Nexstar Media Group, Inc. (NXST) Q2 2016 Earnings Report, Transcript and Summary

Good day and welcome to Nexstar Broadcasting Group's 2016 Second 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 development 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 and Nexstar's filings for 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 obligations to update forward-looking statements reflective of changes in circumstances. At this time, I would like to turn the conference over to your host, Nexstar President and CEO, Perry Sook. Please go ahead, sir. Perry A. Sook - Chairman, President & Chief Executive Officer: Thank you, operator, and good morning everyone. Thank you very much for joining us today to review Nexstar's 2016 second quarter operating results and our recent activities to support our goals of driving record levels of free cash flow in the balance of 2016 and complete the highly accretive Media General transaction, which will bring significant strategic value to the company and immediate and long-term benefits to Nexstar shareholders. As always, Tom Carter our Chief Financial Officer is on the call with me this morning. As we outlined in this morning's release, Nexstar delivered another period of solid growth across its revenue sources and financial metrics as we mined value from our local content and local business relationships, our accretive, scale-building acquisitions and the ongoing development of complementary revenue streams. Looking at our report card, we delivered record second quarter net revenue, BCF, and adjusted EBITDA while free cash flow was impacted by the timing of 2016 cash tax payments, a situation that will self-resolve over the third quarter and the remainder of the year. Nexstar generated $3.29 in free cash flow per share through June 30 as both second quarter and year-to-date core, retransmission and digital revenue are largely tracking consistent with our expectations, while our political revenue is actually ahead of budget. With rising political spending in the second half of the year, contractual retransmission revenue growth, our expanded digital media operations, event programming such as the Rio 2016 Summer Olympics going on now and the normalization of our cash tax rate for the full year, we remain confident that Nexstar will, on a standalone basis, generate record free cash flow for the fifth year in a row in 2016. As such, Nexstar remains on pace to meet or exceed our guidance for annual average 2016-2017 free cash flow of $250 million or average pro-forma free cash flow of $8.15 per share per year. In addition, throughout and subsequent to the end of the second quarter, we made significant progress toward the completion of the Media General transaction, which will result in what we believe to be in excess of 37% growth on our average annual pro-forma 2016-2017 free cash flow guidance relative to what we're generating from our current operations. Overall, Nexstar delivered another strong quarter with results highlighting our ongoing focus on growth and distribution, political and digital media revenue, building new local direct advertising and the successful integration of the accretive acquisitions we completed in 2015 and early 2016. Nexstar generated total second quarter net revenue of $262 million, with a 19.4% year-over-year rise attributable to political ad spending which exceeded our expectations, continued robust retransmission fee growth, another quarter of double-digit digital revenue growth and local advertising strength in some of our largest categories. With the operating leverage in our model, the net revenue increase led to operating income growth of 21.8% resulting in our highest ever second quarter BCF and adjusted EBITDA, which grew 21% and 20.5%, respectively. During the second quarter, television ad revenue, inclusive of political, rose 7.4% with core, local and national spot revenue increasing by 1% (sic) [0.5%] (06:34). The spot increase included a 1% rise in same-station automotive advertising and increases in two of our top three categories despite the re-allocation of inventory to political. Our core revenue continues to reflect healthy levels of new business with Q2 new to television ad revenue of $8.3 million, which was a 7.3% increase over the prior year. With our expanded platform featuring stations in states with high levels of political spending activity, 2016 second quarter political revenue outpaced our expectations and rose by 491% compared to the same period last year and by 67% over the second quarter 2014 levels. During Q2, we realized significant political spending in Nevada, West Virginia, Pennsylvania, Indiana, New York, Wisconsin, North Dakota, Texas, California and Missouri. For Nexstar, Q2 presidential primaries took place across ten states and we were well-positioned to benefit from the contested nature of both party's primaries through the last primary election in June, and we also saw excellent state and local spending in our markets. By category, we booked about 60% of our Q2 political revenue from candidate spending while PAC and issue spending made up the balance. With over $23 million of political revenue booked for the first half of 2016 and both the first and second quarters coming in ahead of our expectations combined with a strong forward indication for federal, state, and local races, we maintain that we will meet and potentially exceed our guidance of $100 million of political revenue for 2016. Nexstar's gross revenue growth in the second quarter excluding political was healthy at approximately 14%, and that reflects the 40.8% rise in retransmission fee revenue and a 17.4% increase in digital media revenue. Our ongoing renegotiations of retransmission consent agreements combined with the growth of our leading, locally focused, digital businesses resulted in a 35.3% year-over-year increase in Nexstar's total second quarter retransmission and digital media revenue to a total number of $123 million. The company's continued strong revenue diversification progress is evident when you consider these higher margin revenue streams accounted for 46.9% of 2016's second quarter net revenue, up from 41.4% in the comparable period last year and 32.8% in the 2014 second quarter which was the