Ladies and gentlemen, thank you for standing by, and welcome to the Gray Television Inc. First Quarter 2020 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to your speaker today, Hilton Howell, Chairman and CEO. Please go ahead.

Thank you so much, operator, and good morning, everyone. As the operator mentioned, I'm Hilton Howell, Chairman and CEO of Gray, and I want to thank all of you for joining us this morning for our 2020 Q1 earnings call. Today, we are all virtually present and spread all over the country. On the line with me are our President and Co-CEO, Pat LaPlatney; our Chief Legal and Development Officer, Kevin Latek; and our Chief Financial Officer, Jim Ryan. We also have today our Chief Operating Officer, Bob Smith, and I'd like to welcome Bob. This is the first time that he has joined us on this call, and he may be able to provide some interesting color to some of you during the Q&A session, if not before. We will begin this morning with a disclaimer that Kevin will provide. So Kevin?

Thank you, Hilton, and good morning, everyone. Certain matters discussed in 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. 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 now return the call to Hilton.

Thank you, Kevin. Well, this year began as strong as we could have ever hoped for it to begin. I'm certain that you felt our optimism on our year-end earnings call in late February. And then coronavirus hit. Certainly, much has changed since then. As a company, I could not be more proud of the efforts of our stations and production companies, their employees, our corporate and shared services staff and our entire leadership team. We moved quickly into a remote work policy across the company, adopted numerous protocols to protect our employees, dramatically ramped up our local news and other local programming, went out of the way to drum up and keep business and double down on our already deep community service. Our advertisers, by and large, faced historic headwinds, but they have stayed with us more than many had expected. As you saw today, we ended the quarter with revenue up slightly due to increases in retransmission and political advertising revenue, more than offsetting the decline in core advertising revenue, which was largely centered in the month of March. At the same time, we managed to reduce expenses during the quarter. However, I want to note, not due to furloughs, not due to layoffs and not due to benefit cuts. In the end, our EBITDA, broadcast cash flow and net income all increased from the first quarter of last year, and all 3 measures were roughly in line with the lower end of the guidance that we had issued before the onset of the coronavirus pandemic. In particular, revenue was $534 million, increasing $16 million or 3% from the first quarter of 2019. Net income attributable to common shareholders was $40 million or $0.40 per fully diluted share. Broadcast cash flow was $181 million, increasing $58 million or 47% from the first quarter of 2019. Adjusted EBITDA was $169 million, increasing $19 million or 13% from the first quarter of 2019. Business slowed considerably in March and it continued in the month of April. Our sales teams used this tough environment to strengthen the strong bonds that we have with our best customers. Some or all of planned buys and even bring in many, many new customers that you will hear about more later on the call. The clouds began to appear to be clearing as we entered the month of May. Still, our visibility is exceptionally constrained, given all of the uncertainty and variability from market to market and from state to state. We're in a very, very strong position with regard to our liquidity to ride out this tough patch. And even if the situation remains changing for the rest of the year, we expect our liquidity position to remain enhanced as we undergo the next 3 quarters. So we look forward to carrying forward with the rest of the year and turning in a decent performance. And now I will turn it over to Kevin.

Yes. Actually, Hilton, I'm going to take it from here. It's Pat. No problem.

I'm sorry.

No. Thanks, and good morning, everyone. The first quarter started out well. In January and February, our core advertising was close to flat compared to the prior year as significant political revenue rolled in. Of course, come March, we saw a significant slowdown in the economic activity across the country due to the public health emergency as well as slowdowns in the oil and gas business in some of the states in which we operate. For the quarter, our core advertising revenue was down about 4%. Due to the strong political revenue this year, our total ad revenue, that is our core ad revenue plus political ad revenue, finished higher by about 8% compared to the first quarter of last year. The video production companies, while much smaller, are significantly more impacted by the current crisis than our television stations. Recall that this group comprises Raycom Sports, RTM Studios and Tupelo Raycom. RTM generally produces evergreen content. Raycom Sports and Tupelo, however, primarily produce video content around live sports, concerts and other public performances. Needless to say, with the suspension and cancellation of live public events, especially sports, the production companies' business largely dried up in March. To be candid, the impact of the shutdown in significant portions of the economy had a bigger impact on April than we saw in March. Like everyone, we're cautiously optimistic that the gradual relaxation of state stay-at-home orders will be successful. If so, pent-up demand from consumers and businesses could improve our advertising and production businesses later in the second quarter and beyond. We will, however, need to wait and see just like everyone else. It's important to recognize though that our television stations are alive, well and serving their communities as local markets are under varying degrees of lockdowns. Our stations rose…

