Ladies and gentlemen, thank you for standing by, and welcome to the Gray Television Third Quarter 2019 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Hilton Howell, Executive Chairman and CEO. Thank you. Please go ahead.

Thank you, Cheryl. Good morning, everyone. Thank you for joining us this morning for our third quarter 2019 earnings call. As usual, I'm joined by our President and co-CEO, Pat LaPlatney; our Chief Legal and Development Officer, Kevin Latek; and our Chief Financial Officer, Jim Ryan. We'll begin this morning with a disclaimer that Kevin will provide and at the end of our comments, we will open up the line for questions. Kevin?

Thank you, Hilton. 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 few 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, adjusted EBITDA 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. Included in our earnings release as well as on our website are reconciliations of the non-GAAP financial measures to the GAAP measures reported in our financial statements. I'll now return the call to Hilton.

Thank you, Kevin. We are extremely pleased to report the results for the third quarter of 2019. This is a quarter of exceeding expectations, both on the high end and the low end of our guidance. Our as-reported total revenue for the third quarter was $517 million, which was at the high end of our previously issued guidance. At this level, our total revenue increased by approximately 85% from the third quarter of 2019. Our broadcast and corporate operating expenses were each below the low side of our guidance. Our adjusted EBITDA significantly exceeded the high side of our guidance. For the past several quarters in a row, we have set new records for broadcast cash flow. The third quarter of 2019 also set another all-time record for a third quarter at $192 million, increasing $57 million or 42% from the third quarter of 2018. This figure also set a new best broadcast cash flow for any quarter in our company's history. Our political advertising was a distinct high point of the quarter. Political revenue, again, greatly exceeded our expectations, especially for an off-cycle year. In particular, our political revenue was $22 million for the third quarter of 2019. Political revenue throughout the year and our expectations for the fourth quarter, certainly point to a record political revenue year in 2020. Our net income available to common stockholders for the third quarter was $46 million, and our net income per diluted common share was $0.46. Excluding transaction-related expenses and noncash stock compensation, our net income available to common stockholders would have been $0.50 per diluted common share. This figure represents a strong increase over the second quarter of 2019, which was itself a strong increase over the first quarter of the year. We ended the quarter with a total leverage…

Thank you, Hilton, and good morning, everyone. In September, Hilton accepted Broadcasting and Cable's Broadcaster of the Year award at the TVB Forward conference in New York. In accepting this award, Hilton announced that Gray would join NBCU, CBS, ABC, Hearst and Graham Media in moving from household ratings to a cost per impression model for selling advertising. Impressions provide more granular data for advertisers and is the accepted metric used by the digital media platforms with whom broadcast television companies compete. Last week, we were happy to see Nexstar announced that it too would move to impression-based selling. Selling ads based on impressions will allow us to monetize all of our inventory, better meet the needs of advertisers and, therefore, should help us and our industry improve local television's share of video ad sales across the competitive landscape of broadcast, MVPDs and digital platforms. In addition to the move to impression-based selling, Gray is also rolling out a targeted sales strategy across the group against a couple of key categories, auto and health. We have seen some success here and believe this effort will have a positive impact on core advertising sales. We've also been working on adding capabilities around the sale of OTT advertising. As you know, it's the fastest-growing sector in advertising, we are going to broaden our focus in this area. Recently, our joint venture with Opry Entertainment Group, a subsidiary of Ryman Hospitality Properties, announced a name for the JV's new 24/7 premier linear multicast and SVOD service dedicated to the country music lifestyle experience. We chose Circle, in a nod of the wooden Circle with Grand Ole Opry stage. As you probably know, Circle will feature original programming centered around artists, music, hobbies, outdoor and offstage adventures, food, family and friends. We are on…