last political cycle. At $98.1 million in the quarter, retransmission fee revenue reached the highest ever quarterly level in the company's history. With the renewal of retransmission consent agreements representing approximately 45% of our subscriber base at the end of 2015 and another 45% renewing this year, we have excellent visibility on the revenue growth from this source in the second half of 2016. Our profitable digital businesses including our locally focused digital content management system, our agency services, our mobile and programmatic businesses presents strong opportunities for continued growth both organically and as we complete the Media General acquisition. Together, we will be a profitable digital company without peer in this space and as we target the mid-sized markets where the number of local content producers and competing options are not as great as they are in the major markets. Moving on now to updates on the Media General acquisition and our other pending transactions. Last year, we completed the accretive acquisition of 20 television stations. Other than Media General, we have just the four-station West Virginia Media Holdings deal pending which will close late this year. We've been operating those stations since December 1 of 2015 pursuant to our time brokerage agreement with our successful integration, the operations and the financial results are already exceeding our expectations. Onto the Media General transaction, we continue to make good progress against our timeline for closing later this year. During the second quarter, shareholders of both Nexstar and Media General overwhelmingly approved the transaction and we entered into agreements for the divestiture of 13 stations for total consideration in excess of $548 million. We believe these agreements bring the Nexstar Media General transaction into compliance with the Federal Communications Commission and Department Of Justice requirements for approval. And last month, we completed an offering of $900 million of new 5.625% senior notes. The divestures proceeds and the cost of capital of the senior notes were key assumptions in the company's 2016-2017 pro forma free cash flow expectations for the combined entity and both are better than the assumptions that are in our current guidance. I'm very proud that during the second quarter, Nexstar celebrated its 20th year anniversary. We marked the celebration across the enterprise, not with a party, but with an eye toward working further in our local communities through the launch of our inaugural Founder's Day of Caring. We offered our over 4,400 employees the opportunity to volunteer on behalf of local charities selected by our local teams. The companies also matched each hour of service with a dollar donation to those charities as well. Over these last two decades, we've grown Nexstar based on our commitment to deliver exceptional service to our local communities where we operate and the expansion through accretive acquisitions as well as a focus on enhancing the operating results of acquired stations and digital media properties with an overarching focus always on localism. To this day, the focus has been fundamental to our success as we've grown to own operator provided services to 104 television stations in 54 markets across the United States currently. Since 2011, Nexstar has completed 17 accretive strategic transactions including 60 full power TV stations and four digital businesses, all of which have increased our scale and diversified our portfolio. Our proven abilities to significantly expand free cash flow via acquisitions is reflected by Nexstar's rapid financial growth over this period as net revenue 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. The Media General transaction meets all of our M&A criteria and enables Nexstar to build upon its role as the nation's leading local media company, while bringing substantial free cash flow accretion and only modest increases to our leverage. Our localism combined with the scale will enable us to compete very effectively across the ever changing media landscape. When the Media General transaction is complete, we will increase our legacy 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. In June I began visiting every Media General station and digital business, a practice which has proven over time to ensure that we integrate the acquisitions quickly and that the operating and financial results meet and exceed the expectations that we have provided guidance for at the time the transaction was announced. Based on these meetings which will continue through September, I am confident that the new Nexstar Media Group will have outstanding operating teams in place as well as the disciplines necessary to realize the tremendous operating and financial upside presented by the Media General transaction. Financially, the transaction is expected to more than double our revenue and adjusted EBITDA and will be immediately accretive to shareholders upon closing. Using what we believe to be conservative expectations for the cost of financing the transaction and identified year-one synergies of at least $76 million, Nexstar Media Group will generate over $500 million of average annual free cash flow with annual free cash flow per share to approximate $11.15 per share per year over the 2016-2017 time period on a pro-forma basis. We intend to initially allocate free cash flow to leverage reduction and expect covenant leverage of approximately 4.5 times by yearend 2016 and that assumes no net proceeds from the spectrum auction. Overall, our strong free cash flow profile, both organically and even more so following the completion of the Media General acquisition, provides us with the flexibility to complete accretive broadcast and digital transaction to rapidly de-lever post closing and for ongoing return of capital to shareholders with our 15th consecutive quarterly cash dividend and our third $0.24 quarterly dividend to be paid later this month. As we continue to share in what are expected to be record levels of political advertising this year, the ongoing renewal of our retransmission consent agreements as well as the completion of smaller transaction announced in the second half of last year, we have excellent