Thank you, Pat. We are very proud of the tremendous community service that our stations have provided during the crisis that Pat just relayed. We owe much to our employees, most of whom are not only essential to us, but are also essential to keeping their communities informed, protected and prepared for the future. Therefore, I want to spend a few minutes highlighting how we as a company and as an employer of about 8,000 individuals has handled the crisis so far. Early on, we adopted mandatory work-from-home protocols for all employees who could safely do so. We essentially ended business travel, banned nonessential visitors and imposed new health screening protocols for those entering our locations. We announced that we did not anticipate that we will need to furlough employees, lay off employees, reduce hourly or salary compensation levels, reduce paid time off, health care, other benefits nor suspend, delay or reduce contributions to the employees' 401(k). We adopted self-quarantine requirements where appropriate as well as physical distancing rules for employees within workspaces and out in the field. We adopted a new benefit that ensures continued pay for salaried, hourly full-time and hourly part-time employees who cannot work due to the coronavirus. We added telehealth and telemedicine options, relaxed health benefit caps and waived certain insurance charges and fees. We provided thermometers, face masks and lots and lots of hand sanitizers for all locations. Thankfully, our efforts have now turned toward working with each station and office individually to identify the physical and other changes that they will need to make in order to begin transitioning some employees back to work at that location. We're hopeful that some of our facilities will begin to bring back a portion of their remote workers starting as soon as June 1, with others…

Thank you, Kevin. Good morning, everyone. Our earnings release and the 10-Q that will be filed a little later today provide a great deal of information. You'll also note that starting with today's release, we are no longer presenting results on a combined historical basis because the acquisitions and dispositions that occurred late in 2019 were individually and collectively immaterial, so we are, moving forward, reporting on an as-reported basis. Given the dramatic events that began in March, we are pleased with our Q1 results. As Hilton mentioned earlier, while revenue was a little lighter than we had wanted, expenses were also lower, allowing for solid EBITDA delivery. Our LAQA leverage ratio net of the $296 million in cash on hand was 4.23x, as expected, sequentially declining from the December ratio of 4.35x. During Q2, we increased our cash on hand by $84 million. So with the $296 million of cash on hand plus an undrawn revolver of $200 million, we're in a very strong liquidity position. Moreover, at this time, we do not expect that we will -- we -- I'm sorry, at this time, we do expect that we will continue to generate significant amounts of free cash during each quarter of 2020 and for the full year of 2020. Given our strong liquidity position, free cash generation, relatively low leverage and no debt maturities until 2024, we believe we are in a very good position to weather the global pandemic we are all experiencing and emerge just as we are today as one of the strongest local broadcast companies in the country. As mentioned earlier, given all the uncertainty around COVID-19, we have withdrawn our previous full year guidance and are not issuing formal guidance for Q2. However, we remain bullish on the 2020 political, as Kevin…

Thank you, Jim. Our company, like virtually every other business in the world right now, has been subject to historic shocks over the last few months. Considering the extent of stateside lockdowns and the limitations on everyday life, it seems many people questioned our ability to keep our heads above water. Well, we've done an awful lot better than that. Our stations reestablished the importance of local broadcast television stations, and our first quarter results demonstrated the ongoing importance of owning high-quality local institutions and operating a lean company. We have no doubt that the country will fully reopen, business will return, and lives will return to a more comfortable and familiar pace some time during the course of this year. Through it all and well beyond, we remain convinced that Gray Television's best days are ahead. Operator, at this time, we ask that you open the line for questions.