Thank you, Pat. We posted a 113% year-over-year increase in retransmission revenue on an as-reported basis, and that's a 15% increase on a combined historical basis. While we should be very pleased with double-digit growth at these rates, the numbers could have been a bit stronger. Virtually all of Gray's retrans contracts reset our rates on January 1 rather than at different points during the year. As a result, our retrans revenue in any month is simply a function of the rate on January 1, times the number of subs for the month. If we reprice some major agreements during the year, our retrans revenues would naturally increase at those different points during the year. In fact, these small spikes could mask sub fluctuations. But because you have no such repricings during the year, you can see subscriber fluctuations and billing adjustments pretty clearly in our results. In the third quarter, our retrans revenue declined by about 2% from expectations due to sub declines primarily at 2 very large MVPDs. Not coincidentally, these 2 operators over this summer dropped or publicly threatened to drop non-Gray local television stations, cable channels and regional sports networks from their offerings across our markets. Of course, when local viewers lose -- when local viewers drop an MVPD because they no longer can get a local station or a cable channel or an RSN, all the stations in that market lose those subscribers. Those sub reductions slightly reduced our Q3 retrans revenue and caused us to slightly reduce our retrans estimates for Q4. We have no doubt that a good number and probably most of the subs who left 1 of these 2 operators in Q3, signed up with a new provider soon thereafter or as soon thereafter as summer ended, and the new providers…

Thank you, Kev, and good morning, everyone. I am going to pre-apologize if my voice is a little bit off or if I'm coughing, I managed to pick up a cold in the last couple of days. Our earnings release is obviously got a great deal of detail and the 10-Q will be filed a little bit later today. Keeping with the way we've always reported. We report on a GAAP basis, which we call as reported in our disclosures. In addition, we presented results and guidance in the earnings release on a combined historical basis, which gives effect to the acquisitions and dispositions, as if the transaction occurred on January 1, 2017 I'm going to keep my comments on the results of operations for Q3 and our guidance for Q4 to a combined historical basis. Please note that Q3 combined historical does include the 2 stations acquired from United Communications earlier this year. And also please note that our Q4 combined historical guidance does include not only the United stations, but also our acquisition of KDLT in Sioux Falls, which occurred in late September. And the Charlottesville station transactions, which occurred on October 1. Overall, we're pleased with the results for the third quarter. In general, our third quarter revenue was in line with the higher side of our guidance and core revenue, especially local TV revenue, did show modest sequential improvement over the first half of 2019. Factoring in the much heavier political revenue in Charlotte, Mississippi, Louisiana and Kentucky, we believe our core local was flat to 2018 in Q3. In Q3, we did see strong growth year-over-year in several categories with financial advertising up 8%, legal up 9% as well as continuing strength in our home improvement category, which was up 9% compared to 2018. Third…

Thank you, Jim. Operator, we're now open for questions.

[Operator Instructions] Your first question comes from the line of Kyle Evans of Stephens.

I can hear the excitement of people's voices over there around political. That's traditionally kind of been a blitz after Labor Day, but it looks like we're starting early, spending a little bit more. Could you tell us what you kind of think the spending curve will look like as we approach the big spend in the 6 weeks before the race. Then I've got some follow-ups.

So historically, cycle after cycle, 50% or more of the total political spend has always shown up in the fourth quarter. 2020 could be a little bit different for us because of our exposure to the early primary states, and so there might be a little bit more, we think, in the first quarter than normally would be there, but we still think that the bulk of the spend is going to be in that traditional post-Labor Day, September, October time frame. But we do believe that our first quarter will probably see a positive benefit from the early primaries, I don't know.

My recollection is that when we were trying to put brackets around '18, we were thinking about some difficult comps that were in the '16 numbers from Alaska. Are there any big pieces we need to be thinking about as we grow '20 off of your CHB '18 number that you gave?

Alaska was $25 million in 2014, not 2016.

Okay.

Kyle, there's a lot of good news out there. So there's nothing that stands out like the Alaska, $25 million was a huge percentage chunk of what we had on a CHP basis that we were referring back to in 2016. There's nothing that really stands out like that this time.

Got you. You are now in some larger Raycom markets. Could you comment on any notable market size change or difference that you see in terms of core and maybe even retrans sub counts?

I want to make sure I understand the question, Kyle, it's Pat LaPlatney. So are you asking about core performance of larger markets relative to smaller markets?

I am, I am.

