Nexstar Media Group, Inc. (NXST) Q1 2016 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to Nexstar Broadcasting Group's 2016 First Quarter Conference Call. Today's call is being recorded. All statements and comments made by management during this conference call other than statements of historical fact may be deemed forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events. Forward-looking statements include information preceded by, followed by or that includes the word guidance, believes, expects, anticipates, could or similar expressions. For these statements, Nexstar claims the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this communication, concerning, among other things, the ultimate outcome and benefits of any possible transaction between Nexstar and Media General and timing thereof, and future financial performance, including changes in net revenue, cash flow and operating expenses, involve risks and uncertainties, and are subject to change based on various important factors, including the timing to consummate the proposed transaction; the risk that a condition to closing of the proposed transaction may not be satisfied and the transaction may not close; the risk that a regulatory approval that may be required for the proposed transaction is delayed, is not obtained or is obtained subject to conditions that are not anticipated, the impact of changes in national and regional economies, the ability to service and refinance our outstanding debt, successful integration of Media General including achievement of synergies and cost reductions, pricing fluctuations in local and national advertising, future regulatory actions and conditions in the television stations' operating areas, competition from others in the broadcast television markets, volatility in programming costs, the effects of governmental regulation of broadcasting, industry consolidation, technological developments and major world news events. Unless required by law, Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed on today's call may not occur, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. For more details on factors that could affect these expectations, please see Media General's and Nexstar's filings with the Securities and Exchange Commission. The forward-looking statements and comments made during the conference call are made only as of the date of today's conference call. Management will also be discussing non-GAAP information during this call. In compliance with Regulation G, reconciliations of this non-GAAP information to GAAP measurements are included in today's news announcement. The company does not undertake any obligation to update forward-looking statements reflective of changes and circumstances. Now, at this time, I'd like to turn the conference over to your host, Nexstar President and CEO, Perry Sook. Please go ahead. Perry Sook - Chairman, President & Chief Executive Officer: Thank you, operator, and good morning, everyone. Thank you all for joining us to review Nexstar's record 2016 first quarter operating results. Our company continues to perform at a very high level and delivered strong operating results, and the positive trends we saw in 2015 are as we expected continuing on into 2016. Today we'll review the quarter's progress and our outlook, as well as other ongoing initiatives to drive free cash flow growth and shareholder return in 2016 and beyond, including the expected completion later this year of the Media General transaction. As always, our Chief Financial Officer, Tom Carter, is here with me on the call this morning. 2016 is off to an excellent start for Nexstar, as we exceeded consensus estimates with record first quarter net revenue, BCF, adjusted EBITDA and free cash flow. The 26.7% rise in first quarter net revenue was attributed to local advertising strength in key categories; political ad spending, which exceeded even our expectations; continued robust retransmission fee growth; and another quarter of double-digit digital revenue growth. With the operating leverage in our model, the net revenue increase drove operating income growth at 52.8%, resulting in our highest ever first quarter BCF, which grew 29.5%; adjusted EBITDA, which grew 28.4%; and free cash flow growth, which was 21.4%. Our record first quarter results continued to highlight the value of our long-term strategy to transform our traditional television operating model into a diversified local media entity with high margin revenue streams while building scale through accretive acquisitions. With Nexstar's current operations continuing to generate strong growth on their own, reaching the definitive agreement to acquire Media General in the first quarter of this year marked a watershed moment in the history of Nexstar and a tremendous near and long-term growth opportunity as we create the industry's leading provider of local news and audience reach with over $500 million of annual average free cash flow. Next month marks Nexstar's 20th anniversary. And as many of you know, I founded the company with one station in Scranton, Pennsylvania based on a commitment to deliver exceptional service to the local communities in which we operate. To this day, the focus has been fundamental to our success, as we've grown to own, operate and provide services to 104 television stations in 54 markets and employ over 4,400 team members across the United States. Since 2011, Nexstar completed 17 accretive strategic transactions, including 60 full-powered television stations and four digital businesses, all of which have increased our scale and diversified our portfolio while significantly expanding our free cash flow growth. Our proven ability to create value via these acquisitions is reflected by Nexstar's rapid financial growth over this period, as net revenues grew from $306.5 million in 2011 to $896.4 million in 2015 while free cash flow rose from $34.2 million to $208.2 million in that same timeframe. Our localism combined with the increased scale remains a significant advantage, which is why we are so excited to be acquiring Media General later this year in an accretive cash and stock transaction. It meets every one of our M&A criteria and enables Nexstar to build upon its role as one of the nation's leading local media companies while bringing significant financial accretion and only modest increase to our leverage. Our current and longer-term outlook for growth remains every bit as attractive as it has been over the last several years. Let me do a quick review of our first quarter and then we'll discuss our pro forma Nexstar and Nexstar Medial General guidance, progress on the Media General transaction, and the high visibility we have for continued growth in 2016 and beyond. Operationally, Nexstar had an outstanding first quarter, which results – highlight our ongoing focus to build new local direct advertising as well as growth in distribution and digital media revenue, and a successful integration of the accretive acquisitions we completed in 2015 and early in 2016. Nexstar generated total first quarter net revenue of $255.7 million, a 26.7% rise from the year-ago period, with the increase driven by strong growth in advertising, retrans, political and digital. Reflecting organic and acquisition-related growth, first quarter core ad revenue rose 7.6%, inclusive of 10.9% first quarter growth in local spot revenue. While we had a few less Super Bowl stations in 2016 than in 2015 due to rotation of the game to CBS from NBC, our teams did a great job in monetizing Super Bowl 50, which led to record Super Bowl revenue for Nexstar and demonstrated our ability to work across multiple screens to drive incremental revenue. We recently announced the launch of Yashi's Digital Mirror, the industry's first integration of linear TV and digital programmatic video. This powerful multi-platform marketing solution synchronizes advertisers' on-air television and digital video in real-time to maximize audience targeting and engagement. Initial launch is exclusive to the Nexstar's portfolio of stations with plan for a broader commercial deployment later on. Importantly, Digital Mirror is another example of how we continue to evolve our business model by developing new technologies, products and services that complement our broadcast and digital media platform that exist today. Returning to our first quarter results, our strong core revenue growth highlighted gains in five of our top six categories and six of our top 10 advertise supported categories. Our core revenue's support and growth continues