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

Jim, I know this is not guide, but you gave the numbers really quickly. And I just want to bounce them back off of you or you can give them again. But what I heard you say was, as a percent of total revenue for 2Q core 44%, political 4% and retrans 48%, is that right?

Correct.

Okay. I just wanted to make sure. And I'm looking at the net retrans margins, and I'm kind of looking back at the CHB for prior years. And I know it's hard to do right now. But any thoughts on where net retrans margins will go longer term? And I know you could just say lower and you have, but I'm looking for a little bit more detail than that.

You are correct. We've said repeatedly that we thought the margins will decline over time. You can do the math on the margin in Q1, and you can see that to some extent, although that has -- as we have said repeatedly for well over a year or more, we've expected that all are reflecting the increases in the reverse comp going forward. And again, our key has always been to focus on the net dollars and to maximize the net dollars and not worry about a percentage point.

Got it. Maybe some commentary on what you're seeing between local versus national in core and maybe any regional or state differences that are jumping out at you?

I don't see a big difference in local versus national. Local is a little bit better by anywhere from 5 to maybe 10 points on a percentage basis depending on the month and so the whole quarter. There's not a huge difference there. State by state, not really anything that jumps out at you as we mentioned in the opening remarks. Certainly, we are in some oil patch states, and they're taking it a little bit harder than others. But no -- other than that, I wouldn't say there's any tremendous pattern.

Okay. Lastly, I think Kevin said that he expects more political in the fourth quarter as a percent of total versus prior cycle. I missed the reasoning behind that. And as a follow on to that, is there any concern that when these political dollars get here, that lower sell-through rates and lower minimum rates will somehow mute the pricing impacts that we've seen in the past?

There is a potential for more back-weighted into fourth quarter. I think it's in part because, obviously, with current conditions, several primaries have slid. It will be -- our sense is that it's going to be more traditional campaign season. We are seeing -- and Bob can speak to this a little bit, too. We are seeing nice space buys already coming in for the fall campaign season. As far as the rates go, we think the demand is going to be so heavy that it's not going to make a difference on rate. Remember, all soft money is pure supply and demand. And if there is a significant amount of political revenue coming in that we expect, we only have a finite supply. So the pricing will be -- it will be -- the pricing will go up accordingly, regardless of where the base business is.

Your next question comes from the line of Steven Cahall with Wells Fargo.

Jim, so you haven't drawn on the credit facility and it sounds like you'll be free cash flow positive each quarter. So is your expectation that you won't need to tap that facility at all right now? I mean, you highlighted it in the release. So just trying to think after all the cash savings, what you feel like your need is for it? And if you did have to use it, can you just remind us of any covenant requirements that you might have or any conversations you might be having with lenders? And I have a quick follow-up.

Yes. Okay. As we look out -- obviously, as we said, visibility is limited. But as we look out kind of "a base case," we see no need whatsoever to draw on the revolver. We are going to continue to monitor that. But I don't see the sense of drawing cash down onto the balance sheet that I don't think I'm going to need. As we model various downside cases, again, we can't envision a case where we would probably need to draw the revolver. There is one maintenance test associated with the revolver. It's a first lien test on an L8 basis. The current covenant is 4.5x. That steps down to 4.25x on January 1. And when we ran the calculation at the end of the quarter, we were at 1.82. So I don't see any issue with the maintenance covenant, even if we were to draw the revolver. And we don't even think we're going to need to draw the revolver. So we're -- again, we're in a very good position from a liquidity standpoint.

Great. And then Hilton, I have one for you, and I'm sorry to put you on the spot here a little bit. Tegna said that it is engaged with M&A discussions with 4 parties. So maybe you can give us a little bit of an outlook for M&A for the industry? And I think there's a perception out there that Gray is less amenable to approaches because it's a controlled company. So again, sorry to put you on the spot, but I was just wondering if you could just comment on that industry theme at all.

