as we progress through the year, and you you know we will not be bashful about taking it in taking every, opportunity that we

Speaker 1

can uncover. So at this

Speaker 4

point, I'll turn the call back to Hilton.

Speaker 1

Thank you, Jim. At at this time, operator, we'd like to open up the line for any questions anyone may have.

Speaker 0

Your first question comes from Marci Ryvicker from Wolfe Research. Please go ahead. Your line is open.

Speaker 5

Thank you. You spent a lot of time on the gross retrans number and the synergies. Can you remind us what the net retrans guide is for is it the low single digit year over year growth?

Speaker 2

Hi, Marcy. It's Kevin. I can't remind you because we we've not said anything yet on that retrans for the year. We still have one network that we have to negotiate. Our terms that current all those current agreements expire in the middle of the year.

We don't know where they're gonna land on that renewal, so therefore, don't know what the reverse is gonna be this year. You know, as as we've been telegraphing with all of the contracts, all of the other big three contracts mostly expiring in 2019 and being repriced in '19, So there will be a there is a a larger than normal step up in reverse comp this year just because of the timing of all those network contracts. So last year was a, obviously, a good year. This year's margin's gonna be a bit compressed, but our growth is probably higher than a lot of people expected this year. But we just we're not ready to give a net guide for this year just yet.

Speaker 5

Okay. And then the free cash flow, the 500 to $5.25 that you would

Speaker 4

estimate for 02/2018,

Speaker 5

Is there anything onetime in that that would not recur in 2019 or 2020, like taxes?

Speaker 4

Just to be clear on that, I am not counting any onetime cash payments. For instance, the 27 plus million dollars national rep termination fee in that number because it's nonrecurring. But it would include an estimate for taxes for 2018 that would be what would we would appear what appears to us to be a normal run rate in taxes. There were no taxes directly linked to the transaction itself.

Speaker 5

Okay. So then would it be safe to think that 2020 would grow above that?

Speaker 4

I I it's yes. Now, obviously, that's gonna depend on where political lands in 2020, but I would expect our grocery transmission will obviously grow, especially the re reprice 20 plus percent of our sub base at the end of this year. So I I would think 2020 is going to be a very strong free cash flow year for us.

Speaker 5

Great. Thank you so much.

Speaker 1

Thank

Speaker 0

you. Your next question comes from Aaron Watts from Deutsche Bank. Please go ahead. Your line is open.

Speaker 1

Hello, Aaron.

Speaker 6

Hey, Hey. Thanks for all the detail today. Couple of questions for me. I guess, first, on the core advertising environment, can you maybe talk a little bit more about the cadence you saw post election November, December into the first quarter and maybe just broadly some go goalposts around what you see, core doing in, 2019?

Speaker 4

I'm gonna look up I I I can give you a number for December. Just give me a second to pull it out of my stack of cheat sheets. And I'll maybe I'll let Pat start with Sure. Sure.

Speaker 3

I mean, look. I could I could speak for legacy Raycom in general. We did see some momentum in fourth quarter. We were pleasantly surprised by that. And again, our first quarter is okay.

When adjusted for Olympics, it's better than okay. And and we we are seeing some momentum in March, probably a function of early second quarter starts, which will happen this time of year. You know? But candidly, it's really too early to give any further guidance for for q two and remainder of the year,

Speaker 1

in my opinion.

Speaker 6

Just given that it's such a big piece of the pie, any insights you can give on what you're seeing in the auto category?

Speaker 4

Yeah. I can speak to that a little bit. Now, again, we had about 3,600,000 of of auto advertising, in the Olympic broadcast last year, so that that obviously creates quite a quite a you know, it it skews comparability a little bit. But when we take that out, I would say our auto is right now in q one looking like it would be down kinda mid single digit range, you know, say, percent, some some place in there. It looks like it's worth going on.

But that that, again, is excluding the the 3,600,000.0 of political that I mean, not political, but auto from the Olympics that was really, you know, kind of incremental last year. The other comment I would make in general for auto is we are seeing Ford Ford corporate cutback, and we'll be keeping our eye on that just like Dodge Chrysler Jeep did last year. It looks like it's Ford's turn this year, but, you know, and that's probably worth a million dollar hit to us in q one.

Speaker 6

Okay. That's helpful. Jim, maybe since I'll throw one more your way here. You talked about being, give or take, around 4.8x leverage pro form a for the transaction as you ended 'eighteen. Can you refresh us on where your head's at, where you see that leverage going over maybe the next year or two years?

Speaker 4

I think it's, absent any large transaction, I think leverage at the '19 is somewhere in the lower fours, and then we're somewhere at the '20 comfortably in the threes.

Speaker 6

Okay. Perfect. And last one for me. Appreciate the time. A little bigger picture.

We saw private equity step into the space in terms of making an acquisition recently. Curious what your view is of that, if it's a one off situation or you think you'll see more of that? And how does that impact the in a bidding environment from a competitive standpoint as you look at assets going forward?