to reflect healthy levels of new business, with new to television ad revenue for Q1 of $7.7 million, marking a 13% increase over the prior year. Nexstar's revenue growth in the first quarter, excluding political, was a robust 19.9%, while political ad revenue rose to nearly $12 million marking a nearly three-fold rise over comparable first quarter 2014 levels. During Q1, we recognized significant political spending in Iowa, Nevada, Illinois, Arkansas, Texas, Missouri, New Hampshire, Vermont and Utah. By category, we booked over half of our Q1 political revenue from candidate spending, tax spending made up approximately 40%, and the balance came from party spending in Q1. In addition to strength in core and political, Nexstar's record cash flows highlight continued double-digit retransmission fee revenue growth, which rose 19% on a quarterly sequential basis and 46.2% year-over-year to $97.3 million, which marks a record level of quarterly revenue from the source. While the renewal of retransmission consent agreements representing approximately 45% of our sub base we completed in late-2015, we have another 45% renewing this year, all in, we project highly visible and significant revenue growth from this source to continue in 2016. In total, our higher margin retransmission fee and digital revenue grew 39.6% year-over-year to $119.8 million in total and accounted for 46.9% of 2016 first quarter net revenue. By comparison and reflecting our continued progress in building our non-core revenue pillars, total first quarter 2015 retransmission fee and digital revenue comprised 42.6% of net revenue, up from 30.9% of net revenue in 2014 first quarter. The operating efficiencies we're deriving from our expanded scale, the integration of our recently completed acquisitions and our continued focus on expense management resulted in record 2016 first quarter operating income of $57.9 million, that's an increase of 52.8%; broadcast cash flow of $98.1 million, a rise of 29.5%; adjusted EBITDA of $82.3 million, the growth factor there of 28.4%; and free cash flow of $52.1 million, which represent a 21.4% year-over-year increase and an approximate 106% rise over the first quarter of 2014, the previous political period. Last year we completed the accretive acquisition of 20 television stations. At this point, other than Media General, we have just four stations in West Virginia pending which that deal will close in 2016, but in the meantime, we've been operating those stations since December 1 of 2015 pursuant to a time brokerage agreement. And following a successful integration, the operations and financial results are already exceeding our expectations. On the Media General transaction, we're making continued progress towards closing later this year, having made all regulatory and SEC filings. We've also moved forward with financing-related rating agency meetings and reviews, station divestiture marketing and post-acquisition integration facilities and personnel planning. The new Nexstar Media Group will increase Nexstar's broadcast portfolio by approximately two-thirds and more than double our audience reach while presenting opportunities related to the increased scale and complementary nature of the combined digital media operations, which we intend to aggressively manage to profitability. Financially, the transaction will be approximately 37% accretive to free cash flow upon closing, as we'll more than double our revenue and adjusted EBITDA. Using what are currently conservative expectations for the cost of financing and the transaction and the identified year-one synergies of $76 million, Nexstar Media Group will generate over $0.5 billion of annual average free cash flow on a – with a free cash flow per share expected to approximate $11.15 per year over the 2016, 2017 period on a pro forma basis. We intend to initially allocate the free cash flow to leverage reduction and we expect covenant leverage of approximately 4.5 times by year-end 2016, and that assumes no net proceeds from the incentive auction. Overall, our strong free cash flow generation combined with our strength in capital structure provides us with the flexibility to complete accretive broadcast and digital transactions to rapidly de-lever post closing and for ongoing return of capital to shareholders with our 14th consecutive quarterly cash dividend and second $0.24 quarterly dividend to be paid later this quarter. As shareholders, free cash flow growth is our priority as we continue to generate excellent core, political, distribution and digital revenue growth. Our free cash flow visibility is solid. Tom and I both took advantage of the displacement in our share price in early Q1 and made recent open-market purchases of Nexstar stock, as we both have tremendous confidence in our team, the closing of the transformational Medial General transaction, and the substantial value it will bring to shareholders. So, with all of that said, let me turn the call over to Tom for a financial review and an update. Tom? Tom Carter - Chief Financial Officer & Executive Vice President: Thanks, Perry, and good morning, everybody. I'll start with a review of Nexstar's Q1 income statement and balance sheet data, after which I'll provide an update on our capital structure. Net revenues for Q1 of 2016 were $255.7 million, up 26.7% over the same period in 2015. Spot core revenue, which we define as local and national, was $129.2 million, which was up 7.6% over the same period in Q1 of 2015. Local revenue was up 10.9% to $93.8 million for the quarter. Spot national revenue was basically flat at $35.5 million. Political revenue, as Perry mentioned earlier, was a robust $11.8 million, which was up substantially over 2015 – 2014's first quarter, which was the last political cycle and 2012's first quarter, which was the last Presidential political cycle. Retransmission fees for the quarter stood at $97.3 million, which was up 46.2% over the same period the prior year. Digital media revenues were $22.5 million, which was up 16.7% over 2015 levels. Broadcast cash flow was $98.1 million, which was up 29.5% over the $75.7 million of Q1 of 2015. Adjusted EBITDA was $82.2 million, again up approximately 28%. And free cash flow, the metric that we're most focused on, was $52.1 million, which was up 21.4% over Q1 of 2015. On a same station basis, net revenue was up 15.3%. Spot core revenue was down a little less than 1%. Spot local revenue was flat. Same station retrans revenues were up 34%. Same station digital media revenues were up 18%. I will note that the core revenue in the first quarter was affected by displacement and disruption from the cable space, most notably, a retrans dispute that we had with one cable operator in the first quarter, which did affect our core and our national advertising revenue and growth rates there. First quarter's station direct operating expenses and SG&A expenses rose 32.9% and 14.8% respectively. The increases reflect higher variable costs related to increased core ad revenues and the operation of recently acquired stations and digital assets. Same station fixed broadcasting expenses were up slightly less than 2% for the quarter. Nexstar's first quarter corporate expenses were $15.8 million, inclusive of about $3.1 million of non-cash comp. The $4.1 million year-over-year increase was directly related to our pending Media General transaction expenses, which approximated $4.3 million in the quarter and are non-recurring in a long-term basis, but we will see those continue to recur on a quarterly basis between now and the closing of the Media General transaction. Again, these are largely related to professional services and fees related to the transaction. For 2016 second quarter, we project corporate overhead will be in the $14 million to $15 million range, inclusive of our stock comp, which is approximately $3 million. Again, on a steady-state basis, base corporate expenses on a cash basis would be approximately $10 million, and including the non-cash comp, approximately $13 million, with the difference between that and our projected for the first quarter being transaction expenses and professional fees. Turning to the balance sheet, I'll review the key items as of 3/31/16. Total net leverage was 4.22 times versus the total permitted covenant of 6.75 times. First lien leverage in March 31, 2016 was a flat two times versus a four times covenant. Nexstar's outstanding debt as of March 31 consisted of $722 million, a first lien debt comprised of $678 million on the term loans and $44 million outstanding