Well, with regard to industry M&A, Steven, candidly, I think from Gray's standpoint, we continue to plan on trying to grow the company through that process. Whether or not really large transactions would even be desirable in an environment like we're in right now is an open question. But there are and will, I think, perhaps accelerate with some of the issues that have arisen in the last couple of months, a lot of operations for a lot of singles and doubles to come up. And so I expect us to continue to grow with M&A. With regard to Gray being a controlled company or at least, the family having a large position with it, our company is not for sale, but I have made it very clear on many different calls that we are open to many different structures that will continue to grow the company and add to shareholder value across the board. There is nothing in there that is going to apply that. We're going to let it lose its stability, because I think that's an essential quality of a company is to have the stability to carry forward and invest more than quarter-to-quarter, to invest for the long term. And I've had the blessing and the curse of being with this company since we had one TV station and have taken it to the pink sheets to the New York Stock Exchange a little bit north of a 2-decade period of time. And we hope to continue that pattern. We think beyond just TV stations, there are other alternatives and other venues for growth. But if you just look with regard to the TV station portfolio, there are so many different things that we have that can lead to growth. As they begin to get rolled out, whether that is ATSC 3.0, whether it is our digital footprint, if you listen to Pat's comments, when we're getting 4.1 billion hits, I think that our ability to monetize that and continue to grow that is remarkable. Our other assets with regard to the production companies, while sports is shut down, sports will return, and I hope sooner rather than later. And those businesses will be returning good returns to our company and good growth to the company as well. So we think we have all avenues of growth open to Gray. And in no way does that put me in a hotspot. I've said the same thing for quarters and quarters and years and years.

Your next question comes from the line of John Janedis with Wolfe Research.

A couple for me. One, just going back to the new clients that I think Pat talked about written in March and April. Seems like a pretty big number under the circumstances, for sure. Can you give us some color on how those were sourced? And to what extent they'll be ongoing clients? And then separately, you talked to the cost savings that didn't include headcount or furloughs. Can you talk about where you're finding the savings? And then is there a run rate for us to think about going forward?

Yes. So I can -- John, it's Pat. I can take that question on the new clients. The -- it is a big number, and we were proud of it. I would tell you that it's in line with nonpandemic times. So that's a good thing. There were a lot of sort of different types of new advertisers. We actually had a fair number of churches and other sort of spiritual groups reach out and want to air messages of hope and prayer lines and that type of thing. It actually added up to what is a pretty significant number. Then we had a lot of sort of home improvement -- new home improvement clients. A lot of people were sitting at home, felt like they wanted to do those honey do jobs that they've been putting off for a while, so we saw some of that. We saw some auto dealers that hadn't been on TV for a long time. And so will we keep those clients? That's certainly our hope. We think we'll have a good chance of keeping a lot of them. And for the second -- I think your second question, I'll turn it over to, I guess -- Jim or Kevin, do you want to handle that one?

Yes. As far as the expense reductions or the expenses coming in under guidance, a combination of a couple of things. While we certainly weren't furloughing or laying anybody off Q1 or Q2, there was -- there's been, because of the circumstances, virtually no new hiring. So that was part of it. We generally forecast heavy in expenses Q1, thinking we're going to come out of the box a little faster with our plans for the year, and that tends to not happen as quickly as far as operational tempo goes. The -- another piece of it was we had some favorable turns on our accounts receivable allowance for bad debts. At the end of the year, it was higher than we would have liked to have seen it. We worked hard on that early part of the quarter, January and February, and we were able to take down our reserves accordingly. So that was some of the favorable difference as well that produced the results you're seeing this morning. And also, obviously, once the pandemic hit, as we mentioned earlier, I mean, travel's nonexistent. Entertainment is nonexistent for all intents and purposes. Some things like that, not huge dollars, but it does -- every little bit adds up.

Okay. And maybe one quick follow up. Big picture, how are you guys thinking about longer-term subscriber attrition as it relates to retrans? If there's an acceleration from here, does that change the negotiating dynamic between Gray and the distributors and networks? Would it be better if actually all parties were just less aggressive?