Speaker 1

Well, the price of poker may have gone up a little bit. We're happy to have Apollo and guys. We know those guys and their smartest whips, and we're delighted that they see the value that we see in local broadcast. And so we are we heartily welcome them to the space and wish them the best with their new acquisition.

Speaker 6

Okay. Fair enough. Thank you.

Speaker 3

Yeah. And just a quick follow-up.

Speaker 4

Your December, question as far as what core did post election day, Is that December was up a nice solid 4%, which was very encouraging to us.

Speaker 6

Okay. Thanks, Jim. Your

Speaker 0

next question comes from the line of Dan Kurnos from Benchmark Company. Please go ahead. Your line is open.

Speaker 7

Great. Thanks. Good morning. Nice to see some recognition of the actualratecom. It's getting factored in Just looking at kind of your sub trends maybe, Kevin, I think that's the other piece of the equation.

Obviously, you gave really healthy guidance, but we heard that there were some noise at the end of the year. Just what you're seeing from linear and OTT and how that's kind of playing out for you over the balance of the year?

Speaker 2

Think we can see more of the same. NBPD subs are dropping for everybody. One operator is seeing bigger drops, which is probably not much of a surprise given they're not carrying some marquee programming and are dropping seemingly every broadcaster that they have a negotiation with. So we are seeing, you know, probably seeing some bigger some bigger fluctuations. Some of those subs seem to be moving to other operators, and I don't think that trend has changed much recently or will change going forward.

At the same time, OTT subs are growing frankly faster than we expected. It's about 1,250,000 OTT subs around the beginning of the year than the whole company. That's a lot more than we expected at this point in time. Even even I peel off Raycom, it's still gone faster than we thought. It's unclear how many of those folks are are gonna sort of stay where they are or move around.

They're different OTT providers, but it doesn't really matter. The economics are decent. And I think we I think we're I'd say we're we're pleasantly surprised at how retrans is doing so far this year.

Speaker 7

Got it. Thanks, Kevin. That's helpful. And then, Jim, I know you never like to go out on a limb on political, but maybe just at least for the off year. I think if I'm looking through the k, you did 31,000,000 or so on a CHB 17.

So, you know, just obviously, you're starting a little lower. It'll probably be back end weighted. Just any thoughts on how political could pace this year?

Speaker 4

I I I think it somewhat looks like 17, although I'm I'm trying to recall. I think we had a well, I think we had, in the 17 cycle, maybe a little bit more off year governor's races than we do in the '19 cycle, so that might mute it a little bit. But you're right. It'll be very, very heavily back weighted. And, you know, it's not no matter what, it's just not gonna be a big number this year because it's an off year for us, and there's no at least right now, there's no huge catalyst.

But having said that, while the dollars are still pretty small, we've actually gotten two twenty twenty presidential orders in Iowa already this year.

Speaker 1

Yeah. I was about to say when when when Jim was talking about that, our company, to my memory, and I've been around almost thirty years now, we've never gotten presidential ad money this early in the cycle. And for us to have presidential ad money at this point, I think it's gonna be literally just raining money in 2020. In all of our states, and we and Gray happily is in essentially every battleground state that is defined by five thirty eight in the country and literally everyone. And I don't think the Democrats are gonna make one mistake in terms of ignoring Wisconsin, Michigan, you know, any of the rest of those areas that are so important, in 2020.

And I think, the Republicans, you're not gonna have, like we had with, the last presidential election year, the president sitting back thinking his celebrity can win him the election. He's sitting on a huge war chest right now, and I think 2020 is gonna be gargantuan, my opinion.

Speaker 7

Well, fair enough. I guess we shall see. Thanks for all the color, guys.

Speaker 0

Your next question comes from the line of Michael from NOBLE Capital Markets. Please go ahead. Your line is open.

Speaker 8

This is Tarunaswani for Michael Kupinski. Raycom had a fairly developed program arm with a decent amount of original programming outside of news content. Can you give us some color on your plans for those operations? And given the much larger platform that you will have with Raycom, does the company plan to move to more fully developed original programming moving forward?

Speaker 3

Yes. We just made a big announcement yesterday with Greta. So that's one project. Candidly, I don't see a bigger move into originals. Although, as you know, we do have production companies in our portfolio, which gives us capabilities.

But in terms of growing originals for syndication, they'll probably be some of that, but not a not a huge focal point right now.

Speaker 1

But I I will say we're we're very proud of the production companies that Raycom brought to our portfolio. While in comparison to the size and the cash flow and the revenue that's generated from our television station portfolio, it's relatively small. Each and every one of them is substantially profitable, and they turn out outstanding products just really across the board from Raycom Sports to Tupelo Raycom to RCN Studios to Swirl Films here in Atlanta. They are assets that Greg is proud to own, and we look forward to explaining their unique niches to you, in the future because it is an added area for growth. At some point, all the TV stations in the world are gonna be bought up, And we'll have to look at for other areas to grow our business.