on the revolver. Our two sub-note, senior sub, senior note issuances continue to be outstanding at $520 million and $272 million respectively. Net debt as of 3/31 amounted to a little over $1.5 billion compared to $1.432 billion at December 31, with the increase reflecting higher revolver borrowings for the time brokerage agreement payment on the pending West Virginia Media Holdings transaction and a purchase of the four North Dakota stations in Q1. Q1 total interest expense amounted to $20 million compared to $19 million in the same quarter of the previous year. The increase relating to borrowings to fund the platform expansion over the year. Similarly, cash interest expense rose to $19.7 million from $18.4 million for the same reasons. Looking at the current capital structure, Nexstar's weighted average cost of borrowings remain at approximately 5%. Q1 CapEx came in at $7.6 million, slightly under budget, and we continue to believe on a standalone Nexstar basis, we'll forecast approximately $25 million to $26 million in 2016 CapEx. Looking forward, Nexstar will raise approximately $4.5 billion of funded debt to finance the transaction with Medial General, with that amount being immediately reduced by proceeds from the planned asset sales. Reflecting just the planned asset sales, we currently – and we currently project $76 million in year-one synergies and our expectations for continued significant political ad spend in 2016, our models in our guidance for the deal assumes leverage of 5.5 times at closing, with covenant compliance decreasing to approximately 4.5 times by year-end 2016. Notably, our year-end covenant leverage expectations assumed no net proceeds from any incentive spectrum auction sales. And while we're not increasing our Nexstar Media General 2016-2017 pro forma average free cash flow guidance of $11.15 per share, we would point out that our estimate was established based on the status of the credit markets earlier this year, and as everyone I'm sure knows, the environment has improved since then. Given that, I will remind you that a 100 basis point change in the average cost of borrowings was equivalent to approximately $25 million in interest expense, which would equate to approximately $30 million of free cash flow. On a per-share basis, that $30 million of free cash flow would change free cash flow per share approximately $0.65 per share based on the 47 million shares expected to be outstanding at the completion of the transaction. During the quarter, S&P upgraded Nexstar to BB-minus from B-plus with an outlook as stable, which we believe reflects the benefits of our greater scale related to the Media General transaction as well as the resulting significant free cash flow generation, which will allow Nexstar to rapidly deleverage post-closing. I'm also pleased to report that we have 10 banking and financing syndicate, which covers the total financing commitment. We believe our defecting syndicate is reflective of the positive view lenders have of the combination. Once we'll do a significant majority of the financing in a secured loan market, which has historically been less volatile than the high yield market and brings lower interest rates than a high yield bond financing, with the added flexibility that loans can be refinanced in the short-term using six months to 12 months with no prepayment penalties. While I'm not going to comment any further at this time regarding our detailed plans for the capital structure, I'll remind everybody that we are free cash flow focused, had a great record in the credit markets and are doing everything we can to secure the best financing terms. As it relates to the transaction and the process itself, some of the key upcoming dates for the Media General transaction, we've made all the regulatory and SEC filings, including the registration statement on the S-4 and amended that registration statement with a filing on April 26. We're waiting for SEC comments on the revised filing, which we hope to have and address shortly any further requirements so that the S-4 can be declared effective. We can then send a date for the shareholder vote, which would follow the declaration of effectiveness by about 20 business days, and then we proceed to commence activities relating to the financing. Also in the coming weeks, we'll finalize terms for the required asset sale, which should be finalized shortly. As it relates to management focus on the free cash flow generation, our record first quarter and strong outlooks for Nexstar standalone and for the combined Nexstar Media General will follow the successful approach we've used in terms of building the top line, maintaining close control with fixed and variable cost, and optimizing the balance sheet. This plan will continue to support our goals of generating free cash flow growth while allowing us to reduce leverage, pursue additional selective accretive acquisitions, pay dividends, repurchase share, and take other actions that can enhance shareholder value. As noted earlier in the call, our 2016/2017 Nexstar standalone guidance for the average free cash flow is $250 million. And on a per-share basis, that equates that equates to $8.15. And with our operations balance sheet, capital structure and cost of capital in great shape, and with good strong Q1 core and political, we are definitely comfortable reiterating that expectation. In summary, Nexstar continues to execute operationally on the M&A front at a very high level, which brought us both significant growth and consistency to our results. We are quickly moving towards completing several key pieces of the Media General transaction, while at the same time, our existing operations continue to meet and exceed our expectations for free cash flow growth. Assets will remain highly competent in both the Nexstar Media General free cash flow as well as the Nexstar standalone free cash flow guidance we have given. That concludes the financial review for the call. I'll now turn it over back to Perry for some closing remarks before Q&A. Perry Sook - Chairman, President & Chief Executive Officer: Thanks very much, Tom. Overall, we believe our record first quarter results continue to highlight the value of the strategy we've successfully executed going on nearly 20 years. Over this period, the company has grown rapidly to become an industry leader based on our disciplined approach to completing accretive acquisitions, focus on enhancing the operation results of the acquired stations and the media properties and an organization-wide commitment to localism. As our business continues to evolve with changing (25:30) of the broadcasting and digital media landscape, we focus to innovate and anticipate to meet the preferences of the consumers and advertisers alike. Local market focus media companies in our view are uniquely positioned to thrive in today's multi-platform world, with large scale reach, the greatest share of video viewership, superior engagement across all devices and influence on consumers' purchasing decisions, all of which are unrivaled by competitive media. With solid core advertising trends, upcoming event programming, including the Rio 2016 Summer Olympics, our expected record levels of political spending, our expanded digital media operations and the contractual retransmission revenue growth, Nexstar is on track to generate record free cash flow throughout 2016 and our fifth consecutive year of record financial results. As such, we remain confident in our pro forma 2016, 2017 free cash flow projection for Nexstar, as Tom mentioned, of approximately $250 million, which is average annual free cash flow, or pro forma free cash flow of approximately $8.15 per share on a stand-alone basis. And as we move closer to the completion of the Media General acquisition, the annual free cash flow per share is expected to approximate $11.15 per year, with our leverage declining and all other things being equal, we look for that enterprise value to shift to the equity account. The daily contributions of my 4,400 colleagues continue to advance our organization-wide commitment to serving our local markets in which we operate, with great local news, events and other local programming, while making appropriate process and operating enhancements to ensure we remain the most efficient and competitive diversified media company in our industry. With all of that, I'd like to thank you all for joining us this morning to review our results. So now let's open the call to Q&A, and we'll address your specific areas of interest. Operator?