John, I don't know what the direction of the sub counts, as I said on the call. I think we have -- I think our negotiations over the last couple of months are exactly the way they were the last few years and the way they will be the rest, at least the foreseeable future, which is we have what is deemed an aggressive view of the value of our stations. And the other side is to their benefit to try to negotiate the lowest possible cost. That's the way it's kind of always been. And we have conversations in good faith about what we bring to the table and our viewership relative to network prime and relative to everything else on the dial. And we come up with the terms that are mutually beneficial. I don't know how this necessarily impacts other than us. We'll be making much stronger points about our dominance on ratings in these negotiations. I don't really know, but that -- I don't know how to more clearly answer the question, because I'm not sure really how to answer the main thrust, which is what's happening to subs. I don't -- we don't know and we won't know for some time.

Let me -- can I just add one thing? This is Hilton. Just sort of the silver lining to this sort of dark cloud that this coronavirus has thrown over our industry and the whole country. I think that it has validated the business strategy of Gray seeking to acquire and then continue to grow and invest in the highest quality local television broadcasting companies in the country. And for -- in a time period when industries and businesses are simply shut down, I mean, closed their doors for us to pick up 700 new clients in the first month and 800 new clients in the next that had never been on our airwaves before, I think that proves the strength of our dominance in those local markets. And then to have the stunning numbers of increased viewership, and then if you go back to Pat's comments, it's gone from 30% to 100% increases in all of those different categories. I think that, that augurs well. I think that with regard to retransmission consent, there should be, and I think it may be Gray that needs to lead this charge, a different calculation based upon our market share versus just being a national affiliate. Because these kind of numbers and this kind of proof, I think, is absolutely outstanding. I could not think of a better validation of the company that we have built than what we have been able to lay out. And so I just want to repoint that out to you, because there is a silver lining for our company and then for our industry as well. So I'm bullish about the future.

Your next question comes from the line of Jim Goss with Barrington Research.

Hilton, this might go in line with what you're saying. But I wondered, with the increased viewership as -- at the outset of the pandemic, but you didn't get to take advantage of it so much because of the reduced ad demand and pricing. And now you have a reversal of that trend as the economies open up because you'll probably lose some of the viewership. They won't be home. But maybe you'll have an opportunity to get some of the ad demand to the extent some of the local advertisers are able to open up and have that -- the funds available to spend. How do you see that dynamic working out in terms of like the pace of the recovery and the shape of that recovery?

I think, when -- I believe, and I'll let anyone else that's on here put their own opinions in it, but I have been through -- this is the third really dramatic advertising recession that I have been through personally. One thing that always happens is the strongest station has the fastest recovery. I think that what we have done here has proven our numbers to the viewing community and then the people that turn on television, right, and -- especially with regard to local ads. I think it's going to give us a very good position as we go forward. Because automobile advertising, they still have a lot of stuff that they've got to get moved up there -- off their showrooms. With regard to legal, financial, everything, and I think they're all going to come back to the place that can actually move their products, and that's our TV stations. So I think it will help us with regard to pricing. I think it will help us with regard to demand. And I think that because we didn't retreat in the face of this disgusting thing we are going through, instead, we doubled down and tripled down. We invested. We added to our news. We put in late night newscasts. We were able to do it and then have our anchors in all of our markets relate almost immediately to the people that were at home, because they were broadcasting from their homes. So over 90-some markets, I mean, it's -- there's a connection that has been established through the course of this pandemic that I think is going to augur well for the success of our business in the medium and long term. I hope I answered your question. And we're also just on our soapbox.

I was also wondering, though, partly, do the advertisers who pulled back for various reasons come back into position and interest in placing those ads and paying the higher prices? Or do you think they'll -- some of your market has been damaged and it will be harder to get some of those dollars back?