So look I mean as with last quarter, we didn't see a huge differential between our performance in larger markets versus the smaller markets. And sub counts, I have to ask you guys. I mean we really didn't see any -- yes, I didn't see any real difference in Charlotte relative to -- or Charlotte or Cleveland relative to smaller markets.

Great. And are you I guess this is hard for you to answer, but I think it's only feasible to ask it on a relative basis, how exposed to satellite are you versus your peers? More, less, roughly.

Yes, Kyle, I have no idea. I don't know how exposed our peers are, so I don't know how to compare that. I mean there are 2 of our -- 2 of our 3 largest operators are satellite providers, I suspect that everyone else can say the same thing. But I don't -- I'd have to ask everybody else if that's true.

Okay. Great. One last one, the obligatory auto question, have to ask it, kind of how is it pacing in 4Q? And what's your 2020 outlook?

Fourth quarter, it's, again, on a relative basis, looking a little bit better right now. Now again, it's pacing but I would say, yes, a little bit better from the first part of the year, which is encouraging. Next year -- we're still in our budgeting process, so it's -- we're still kind of framing our expectations for next year. But I -- but we have been encouraged by the sequential -- auto seems to be getting a little bit better each quarter this year. So that would kind of be our expectation going into next year, at least the first part of next year. That continues to get a little bit better. Now with massive amounts of political show up later in the year, as you've seen many, many times with us, it'll be a different story, but that's a high-class problem to have.

Your next question comes from Aaron Watts of Deutsche Bank.

A couple of questions for me. Maybe I'm parsing things too closely here, but it looks like a little bit of a slowdown in kind of the core advertising environment from 3Q to 4Q. Is that just the impact of a little more political? Or is there some other levers that are kind of pulling the strings there?

Well, there definitely was in a sort of a tight part of our geography core displacement due to political. So in Charlotte, with the NC 9 race in Louisiana, Mississippi, and to some degree, in Kentucky, with the gubernatorial races, there was some core displacement. So if you're -- if you take that into account, you're relatively flat there for the quarter on local.

And I think part of it may be just in the guidance ranges and rounding large numbers. I mean my personal expectation is that Q4 core, especially the local is, again, at the end of the day, going to be slightly better than what we've seen the first 6, 9 months of the year. So maybe a little bit more optimistic that it's -- again, getting a little bit better. And again, if our political ends up in Q4 doing what it did in Q3 and greatly exceeding expectations, then we're probably going to see some displacement a little bit, which will impact the core. But if that happens, again, it's a problem I'm happy to deal with.

And putting political aside, what would you say the biggest overhang is, as you speak with your salespeople who have feet on the ground in the markets that -- the concerns they're hearing from your advertisers?

I mean if you go on a category basis, auto is challenging. On the upside, legal has been very, very healthy for a long time, and we've got some upside on the finance side, which includes insurance, but generally, activity is, while, it's not great, it's not awful either.

Okay. And then just -- I had a bigger picture question for you guys. Curious if you anticipate the launch of a couple of these heavily promoted new streaming services this month and then obviously, a couple more coming next year to have any real impact on your business, whether it's from kind of audience rating standpoint or on the sub base and cord cutting. Just curious your thoughts on that?

I think we kind of -- we saw a note that said there are 27 over-the-top providers that have launched or are launching. It seems like a pretty crowded field. So I guess our takeaway is, whether it's -- whether there's 27 or 26 or 15 of these over-the-top providers in 2020. The economics of pushing people or should push people to get a cable or satellite bundle. It's a heck of a lot easier and it seems more cost-efficient than signing up for a bunch of these providers. The splintering off of the ecosystem, we're cautiously optimistic that's going to actually help us retain subs in the ecosystem.

Your next question comes from Steven Cahall of Wells Fargo.

So Kevin, maybe first, just on retrans. So to be clear, do you expect Q4 to be the low watermark for gross retrans between what you're seeing on the subscriber accruals and the repricing that you're doing the end of the year? And then I think net retrans decelerated a little more in the quarter. Is that just due to the FOX deal, and I was wondering if you have any commentary on maybe what net retrans might look like next year? Is it mid- to high single digits, low doubles? I don't know if I can pin you down, but I figured I'd try.