Thank you. And we'll turn first to Marci Ryvicker with Wells Fargo.

Morning. A couple of questions on core. I assume that you would have been up low-single if you did not have the retrans dispute. If you could just comment on that? And then secondly, can you talk about core spot in the second quarter, if that's also up low-single? Tom Carter - Chief Financial Officer & Executive Vice President: I'll take the first part, Marci, and pass it off to Perry with the rest. The short answer is yes, we would have been up slightly if it hadn't been for that disruption. Perry Sook - Chairman, President & Chief Executive Officer: And as it relates to second quarter, I know there is this perception running around that there is a slowdown that's going to occur in the second quarter, second half of the year, but what we're seeing is exactly the opposite of that. If you look at April, May and June, we are seeing sequential builds in core revenue through the second quarter. And while it's not done yet, we still have two months to go, I would expect our second quarter results to look a lot like our first quarter results as it relates to core, over-delivering on political, distribution, digital. So, all within the bandwidth of our expectations and we hope yours.

Now, some of the companies you've reported suggested that the second quarter political numbers will be lower than the first quarter because of how strong the first quarter primaries were. Should we expect the same thing for you guys in the second quarter versus the first for political? Tom Carter - Chief Financial Officer & Executive Vice President: I think they'll be comparable to slightly down perhaps. But I think that's just more the cadence of the primaries. Perry Sook - Chairman, President & Chief Executive Officer: We have, after today, four presidential primary contests that will be conducted, but we also have, from this point to the end of the quarter, 16 state and local primaries, which are decoupled. Many states decouple the presidential primary from their state and local. And by example, Nevada has got the statewide primary for the Senate race. We've already got over $1 million on the books for that race. And that contest will be adjudicated on June 14. So we have 16 statewide races in addition to the four presidential primaries still yet to be conducted in the second quarter. So our expectation is political will be in the same neighborhood as our first quarter results.

Got it. Thank you so much.

Next we'll move to Aaron Watts with Deutsche Bank.

Hey, guys. Thanks for taking the question. First one, just on auto advertising. Curious if you're seeing the OEMs devote a greater portion of their ad budget to digital versus television? Or maybe more relevant, mandating that a greater percent of the co-op ad spend provided to the regional and local dealers must go towards digital? Obviously, that could potentially put some pressure on what the dealers spend on your stations. So just curious what you're seeing there. Perry Sook - Chairman, President & Chief Executive Officer: Sure. Aaron, in the first quarter, we saw local dealer spending, which was up approximately 3% and the category flat. So there was less Tier 2 money obviously as part of the total. I don't know that I would call it a trend. I think it's really by nameplate. Have we seen that happen with Nissan? Yes. Have we seen that happen with Chevrolet, and Lexus, and Honda, and General Motors? No.

Okay. To the extent there is some dollars that may shift towards digital, are you able to capture any of that with some of your offerings? Perry Sook - Chairman, President & Chief Executive Officer: Sure. I mean, it's our attempt to do that. What we try to do is offer products that are offered in syndication but, say, you can do business with people you know locally. Automotive as a percent of our ad supported revenue, as you know, is in the mid 20%s. As a percent of our digital ad supported revenue, it's a number substantially less than that. So we do have opportunity to grow in automotive on digital, and our teams are working to try and make that happen.