I do not think we have been damaged one iota. I think that when people come back and -- we've seen some of this on our own Board of Directors. The Chief Financial Officers of Haverty Furniture serves on our Board. The Board adjourned yesterday. They have gotten 54 of their -- I'm sure it's in excess of 100 stores back open and where they're in our markets, they're trying to advertise with the people that can get the eyeballs, and that's going to be us. And I think that we have better data to sell and our account executives will have a better sales ability to make that pitch across the board. So I think we're going to keep the pricing.

Okay. And maybe one other -- I think, maybe for Jim. Gray tends to run a tight ship in every way, shape and form. But one of the things that's been coming out is the revaluation of physical office space requirements in a -- demonstration that people can work remotely to a greater extent. Is there any consideration of addressing or developing any cost savings in that area that might be sustainable?

I don't think there's going to be any significant cost savings even if in some circumstances we continue to run more dispersed and more remotely simply because we are now, and it seems to be actually working -- it seems to be working relatively well. But I think the basic cost of whatever we're doing probably still stay about the same. As mentioned early on in Kevin's remarks, we are just now beginning to start to think through in each of our locations across the country how we transition back some -- to all or some portion of our employees. That's highly dependent on the physical plant. We're dealing with the size of the staffs, lots of variables that are literally location by location. And we're just now beginning to think -- start to think through that and what it will mean. There may be a little bit of cost associated with that if we have to do some modifications to buildings to help social distancing, things like that. But right now, we don't expect that those costs would be significant. And we'll -- as we continue to work through that and as we report on our next call, we can update everybody on our progress on that project.

Okay. And maybe one last thing. Kevin, does this sort of environment create any potential for relief in Washington for things like major market -- major affiliate duopolies or any of the other things that you might have had an interest in?

I think it's a little too early to tell. And the overarching fact that we are a couple of months from an election means that it's an especially tough push to expect the FCC will be taking any major actions.

Your next question comes from the line of Dan Kurnos with Benchmark.

Most of the high-level stuff has been talked about. But maybe, Jim, I don't know if I can pin you down explicitly on how April core came in. And then maybe just further, just talk about booking trends, what gives you that optimism outside of what Hilton talked about? We've heard some other companies mention maybe an OEM restart once the plants get back up and running, if that's contributing to sort of why you think things continue to get better? And then on the political side, is there any change in sort of the buckets in the way you think that comes in? You reaffirmed your guidance. And Kevin, you gave kind of good overall color. But is there any concern that maybe presidential is a little bit lower just due to the free air time, but the down ballot stuff which we've heard has been coming in incredibly heavy right now kind of makes up for that? Or is sort of the general outlook still relatively the same given fundraising levels?

The President has $0.25 trillion in cash right now and more days ahead to raise money. And you've seen the articles, the President is now -- the President's campaign is actually placing ads on TV. Remember, there were no ads for President Trump -- sorry, for candidate Trump 4 years ago, and we're seeing the ads today. And I think we'll see a lot more in part because there is a fear that this may be slipping away. He is running for reelection. That's very different than perhaps his intentions when he ran 4 years ago. And as I've mentioned, if we didn't have this COVID crisis, he probably would have done 20 rallies in the last 40 days, and that would have garnered a lot of free press. Instead, he's not doing rallies and the podium in the White House is not necessarily helping him right now. So I think advertising is going to be important for them to define Biden and to get the vote out. So we're certainly expecting presidential spending from him. So nothing has happened that would suggest that it's going to be lighter. I think -- as I said, I think this environment suggests that we'll see more spending at all levels, not less.

So to go to the question on the sequentialness of Q2, as we said, currently, based on pacing, we think it's looking down at least 33% for the whole quarter. But we said it was sequential -- it appears to be sequential improvement. So you can assume, obviously, April was down more than 33%. May is looking better. And June, as of today, is looking like the best month of the quarter. So we're, again, cautiously optimistic on that trend line, and we'll see how -- we will -- it's encouraging that it looks like it's getting better.

Your next question comes from the line of John Kornreich with JK Media. John Kornreich;JK Media;General Partner: Jim, just humor me a bit on retrans and you can reiterate some things that you've said already and in the past. How much is up for renewal this year and when?