So Q1 started with a lot of billing adjustments coming in from the prior year. A lot of catch-up payments. We audited some providers. We explained it on the call for the Q1 results. And we're cautiously optimistic that Q4 is going to turn out better than what we've predicted. As I said, we think these folks who left the 2 big operators over the summer are going to start showing up again with payments, but we don't -- we can't accrue for it until we know it's there. Come Q1, we will have repriced roughly 1/5 of our sub base, and all contracts that don't reprice will have an escalator in the low -- very low double-digit range. So if we do nothing, our growth should grow by low double digits. And again, about 1/5 of the subs will be repriced under new schedule. So yes, I'd say, looking at this year, next -- this year or next year, Q4 is absolutely -- should be the low watermark as you referenced it. Two things happened, second half of this year. FOX repriced on July 1, for all markets. And if you go back to 2014, when we signed our last CBS deal, it was a 5-year deal that went through August 31, 2019. That -- we did a contract with CBS, that added a couple of years to all of those CBS market affiliation agreements about 2 years ago. The new prices kicked in on September 1, 2019. So our CBS has stepped up to a market rate on September 1 instead of the rates that we negotiated back in 2014 that we were paying in August of this year. So we have the CBS impact coming in the middle or 2/3 of the way through the third quarter, and we'll certainly see that impact through the rest of the fourth quarter. So that's why you'll see the net retrans is sort of ticking up a bit in Q3 and then especially in Q4 as we have a full quarter of CBS and a full quarter of FOX market rates. And looking at next year, our numbers show us growing net in gross, but we're not prepared to give any guidance. We have, again, some significant negotiations coming up in this year. And don't think it's appropriate to be giving guidance that may be used against us in those negotiations.

And then maybe a quick follow-up for either for Hilton or for Jim. When we think about the new share repurchase authorization, how much is this about just seeing the value in your shares in the market versus incremental positivity on the free cash flow that you're generating? And I guess if I think forward with more than probably $400 million in average 2-year like blended free cash flow. Do we think about like maybe 1/3 of this is something that you would want to put to repurchases versus debt reduction? Or any way to kind of frame debt reduction versus share repurchases would be helpful?

I think Hilton was very clear that the first priority, absent some sort of compelling M&A would be to debt reduction and delevering. But you are right that there is -- it's nicely over $300 million of free cash this year and in '18 we did over -- it was around 500-ish. I don't have the number right in front of me, but it was very healthy. So your 400-ish is maybe even be conservative as you move through '20. So I think we do clearly think the stock has been undervalued. And as Hilton said, we intend to be opportunistic from time to time. And -- but we also have the capability and the free cash to be able to do a little bit of both at the same time of reducing our debt and being maybe a little more strategic from a stock buyback standpoint. So I think you'll see us being -- trying to be balanced and a little bit will depend, I think, on -- especially over the next 12 months, where the broader market is valuing us. And if we're getting what we think is a reasonably good value. That might be one answer. And if we think we're being significantly undervalued, we may tip the scale in favor of the other direction a little bit.

And Steven, I think -- I do, I think that's fair. I think we're going to try to balance this out, but we're going to have to see how everything sort of matures out, but we're seeing the benefits of the synergies from the Raycom transaction, and our free cash flow is coming in really in a superb fashion. So we think we've got ample free cash flow to meet our targets to delever, while at the same time, giving some return to our shareholders through stock repurchases.

Your next question comes from Marci Ryvicker of Wolfe Research.

Kevin, do you get the Sling sub numbers on a delay from when you get the Dish DBS sub numbers? Or do both of those numbers come at the same time for the same month. And I'm obviously asking you because Dish reported this morning and Sling had a pretty big gain.

Yes. We were encouraged to see the DISH number for Q3 was a lot better than what we had expected. So that bodes well for the reports we're going to be getting over the next couple of weeks and months. We do not get Sling numbers though, Marci, because Sling is carrying O&O stations and not carrying affiliates. So they won't give -- there's no carriage of local TV stations, and therefore, no reason to send us reports or payments.