Okay. And then my other question, a little bit bigger picture, but if you could help remind me – when I read about Hulu or others of the ilk launching or potentially launching skinny bundles that would include broadcast stations, where does Nexstar fit into that in terms of getting compensated? Who's negotiating? Is it you? Is it the network? Just maybe some color around that? Perry Sook - Chairman, President & Chief Executive Officer: Well, each of the, let's call, them non-traditional MVPDs are separate circumstances. But I think the important thing to know there is whether we negotiate directly with Hulu or our network partners negotiate direct on our behalf, it is still the local station, the local license holders' control over whether they negotiate a deal or opt into a deal. So the grant of rights remains with the local station for the broadcasting or the streaming of that programming within our DMA. So we are an important part of this, and whether the networks negotiate, as many have on behalf of Sony Vue, and allowing us an opt in or opt out or whether we negotiate directly, I think the outcome is generally the same. We don't agree to deals that we don't think are good deals and are deals we're comfortable with, whether we negotiate them directly or whether we opt into a deal somebody else has negotiated.

Okay. Helpful. Thank you.

Now I'll move to Kyle Evans with Stephens.

Hi. Thanks for taking my questions. Tom, you ripped through the same station numbers very rapidly. If I heard correctly, the same station digital growth was better than the overall total digital growth. Could you walk us through some of the digital trends in the quarter, and maybe compare and contrast local versus some of your national operations? Tom Carter - Chief Financial Officer & Executive Vice President: Sure. Well, we don't have much in the way of national, but I think really what you're referring to is Yashi and the programmatic side was slightly down for the quarter. And then obviously, the local side was up substantially as was LAKANA, which is our CMS business, providing the services to other publishers during the quarter. So the growth was pretty consistent, not a big difference between same station and total.

And can you talk about the down programmatic piece of the business? I know it's volatile and it's ... Tom Carter - Chief Financial Officer & Executive Vice President: I was going to say, some of it is volatility. Also we've seen some marketplace dynamics change specifically with regard to availability of advertising. Some of the private networks and the private exchanges have tightened their availability of advertising, which has affected placement agents like Yashi in terms of availability to access that inventory.

Got you. And you guys put up a really nice retrans number in the quarter, and that's on 45% sub-renewal. You have another 45% coming. Is there any reason to believe you can't get the same bump in per sub monthly pricing on the next 45% that you got on the 45% you just got done with? Tom Carter - Chief Financial Officer & Executive Vice President: Well, it's difficult to say because obviously, there's a lot of variables that go into that. What we have said is we think that the percentage same station growth will decline slightly, but that's just the law of large numbers coming into play. It's not necessarily indicative of what's happening in the rates, but we can continue to meaningfully grow the dollars on the retrans and we don't see any storm clouds on the horizon that are going to prevent that.

Okay. Thank you.

John Janedis with Jefferies, please go ahead.

Thank you. Perry, maybe a little bit of a follow-up. You talked about the $24 million in retrans synergies from the Media General deal. And I just wanted to ask you, with consolidation on the distribution front, will there be any impact on your retrans revenue when those deals come up for renewal in terms of rate harmonization that we should be thinking about? Perry Sook - Chairman, President & Chief Executive Officer: Short answer is no. We do not anticipate any bumps in the road. We have acquired over 60 stations in the last – since 2011. So in the last four-and-a-half years or four-plus years, invoked our after-acquired clauses and had 100% harmonization, if you will, of the acquired station's rates with ours. So we don't anticipate any issues there on a going forward basis. Tom Carter - Chief Financial Officer & Executive Vice President: And John, just to remind you, there is some consolidation going on on the broadcasting side as well, which allows us greater scale. And we believe negotiating leverage with them. So, part of the whole reason for the Media General transaction was to make it a fair fight.

Okay. Got it. Thanks, Tom. And then just separately, based on your timeline for Media General, does that imply you could announce some detail around the divestitures by the end of the second quarter? And then on Rio, can you give us a sense of the potential revenue impact? Tom Carter - Chief Financial Officer & Executive Vice President: I'll take the divestiture question. The short answer is yes, we would expect to have something done really in the next month or six weeks, and then roll that out as appropriate. Perry Sook - Chairman, President & Chief Executive Officer: Yeah. We're working hard on the divestiture markets. And it's been a very robust process, which has been a pleasant surprise I think to all of us. And our plan would be to hopefully announce those divestiture market agreements prior to our shareholder vote. And all of that we would hope would happen in the second quarter. As it relates to Rio, Rio on our NBC affiliates – NBC affiliates are our second largest revenue producing group of stations. So our expectation for Olympics is a mid-to-high seven-digit gross revenue number. Some of that will be political because of the timing. But on an all-in basis between digital and over the year, we're looking for a number that's in the mid-to-high seven digits of revenue.

Great. Thanks very much.

Next we'll turn to Dan Kurnos with The Benchmark Company.