Kevin, you want to jump in? John Kornreich;JK Media;General Partner: In terms of subs?

Yes, about 56% of the subs are up for renewal this year. We have one major deal that was up in end of March and that we are still negotiating. The rest of them are up at the end of this year, at December 31, more or less. John Kornreich;JK Media;General Partner: One major now and the rest at the end of the year?

Yes. Correct. John Kornreich;JK Media;General Partner: And your annualized retrans in the first quarter was about $850 million, $860 million. Is that pretty much the way it's looking now for the year? A little bit on the low side, but...

No. I think it would be for -- on a full year basis, it would end up being a little bit higher than that. Because, again, Kevin mentioned that there was a deal up at the end of March. So obviously, that doesn't go to a new rate grid. The first 3 months of this year were at the rates negotiated 3 years ago. So there would be -- with that contract, there's a step-up beginning or will be a step-up beginning retroactive to April 1. So that will move the number up a little bit over the next 9 months. John Kornreich;JK Media;General Partner: Okay. And what was unusual in the first quarter $213 million?

I don't think there was anything really unusual in first quarter. John Kornreich;JK Media;General Partner: So you expected all along that your net retrans was going to be down in the first quarter?

Yes. And I think I have to go back and see what we said exactly when we guided for Q1, but the gross number came in pretty close to the guide and the expense number was also pretty much what we thought it would be. So I -- so yes, we would have expected a muted Q1. John Kornreich;JK Media;General Partner: Are you willing to say that net retrans for the year, just a very simple, will be up? Forget about how much, just will be up?

Tell me are subs going to be down 12%? Are they going to be down 5%? John Kornreich;JK Media;General Partner: They'll be down 5% to 7%.

I mean, that was a rhetorical question. I don't -- John, I don't know the direction of the subs. And -- because half of our contracts are fixed fees regardless of sub count. That impacts the net. So that's why we're not making any guidance directly in the release or indirectly. John Kornreich;JK Media;General Partner: Okay. I was surprised that the net retrans was actually down 10% in the first quarter.

Recall, all of the contracts -- every network contract steps up on January 1 and then last year was rolling into new rate grids.

And we've said repeatedly that '20 was a tough year for us on the reverse side because of the affiliation agreements that renewed in part years in '19. So now we're getting a full 12-month effect as well as a rate increase effective January 1. So this was always going to be -- for many years, we've said this was always going to be a tough year in reverse for us. John Kornreich;JK Media;General Partner: And that cycle could reverse in '21 when you negotiate 56% that carries into next year. And reverse side has already been settled.

Yes. Well, there will be another step-up in all those agreements on January 1 next year, too. But you're right. We'd basically be able to reprice roughly 50% of our sub base at the end of this year. It's a much better picture for growth next year with that many subs repricing. John Kornreich;JK Media;General Partner: Okay. I got an easy one for you, Jim. Are you willing to say revenues will be up in the second quarter of '21 versus the second quarter of '20?

Second quarter of '20. Yes, I'm willing to bet. I'm willing to stick my neck out there for that one. I think that that's a reasonably safe assumption to make at this point in time.

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

I just have a couple of quick questions. I was just wondering, do you have a sense of how your stations have or are performing relative to the other stations in your markets? And I'm just trying to get a sense of like whether your local station rankings or actions you've taken to reach out to your best clients have had in your particular markets?

Maybe Bob, do you want to take that?

Sure. Happy to do that. It's Bob Smith, COO. We monitor our competition. Quite candidly, as you know, the performance of our stations means that we have a lot of #1 producing revenue markets and -- along with political as well. So we're pretty comfortable that we're seeing the lion's share of the dollars in most of our markets -- probably not 100% of them, but very close to that. Secondly, we're doing -- we do outreach to our biggest clients in our markets. The general manager gets involved. GSM gets involved. I've talked to a few big clients. I've talked to 7 ad agency owners, some of the biggest ad agency owners in the political world just this week and so -- just to take their temperature. And so we're pretty thorough, and we have a lot of strong relationships in our local markets, and that's why we've been able to, I think, also get some new business on the air. And there's been a few superstars in that regard throughout the company. So we're in a good competitive position, I would say that.