Got it. And then I am not complaining about the share repurchase at all, but at some point, Gray was a dividend payer. So curious if there's been discussions about returning to paying a regular dividend if that would depend on your leverage ratio. And why repo over dividend, why not both?

Marci, I will tell you, honestly, our Board discussed that subject matter yesterday in our Board of Directors' meeting. The question is when, not if, we will be returning to paying a dividend, and relatively soon. It's something that the Board weighs very seriously and something we are likely to give you some news on at some point in the future.

To follow-up, Marci, on that very quickly. If you recall a couple of years ago prior to the Raycom transaction, several quarters in a row, Hilton said exactly the same thing as we began to bring leverage down. So this was kind of like the '17, '18 cycle, and we were thinking ahead to the -- towards the end of '18 and he said -- kind of the same things then. And so I think we're -- now having done Raycom that shot clock got reset 2 years forward, and it's really kind of looking through the '19, '20 cycle and as we go farther and farther into '20, I think those discussions will pick up more and more importance.

Your next question comes from Jim Goss of Barrington Research.

And this might tie into what you've just been talking about, it seems to me that if you get leverage -- you're successful in getting leverage down to 3s by the end of 2020. That's really low relative to anything I can remember for lots of years. At some point, do you have to reprioritize your whole notion of what is sequencing of capital allocation because it -- I don't know that you want to get much beyond 3?

Jim, I think that point is very fair that if -- when we get leverage down to a very, very comfortable zone, it does allow the company then to reconsider and reprioritize its free cash flow, right? In the immediate short term, we're going to be a little more balanced. But if we end up in 2020, where we absolutely expect to be then I think are -- I think it would be very appropriate to be reconsidering those allocation priorities.

Okay. And this might be at Kevin, but I'm wondering, in terms of the sub reductions you've experienced, is there any greater move to antenna usage as some choose to try to find OTT services that would retain your exposure for advertising, but you'd lose some retrans sellers from that?

Jim, I think that's been going on for a number of years, probably going back to when broadcast just put up digital signals and we put out a very high-quality, high-definition signal that is much better than what you can get on a lot of cable and satellite systems. Folks have been discovering antenna. So we've certainly seen the OTT -- OTA penetration, over-the-air penetration, increasing every year, every market. The estimates are kind of all over the place. No one really knows. There's probably a lot of folks who have both the pay-TV subscription and an OTA TV somewhere around their house. You're right, as people move to OTA, that helps us with our multicast business, which is available to those folks and not generally available on cable. And it continues to reinforce the message to advertisers that we are the only provider that can reach 100% of the homes in the market. Our reach is better than advertising on the cable satellite folks who also sell against us because they can only reach a portion of the market. So it helps us with the sales. I will caution that we don't have real confidence that the rating agencies are measuring any of those OTA households yet, and that's a challenge that -- for the industry and a challenge for the rating folks. So we do need to capture those. And we think if we were -- if we had actually measured the OTA homes, we would see our ratings be a lot higher than what the ratings agencies are showing us now.

Okay. And my last question is, I think everyone has seemed to embrace the notion that political is going to be great in 2020. I'm wondering, is there anything that you think could go wrong that could derail everyone's optimistic assumptions?

President's getting impeached right now, the House and the Senate are in play. Virginia just split the state legislature. No. I mean the President is not going to get unimpeached. I don't see a momentum that would make the House or the Senate less competitive. If anything, I think the bias is in favor of becoming more competitive. Impeachment is only just starting. We don't have public trials yet -- public hearings. We don't have we don't have a trial in the Senate. This is going to become more of an issue and more divisive. And at any moment, a Supreme Court justice could retire. And that will bring out even more interest in the 2020 elections. So I think all the bias is in favor of being better, not weaker. So it has to go back to Trump. Trump's raised more than $150 million. That's about $150 million more than he'd raised at this point in the 2016 election, and they are -- every expectation is that they will be playing aggressively on broadcast television this time around, and the democrats are not going to make the mistake of skipping states like Wisconsin, Ohio, Michigan. And in fact, if anything, we see that the number of toss-up and competitive presidential states this time is wider than it was 2016, which is more, frankly -- more states in play. So that's good for us.