Great. Thanks. Good morning. Just going back to core quickly, we've covered most of it. But maybe, Perry, if you could give us some of the other puts and takes category-wise? What's performing well and what's not? And then just with the Digital Mirror launch, just – maybe some higher level thoughts there on if it's sort of a requirement now from an increasingly multi-screen world to have this kind of an offering? Or if you're just getting out ahead of this and trying to put out more of a programmatic effort on the digital front? Thanks. Perry Sook - Chairman, President & Chief Executive Officer: On categories in reviewing the first quarter, of our top-10 categories, these seven were up. Flat to up I guess I should say/ Auto, fast food, furniture, attorneys, medical healthcare, paid programming as well as services, which is kind of a catch-all category. The three categories that were down versus the prior year, I think we discussed were tools, cable advertising for obvious reasons, and then the retail category was slightly down. So that's our top-10 category. As it relates to Mirror, this is the – we view this as a product that's kind of a forced multiplier, that if you're running a spot in a football game for an F-150, you can geographically and demographically target within our market, folks who we believe are watching that football, have self identified as truck drivers or truck fans and football fans, and send a message out to them, hey, you're watching this game and go on down to your local Ford dealer and register for a trip to an upcoming Dallas Cowboys home game. So it's an opportunity to mirror the broadcast message with geo and demo targeting data, which we see as a force multiplier. It is the first of its kind out there as a product. We see it as an opportunity to create added value and enhance advertisers' messages, increase their effectiveness and kind of reach the holy grail of one-to-many and one-to-one marketing almost at the same time. So it's in the testing phases within the Nexstar portfolio, and we hope to be able to report results of those tests, but I can tell you that with some of the advertisers and portfolio managers that we've spoken with, they're very excited to learn more about the product. Now, will they actually use it? Time will tell. But we believe it is an investment in ourselves, an investment using our technology, creating products within the companies that we own that will further magnify advertisers' messages in an increasingly fragmenting environment. And we think that's good for everyone, including ultimately our shareholders.

Great. And then I'm sure I probably know the answer to this, but even though all we've gotten at this point is just the initial clearing target. Any thoughts on impact on closing as it relates to the spectrum auction? Perry Sook - Chairman, President & Chief Executive Officer: Nothing other than what's been publicly said, and that the auction will begin on May 31, and expecting a couple of rounds of bidding per day, and there'll be 52 rounds in total if needed. So the process will begin in earnest at the end of the month, and no one will be allowed to say anything about it until it's over. But I think we have said that we will be a participant in the auction or at least the registered certain stations to participate in the auction and we'll make dollar-denominated judgments everyday as that auction is conducted as to whether (41:47) inventory into the auction is in the best interest of our shareholders.

Great. Thanks, guys.

James Dix with Wedbush Securities. Please go ahead.

Hi. Thanks. Just two follow-ups. I think Perry, you mentioned that auto advertising is about in the mid 20s of your total core at the moment. How does that compare to similar point to prior economic cycles and do you see auto likely continuing to hold at that share or could that potentially lag a bit? Just interested in your views on that as a driver. And then secondly, just on the auction, when would you expect the next time that you're going to be able to disclose anything of substance on your participation or the auction overall? Thanks. Perry Sook - Chairman, President & Chief Executive Officer: Sure. As it relates to auto, I think we kind of went through the cycle that when credit collapsed and no one could get a car loan in 2009, the auto dropped to something that was approximately 15% of our television ad spend at its zenith prior to that collapse, it was 27% of our ad spend. We're not all the way back to the peak of where we were. We're kind of in the mid-20s right now, which would indicate there could be further expansion before we'd be testing new ground. But I think auto because it's such a major category and it kind of mirrors things that people buy on time, which also includes furniture and the retail and department stores. It's almost a proxy for advertising, and so I think as advertising grows, the automotive category will grow and I think it will certainly keep pace with its share of market currently of our ad supported revenue, and my bias would be to the upside that it will grow, and I guess time will tell. As it relates to the spectrum auction literally until the forward auction is concluded, there'll be no public statements. And their estimate that could be third quarter, fourth quarter and only the FCC will really know for sure. So I would not anticipate any authorized noise or information coming from any of the participants or the government until at minimum kind of mid-to-late third quarter, maybe fourth quarter in terms of the forward auction being completed and then I think we'll all be in a position to talk about it.

Great. Thanks very much.

We'll now move to Michael Kupinski with Noble Financial.

First, congratulations on your quarter. And most of my questions have been answered already. But my question really relates to the company's strategy post Media General merger. And correct me if I'm wrong, but you've been somewhat critical of companies seeking national digital platforms, which made straight from traditional broadcasting. And I was wondering in the new world for broadcasting that may be opened up by the new ATSC 3.0 standard, there may be a number of new business opportunities. And was wondering can you talk about your strategies to grow the business possibly in light of the new standard? Do they include new business initiatives outside of traditional broadcasting other than your local digital businesses? Perry Sook - Chairman, President & Chief Executive Officer: We had about an hour long meeting yesterday talking about uses of the spectrum that are non-ad supported that we can potentially activate and effectuate here in 2016 even with the pendency of the auction. So it's something we talk about all the time. And I'm not critical of other companies' efforts. I'm just saying our cup of tea is local. We do local really, really well I think. And I hope you all think that as well. But that's what we – that's our strength. That's our skill set. And so doing anything of a national basis or trying to build some national platform, I think there are others that probably can do that better than we can. And we believe our spot in the ecosystem is perhaps superior to National Cable Networks at this point in time. And so that – those are just our points of view. I'm not critical of anybody else's points of view. That's what makes the world go round. But either before, during or after the transition to 3.0, which we enthusiastically support, obviously there are many elements to that transition, including the transition itself. You don't have a second channel to be able to phase out over time. This would be a flash cut situation. That enters a level of complexity that needs to be dealt through. You'd like to do that with all the stations in the market simultaneously. But there's also the backward compatibility issue that needs to be dealt with before this is a widely adopted technology. And we don't want to create a haves and have-nots in terms of video that you only can consume video in this country if you have a pay service. That's not our business and how our business was founded or what it's all about. So we have to deal with the backward compatibility issue for TV sets that won't be operational under a new standard. I think all of that kind of clears the way for a number of ancillary uses of the spectrum, more efficient uses of the spectrum, which creates more spectrum available perhaps for lease, for things perhaps even other than video. And I think we will continue to explore all of those opportunities now, during and including the time of the transition to the new transmission standard.