And that's given us a great foothold in that regard.

Speaker 8

Great. Thank you very much.

Speaker 0

Your next question comes from the line of Steven Tuhal from Royal Bank of Canada. Please go ahead. Your line is open.

Speaker 9

Yes. Thank you. I was maybe wondering if you could talk a little bit more about the one big four renewal you haven't done yet. That company is also going through some transformative M and A. And I wondered if that at all impacted the way they're coming to the negotiating table.

And then also on the pro form a free cash flow numbers that you gave, does that give your future cash interest expense? Or as we think about trying to forecast 2019, do we need to build in a little bigger cash interest expense given the debt you've just raised? Thank you.

Speaker 2

I'll take the first the first question. On the other renewal, I mean, I'm not seeing anything particularly different than what we've talked to them about in years past. So we're that that conversation started a little slower than others, which is not a surprise. And there's a lot of important markets there, and we'll we'll get through it. But there's nothing there's nothing that we've seen that is really all that different than what we've seen in the past renewals.

Jim, do you wanna?

Speaker 4

Yeah. If you take our current capital structure now and go through the different tranches, you know, you make some assumptions on LIBOR. But at current current LIBOR rate, it's about 220, 225,000,000 per year. And then, obviously, there's the preferred dividend now too of $52,000,000 a year. And both of those are taken into account in the free cash that I was talking about.

Speaker 9

Great. That's very helpful. Thank you.

Speaker 0

Your next question comes from the line of Jim Goss from Barrington Research. Please go ahead. Your line is open.

Speaker 10

Thanks. I was wondering with the grid of ancestrin programming, are you planning on making that a great exclusive, or will that be syndicated to others? And will that tie into your efforts to sell political ads in the coming years?

Speaker 1

We will make an effort to syndicate it and sell it to others. We will obviously and we have already we have already identified clearances within all really 93 of our markets for a space on on Sunday, but we will be looking for syndication.

Speaker 10

Okay. And and will there be a political ad placement on that as well? So that's one of the benefits of having this sort of a person.

Speaker 2

Yeah. Jim, Greta is joining our news operation right now, and we're we're talking about some shows that we would plan to nationally syndicate, but we don't have details on what those shows may be or what would be in them. But right now she's joined us as an analyst and she'll be appearing on our local newscast soon as this afternoon.

Speaker 10

Okay. And the switch to Comscore from Nielsen, I wonder if you could talk a little bit more of the value you expect to bring from that, maybe the rationale behind it. I think you're not the only one to have done that.

Speaker 2

I'll let Pat talk from an operations standpoint. I will say that we have had a we've had a lot of frustration with our our other service, particularly in the diary market. And our in a lot of markets many markets, we had both Nielsen and Comscore, and we were able to see and basically compare the two for a significant period of time. And Comscore data, which, as you know, comes from many more data source sources of data points than diaries, were much more stable, much more responsive to what we were seeing in the news I mean, in the market and what was on television than what was showing up in the diaries. And despite of the conventional wisdom, as I can tell you, all of our stations do better in Comscore than do in Nielsen anyway.

So from from that perspective, Comscore stability was very important to us, but I'd also let also, Pat add some thoughts.

Speaker 3

Yeah. Sure. So legacy legacy Raycom effectively had we had moved to Comscore in the diary markets, I think, three years ago. So this really is a big change. We still work with Nielsen in larger markets, and and we've consolidated with Comscore in the diary markets.

Speaker 10

Will it also give you better information to justify any improvement in pricing power in those markets? Is that part of the rationale?

Speaker 2

Was not part of the rationale.

Speaker 10

Okay. Lastly, capital allocation priorities. What what is the rank order of your desires and plans? We

Speaker 2

have talked we we announced Raycom. We said our number one priority was to close Raycom. And after that, we would put a focus on bringing our our our debt down, but still keep an eye open for smart acquisitions that made sense for us. And I nothing has changed in that regard. So right now, we are focused on paying debt down as we get to a different level, not to get ahead of the board, but we anticipate they'll be looking again in capital allocation returns to shareholders.

But I don't have any I have nothing to report to this time that, again, that will be the board's decision. But we've said since Raycom closing that our focus will be paying debt down once the deal closes, which is now our focus.

Speaker 10

And

Speaker 0

there are no further questions at this time. I'll now turn the call back to the presenters for closing comments.

Speaker 1

Well, I just wanna take a moment to thank every one of you for joining us this morning. We have a lot of exciting things ahead. We're thrilled to be bringing, all of the professionals of Raycom and all of their operating units, within the new gray umbrella. And I think it's going to lead to, remarkable results, in our future quarters and for the year. And, we look forward to sharing with you the next quarter.

Thank you very much for being here this morning.

Speaker 0

This concludes today's conference call. You may now disconnect.