Even if you take what we announced this morning in terms of our political, that's an all-time historical record. And this is an off off-year. So we have absolutely no indication that there's anything other than robust optimism for next year's presidential election year. I know that I'm probably the biggest optimist on this call. But I expect really large numbers.

Let me just give you 2 data points, Jim, on Richmond, which we didn't even call out on this call earlier. Our NBC station in Richmond had 14 separate candidates on the air for State House. That's -- we've never seen that. We typically don't see a lot of spending from State House candidates. We had 14 on the air and -- on our NBC in Richmond. And it's another antidote election day, we all talk about -- it was Tuesday this week, but not Louisiana. Their governors' race was a couple of weeks ago, there's a runoff that takes place a week from Saturday. So we are still seeing spending in Louisiana. In fact, on Tuesday, we had -- we got -- remember, in Louisiana, we have very strong stations in New Orleans, Baton Rouge, Shreveport, Monroe and Alexandria. So we cover almost the entire state there. We got another $300,000 worth of orders in just 1 day, and that was an election day when everything else was quieting down and the money was still coming in. So the bias is in favor of it being better, not weaker.

Okay. Well, as concerned as you sounded a few years ago, you sound 180 degrees, the opposite this time around.

Thanks.

So guys, I would say '16 was the strangest year that I think any of us has ever been through in terms of political spend. I mean Hillary didn't spend in the blue states, she thought she had them. Trump was able to do rallies and get free coverage. It was a unique position that I don't really think we'll ever see again. And so I think 2020 is going to be -- I think it's going to blow through the ceiling.

Your next question comes from Dan Kurnos of Benchmark.

Just a couple of questions. Slim picking to you, Jim, I don't know if you announced the -- what synergy capture you had, had through Q3. But I mean you guys are crushing it on the expense side. So I mean you sort of mentioned that you could exceed that number even in year 1. So I'm just trying to get a sense of where you're at and how much of a delta we could see heading into Q4?

I think it's going to be hard to see much more in the Q4. Again, that core number, which you can see from the guidance table, when you back out the transaction related you move -- back out the reverse comp, is down significantly year-over-year. So I think that's your real indicator of your synergy realization. We've got a few more automation projects. One at a couple of stations that have a potential of still being completed this year, which will allow us to reduce staff a little bit in those places, but it's getting in -- it's kind of -- at that point, you're into the weeds, and it's -- while it's helpful, and it increases our efficiency, it's not really going to move those numbers, especially when year-over-year we're down $20-ish million already.

Got it. That's helpful. And then I guess, Hilton, probably the only question you haven't been asked is on the M&A front. Do you think there needs to be larger consolidation at this point in the later innings and your willingness to be on the other side of the table as a recipient of a bid?

Sure. I'm glad you asked. The answer to your first question is yes. The answer to your second question is, Gray is not interested in putting itself out for sale, but it is interested and candidly, I'd say, very interested in any one of a number of permutations that would grow the footprint of our company larger than it is today. And in the best long-term interest of our shareholders, I suggest that you look at what we did just 3 months ago with Raycom, we handled lots of social issues, we handled lots of political issues, we handled lots of operational issues in a very seamless, tactile and professional and personally professional way. You didn't see us coming in with those synergy numbers and raping and pillaging our TV stations because there's too many of them that are too dang good. But Gray is interested in any number of permutations. There's a million ways to get a deal done, and we are interested. Are we interested in picking up the phone and calling a banker and putting us up for sale? Not a chance. But we'll see what the future brings. And Gray can move on a dime, and has demonstrated its capacity to do so. Our Board is certainly in favor of different potential ideas, whether or not any of those come to pass, we don't know. We're also stubborn. It took us 16 months to get Sioux Falls done, but we stuck with it for 16 months, it damn near killed Kevin Latek, who wants everything done by the end of the day, all right? But we stuck with it. And so I hope I've answered that question on both sides, Dan?

Yes, no, that's super helpful.

Your next question comes from Michael Kupinski of NOBLE Capital Markets.