Okay. And then thank you for your comments on your interest in M&A. I was just wondering, given this pandemic, has your comfort level on debt leverage post this pandemic changed in any way?

Well, our leverage at the end of the quarter was 4.23. We had said -- in our year-end call back in February, we indicated that we thought we would end up the year somewhere in the 3s. Now obviously, we've withdrawn full year guidance for all the obvious reasons. But at the same time, I still think leverage is probably somewhere in the lower 4s by the end of the year. It may be a little bit -- it might fluctuate a little bit as we move quarter-to-quarter. But when the political hits in fourth quarter, I think we -- the leverage is somewhere in the lower 4s. I think overall in -- where we would be by the end of the year and then thinking ahead to '21, assuming '21 is "normal," we feel pretty good about our leverage range. And I think we'd be -- I think that currently are among the lowest in the peer space and moving -- over a period of time moving even lower. So I think we've got some flexibility with leverage. But we also like -- we like the ZIP code we're in currently and the ZIP codes we'll be heading to over the next -- now to the end of '21 and into '22.

Got you. And as you think about acquisitions going forward post the pandemic, any thoughts about the high end of your leverage range, what you're willing to go to? What you're not willing to go to? Has that changed?

We've always been a little careful to set arbitrary highs and lows certainly before the pandemic. I mean, I think the rule of thumb for the industry and depending on timing of deals, size of deals, if you just think about how the peer group has run over the last 3, 4 years, kind of a big, large deal, you might be a little bit over 5 to maybe 5.5 going with the trajectory going into the 4s and into the 3s. And people who have done that and then wash and repeat it, right? And we've done that several times. I think going forward, what would be probably a more comfortable range really? We need to get through the current environment and understand clearly what the future environment is. If it's pretty much back to normal, like '18, '19 and what everybody thought '20 would be before the pandemic hit, then I think that would lead you to one conclusion. If the post pandemic new normal is slightly different than the old normal, then you might end up at a little bit more conservative leverage standpoint. I think right now, it's kind of impossible to say other than we're very comfortable with where we are and where we see ourselves heading over the next 12 to 18 months.

Gentlemen, your final question comes from the line of Davis Hebert with Wells Fargo.

I was going to ask the leverage question, so thank you for that answer. But I guess just one last one. With no live sports, I'm just curious, I think the answer is no, but are there any triggers in your agreements with the networks for lower payments and/or rebates to the MVPDs? And as you renegotiate some of these deals, do you think that's going to be a conversation?

Davis, it's Kevin. The short answer is no. Remember this, the network sports agreements are negotiated between the network and their respective affiliate associations and then presented to affiliates with the recommendation to enter or not enter into the agreement. And so you basically have a form agreement for all affiliates in the country, which you pay a pro rata share of the total amount negotiated based on the DMA population. You don't have an individual negotiation over sports with a network when you're doing your affiliation agreements. The sports deals are separate. So I don't anticipate -- there is no trigger. For example, with NBC, you pay NBC Olympic fee every year, even though Olympics are every 2 years. That's the way the payments were structured. And we are going to get Olympics. We'll get it in 2021, but I don't see any near-term relief, especially since the networks, is our understanding, are actually required to pay the leagues regardless of the state of play. If there are refunds from the leagues to the networks, then that will open a conversation. But at this point, it seems that the networks are still paying the leagues for -- under their contracts.

This concludes our question-and-answer session. I will now turn the call back over to Hilton Howell for closing remarks.

Well, thank you very much, operator, and thanks, everyone, for your very insightful questions. Thank you for your time this morning. It is interesting times that we live in, but we will come through these. My personal feeling is we will come through these times a lot faster, and I know that this company will emerge from it much stronger than it was when it even began, and it was strong when we started. So thank you for your time, and we will talk to you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.