Perry, do you perceive the prospect of you offering a skinny bundle, a skinny cable bundle in your local markets? Perry Sook - Chairman, President & Chief Executive Officer: Well, I would say it's already awkward. I mean, just basically every cable company out there has a broadcast lifeline low-end service. And so that's kind of how cable started, and it still exists today. It's obviously not the most advertised package because there is more markup with more services and paid TV and pay-per-view and those kinds of things, but by franchise agreement, most if not all cable operators have to offer kind of the skinniest of bundles, which is kind of a broadcast lifeline service. And that exists today. It is a choice for consumers. And again, as I've said in many conferences, I grew up in Pennsylvania, when cable started, where cable started, and it started with a broadcast skinny bundle. It was only as the cable industry evolved that other layers got added to the cake, but it's the foundational part of the bundle, and I believe that in a skinny-only bundle, viewership goes up, advertising is more effective because there is less fragmentation the skinnier the bundle gets. And my belief is we will always be a part of the skinniest of bundles if those are to be commercially viable.

But certainly you have the ability under the new standard to offer your own skinny bundle. I mean, that – I was wondering if you would ever venture off into offering your own pay service. Perry Sook - Chairman, President & Chief Executive Officer: On an à la carte basis? I -

Yeah. Perry Sook - Chairman, President & Chief Executive Officer: That's a little more difficult than meets the eye to establish a billing relationship with your consumers, and that's one of the ways the bundle works so well. And I'm not sure that people would necessarily buy every television station in the market on an à la carte basis. I think they'd realize pretty quickly, A, I've got to have broadband to do that; B, if I want all the stations in the market, I'll just put an antenna outside if I don't want to pay for anything. And 12% of our viewers do that today. 12% of the households we reach with our broadcast signals on the main set do not consume us via a pay service. So I'm not sure – that sounds more like a solution chasing a problem. So I'm not sure it would be commercially viable nor that there would be an inherent advantage to that because the pricing would have to be within market or people would go consume it another way. So I'm not sure there is a distinct advantage, and I think there is a hell of a lot more overhead in that proposition than we have today.

Okay. Thank you. Appreciate it.

We'll turn to Tracy Young with Evercore.

Hi. I just wanted to follow up again on the acquisitions that impacted in the quarter. So you said West Virginia is not acquired, but you're paying a time brokerage agreement, you're getting a time brokerage agreement? And then also North Dakota, have you closed on those yet? Tom Carter - Chief Financial Officer & Executive Vice President: Yes. Perry Sook - Chairman, President & Chief Executive Officer: We have closed on North Dakota, and we closed on the CW in Des Moines. West Virginia, we began operating those stations under a time brokerage agreement in December of 2015. So we do have a full quarter of their impact in the 2016 first quarter. Tom Carter - Chief Financial Officer & Executive Vice President: But on same-station basis, West Virginia and North Dakota are excluded.

Got it. Okay. And then again, just going back to Yashi, are you seeing any improvement in Q2, or is there any seasonality in that business? Perry Sook - Chairman, President & Chief Executive Officer: Oh, yeah, it's an ad-supported business. There's definitely seasonality, as I think we reported the highest month in their history of the company was December of 2015 and first quarter was lower. And so it is a seasonal business. It is a lot like any other advertising. And yes, I would say we are seeing sequential improvement in Yashi, and knowing that programmatic is volatile for all the reasons that Tom mentioned and it is a relatively small piece of our entire digital portfolio, but to the space we need to be in, we need to learn because potentially it has applications to the television side of our business in terms of programmatic. So it is not a – it is not a driver of our results. It is a component of our results, but it's something that the board and I and Tom O'Brien and his team spend time on because obviously we want it to outperform our expectations rather than perform at or under our expectations. So we are seeing improvement in process. We're opening new exchanges. So, with the closure of LiveRail, we had to find other sources for inventory. We've opened our own exchanges and open to new exchanges to source quality video inventory and to eliminate and minimize the amount of non-human traffic that could be present in those results. And so that's a work in progress for every programmatic company out there, including the largest you can think of, but it's also a work in progress for us. But I feel like we're making great progress in that regard.

Great. Thank you very much.

Next up is Jim Goss with Barrington Research.

Thanks. I have a couple as well. One, just going further on the digital versus broadcast since you're making this effort in both, I've gotten the sense that there's some increase in dissatisfaction with some of the digital ads because of what you've said, non-human traffic and that sort of thing. What is your read on that? And do you – as you have a push and pull between the two, do you think it's reinforcing your traditional media more than making digital that much more necessary? Perry Sook - Chairman, President & Chief Executive Officer: I don't think, Jim, it's a zero-sum game. People talk about measurability issues with Nielsen and viewer assignment and how the numbers aren't good. And then you go over to digital side and I've seen estimates of 30%, 40%, 50% of all digital traffic is fraudulent. I think marketers are taking their measure of that. And I don't think it's an either/or, which is why we're in both businesses. And if you look at – I place a lot of credence on purchase funnel behavior because we're here to help people sell stuff. And they use television for brand awareness and model awareness, and then the closer they get to the point of purchase, the funnel widens for research on the Internet. Television is still dominant. But if you look at the two things that influence how people buy stuff, it's TV and Internet, and TV and digital. And we're in those businesses because we do two things, our central formation, we produce local content and we help local businesses sell stuff. And so the tools to do that are television and Internet, and I don't see it as an either/or or a zero-sum game. And I think most of the marketers that we deal with don't see it as a zero-sum game. They see they need to have presence in both, and that's why we're in both.