And first of all, I want to applaud the company for moving towards a cost per impression model. I think it's a logical move. It makes sense. But I have a couple of questions, I'm just trying to get my head around that. Historically, TV pricing has always been the umbrella to other mediums in the local market. And in moving to a cost per impression sales model, can you talk a little bit about the challenges of moving to this model, how have advertisers accepted it, how does your pricing stack up against the other mediums that offer cost per impression? Can you just give us some sense of what the variance in pricing might be?

Yes. So we're early in the game, right? I would -- I think the real upside is that when you sell local television, you have -- you're on the air 24 hours a day. And all of those quarter hours actually draw audience. And in the world we live in today, it's difficult to sell a 0.6 rating at 01:45 in the morning, even though there's an engaged audience there. And so the good news for local TV is that we have a big audience relative to -- relative to most other media. And being able to take our very large linear audience and ultimately, combine it with what's becoming an enormous digital audience is a great benefit to us. Again, when you're -- you've got a bunch of different measurement systems that you deal with today across these different platforms. Ultimately, the goal would be able to bring it all together. And once you can aggregate all those impressions in the same place, it's a significant advantage.

Got you. And does the move increase the potential revenue opportunity? I mean I'm just kind of looking at it from the potential positioning of the company to get a larger piece of programmatic or automatic buys. And then I'm just wondering, in terms of moving towards the cost per impression model, do you now compete with other broadcasters in terms of their rates? I'm just trying to understand how the industry is moving in that direction.

Yes. No, you'll still be competing with other broadcasters. But again, I think it's not just Gray, I think most of the other broadcasters, the news business, have other platforms where they get their audience. And ultimately, it's good for the entire industry to be able to utilize all that audience in a single sale. And by the way, it's really better for -- in my opinion, better for the buying community, too. One of our challenges is getting our large linear audience allowing or making it more accessible to buyers, and that's something that you probably read about the TIP initiative and other efforts in that area. So it's all sort of -- again, early stage, but it's all moving in the right direction.

Your next question comes from John Kornreich of JK Media.

Yes, Jim, real quick. Can you repeat what you said about the full year $2.1 billion estimated revenue. What did you say about expenses?

I said estimated expenses including the $74 million of transaction-related and that would also include noncash stock comp is about $1.5 billion.

So adjusted for that, it's more like $1.4 billion, but is that after corporate overhead? Or is that a BCF kind of...

No, that's -- that would include the corporate overhead number. And I also said that the full year operating cash flow, as we've defined it for years is tracking to be about $700 million this year.

Right. And that's an OCF? Is the $700 million an OCF, not a BCF?

Which would make a 2 year blend -- That's correct. That's an L.A. OCF, which would put the 2-year blended at call it, 800-ish zip code.

Right, so BCF?

No, OCF, on a 2-year blended average.

Two-year blended? Okay.

It may be around $800 million. In the '19 straight up OCF, just for the 12 months of '19, is looking to be around $700 million.

Right. And on free cash flow, I think you gave a range of $3.15 to $3.25?

Yes.

Is that just fiscal '19?

Yes.

And is that net of the $75 million transaction expenses?

It excludes the transaction expenses.

It already excludes it? Okay. That's it.

Your next question comes from Kyle Evans of Stephens.

One quick follow-on. I believe, Pat, you mentioned broadening the OTT focus of the company. I was hoping for a little bit more detail there. You have 3 competitors that have named OTT ad exchanges. Was just kind of wondering where you might go with this new focus on OTT.

Yes. So can't be terribly specific today, Kyle, but I would tell you that we're moving in that direction as quickly as we can.

There are no further questions at this time. I will turn the call back over to the presenters for closing remarks.

Well, thank you, Cheryl. And I just want to take one quick moment to thank all of you again for attending this morning. We're very excited about what we have achieved so far this year. The synergy numbers are clear. But more importantly, the operational success of bringing these 2 great companies together, I think, has been sterling. We truly are one company, and we are working as one. And I'm enormously proud of the team of professionals in our stations and our shared services and our corporate headquarters and across the country, and what they've achieved and what they're building. And it really is an exciting and invigorating time for our company. Thank you for being here, and we will talk to you at the end of the year.

This concludes today's conference call. Thank you for your participation. You may now disconnect.