Is mobile advertising the one category that can break the – like the total domestic ad spending out of the relationship that's traditionally ahead with GDP and sort of morph into other categories of marketing, and basically expand the overall category rather than just making a market share gain? Perry Sook - Chairman, President & Chief Executive Officer: Well, yeah, I think by example, we don't break the results out specifically because it's a fairly small company. But Kixer, which is our programmatic digital mobile video monetization company, their results were up 28% in the first quarter. And that's incorporated into LAKANA's results, which were again ahead of budget. But that company is on track for considerable growth because it specializes in the mobile space. They also have a machine learning element to it which I think has application across our other programmatic companies, across our other digital platforms that we think it was a jewel of a buy and a company that not only has tremendous growth potential but can help our other companies, digital companies, be stronger and smarter about how they do things. We believe that much in the technology. So I think you're right. Mobile is the – no one is monetizing mobile at the same percentage that mobile is being used to view digital video, and that includes every company you know, ours included. And therein lies the opportunity. And again, that's where we look at a product like Yashi Mirror that we can also run through Kixer to specifically address mobile video as well. I think all of these things are cumulative, and we're there to provide solutions for advertisers, and we have to have our hand in as many – on as many tools as possible I think to generate superior results.

Okay. And one other item separately. With regard to the auction, if you are to put certain of your properties into that mix, is it – would the motivating factors be things like a sense of getting a value that you might not necessarily get if you were to sell something outright, or is it an opportunity to reposition the portfolio since you'll sort of be at the max and you may still want a different mix and have opportunities to make additional acquisition to get back to the max in different markets? Or what other elements do you think would be in mind? Tom Carter - Chief Financial Officer & Executive Vice President: Well, I'd say those are some of them. Obviously, we make dollar-denominated decisions in our economic animals here. A lot of it goes into the market, the station, its affiliation or non-affiliation. Are there other Nexstar stations in that market that we can channel share with? So there are a lot of ingredients that go into baking the cake. But having said that, we do have a reserve price on every one of our stations, and that reserve price is at or above its intrinsic value as an ongoing business. So every day at 4 o'clock, you tell us what our cash flow is worth, and we can then translate that into what that station is worth and make an economic judgment based on that in addition to some of those qualitative factors that are market-driven as well as specific station attributes.

All right. Thanks. That's very interesting. I appreciate it.

We'll now move to Barry Lucas with Gabelli & Company. Barry L. Lucas - Gabelli & Company: Thanks for squeezing me in. Appreciate it. If we look at the pace of retrans and another 45% of the sub base renewing in this year, so 2017 should be a lot harder. Maybe a comment on two elements of the same coin, which would be the pace of your network renewals and your outlook for net retrans growth going forward. Tom Carter - Chief Financial Officer & Executive Vice President: Well, I think we – in our presentation on a Nexstar-only basis, we've said what our cadence of renewals are. And there's a pretty backend loaded renewal schedule that is past year-end 2018. We only have the FOX affiliates up for legacy Nexstar in – at the end of 2016. So that will affect 2017. But again, FOX, of the four major networks, is the lowest percentage of our affiliations. And then after that comes ABC, then CBS, then NBC. So we're in a very favorable spot, we believe, for the next two years or three years. And just to reiterate what we have said in the past and none of this has changed, we expect double-digit net retrans growth, if you want to think about it that way, net retrans being retrans revenue less affiliate expense to continue for the next three years to four years. Barry L. Lucas - Gabelli & Company: Great, Tom. Thanks for that. Last item for me would be, it seems like the FCC has gone toward the outer edge in terms of the amount of spectrum that they want to clear as part of the auction. I was hoping one of the two of you can opine on what you think that might do to pricing. Perry Sook - Chairman, President & Chief Executive Officer: Well, it's interesting. It's not so much what we think. It's what the acquire – what happens in the forward auction determines how much spectrum would be cleared. I think that many broadcasters registered a lot of stations to hang around the hoop to see what happens, because remember, if you didn't register on January 12, you can't participate in the auction even if you change your mind. You're locked out. So there is – and there is definitely more spectrum registered for the auction than will be harvested in the auction. I can only speculate on what the FCC sees. I think they're smart enough to realize what could be a false-positive and what not. I think there will be robust participation in the early rounds, but as the bidding clock and the price clock begins to descend, I think you're going to see self (1:01:13) selection happen in a major way. We – in answer to the earlier question, we are not looking to clear cat space via the spectrum option. We are only looking to maximize the value of that spectrum in a material premium to what it's worth as a going concern. So if that happens and we clear cat space, that would be a happy coincidence. But it is, as Tom said, a dollar-denominated division, and I think with those targets established, obviously they're going to need a lot more spectrum in many markets than was originally assumed to hit those targets. But again, that's only one piece of the equation. It's what happens in the forward auction that will really determine how much spectrum is cleared and what the prices are. So, more to come. I wish I had more information to comment, but I'm not sure I could, even if I did. So I think we all are at about the same place in terms of knowledge basis and in terms of where we are going into the spectrum auction. And we'll see, A, how long it takes, and B, what the forward auction looks like, and then we'll turn opinions and suppositions into facts. But at this point, Barry, I just don't know that anybody knows enough to say anything more. Barry L. Lucas - Gabelli & Company: Great. Thanks for the color, Perry. Perry Sook - Chairman, President & Chief Executive Officer: You're welcome.

And gentlemen, there are no other questions in the queue. So I'll turn the conference back to you for any additional or closing remarks. Perry Sook - Chairman, President & Chief Executive Officer: All right. Well, I'd like to thank everybody for joining us today. Be on the lookout for our S-4 going effective and our shareholder vote, all of which we hope will happen here in the second quarter, and as well as divestiture announcements. And I hope we'll have all of that in the rearview mirror before we gather again in three months' time. So thank you very much for joining us this morning, and have a great day.

With that, we'll conclude today's conference .Thank you, everyone, for your participation. You may now disconnect.