visibility to delivering or exceeding our free cash flow targets and a clear path for the continued near and long-term enhancement of shareholder value through the Media General transaction. With all of that said, let me now turn the call over to Tom Carter for the financial review and update. Tom? Thomas E. Carter - Chief Financial Officer & Executive Vice President: Thanks, Perry, and good morning everybody. I'll start with a review of Nexstar's Q2 income statement and balance sheet data after which I'll provide an update on our capital structure and some points of guidance for the second half of 2016. For Q2 of 2016, net revenue was $262 million, which was up 19.4% over the reported figure from Q2 of 2015. Core revenue, which is local and national, was up 0.5% to $133.5 million from $132.8 million. Local revenue was $97.6 million, up approximately 4%. National revenue was $35.9 million, which was down 7.5%. Political revenue, as Perry mentioned, was $11.3 million which was up substantially over the prior year's period. Retransmission fees were $98.1 million which was up almost 41%. Digital media revenues were up 17.4% to approximately $25 million. All of this totaled into broadcast cash flow of $103.2 million, which was up 21%, adjusted EBITDA of $90.2 million, which was up 20% and free cash flow of approximately $49 million. On a same-station basis, total net revenue was up 9%. On a same-station basis, core spot revenue was down approximately 3% due to displacement of ad inventory partially related to the high political ad spending and softness in the national advertising market. Same-station retrans revenues rose approximately 33%, and same-station digital media revenues were up approximately 10% as we have some excellent traction in our local digital products. Second quarter station direct operating expenses, net of trade expense, and SG&A expenses rose 27% and 14.5% respectively. The increases reflect higher variable cost related to increased advertising revenues, expanded local programming on our existing station and the operation of recently acquired station and digital assets. On a same-station basis, fixed expenses, ex-programming expenses were flat year-over-year. Nexstar's second quarter corporate expenses were $13 million inclusive of $3 million of non-cash comp. The $2.6 million year-over-year increase reflects increased staffing and infrastructure to manage and operate the additional stations and includes approximately $2 million in non-recurring transaction-related expenses. For 2016's third quarter, we project corporate overhead will be approximately $13 million to $14 million inclusive of stock comp, while cash corporate overhead will be in the range of $10 million to $11 million and that includes our estimate of transaction-related expenses during the quarter. Turning to the balance sheet, I'll review the key items as of June 30, 2016. Total net leverage was 3.99 times versus a permitted leverage covenant of 6.75 times, down from 4.22 times at March 31. First lien leverage as of 6/30/2016 was 1.83 times versus a 4 times covenant and was down from 2 times at March 31 of 2016. Nexstar's outstanding debt as of June 30, 2016 consisted of $695 million of first lien debt and then the two senior note issuances, the 6.875% at $520 million and the 6.125% at $272 million. At 6/30/2016, we also had $27.2 million of cash on the balance sheet. Net debt at March 31 (sic) [June 30] (19:16) totaled $1.46 billion compared to $1.5 billion at March 31 with the quarterly sequential decline reflecting our continued application of free cash flow towards debt reduction. Q2 total interest expense amounted to $20.6 million compared to $20.4 million the prior year, while cash interest expense was $19.6 million during the quarter. We expect Q3 2016 interest expense to approximate $30 million as we include interest from the recently placed $900 million escrow and senior notes. Looking at the current capital structure, Nexstar's weighted average cost of borrowing remains at approximately 5%. Our Q2 free cash flow was down slightly due to the impact of higher than forecasted cash income taxes paid of $17.7 million during the quarter. This was largely due to the timing of the payments of the 2016 taxes, and we believe that the situation will normalize over the second half of 2016 and does not affect our free cash flow guidance as it relates to this particular item. Q2 CapEx was $7.1 million for the quarter and $14.7 million for the year as this relates to local news and infrastructure investments. We do believe that CapEx for 2016 will increase slightly as we have allocated $2 million to $4 million of additional CapEx for the Media General process and the integration of that, as well as the diginet announcement that we made earlier in July with regard to additional programming on our local stations. We're fortunate and opportunistic – we've been fortunate and opportunistic in tapping the leverage finance market in July and completed that $900 million note offerings that I mentioned earlier at a very favorable rate of 5.625%. This amount fully addresses the portion of the plan financing for the Media General transaction that we will do outside of the secured loan market and which we intend to finalize in the near future. Just to remind everybody, we expect that to be approximately $3.2 billion in the secured market largely in a term loan B, as well as a term loan A, and a approximately $175 million revolver. Our rationale for this structure is that the secured loan market has historically been the less volatile – has been less volatile than the high yield market and brings lower interest rates than the high yield bond financing. Our capital structure weighs the proper balance of fixed and floating debt, an attractive weighted average cost of capital, and prepayment and refinancing flexibility that's provided by the senior market. In addition, we'll have a well-staggered maturity profile with no significant maturities until 2020 at which point we expect that we'll have made significant headway toward substantial debt reduction. Reflecting the proceeds from the asset sales, our currently projected $76 million in year one synergies and our expectations for continued significant political ad spending in 2016, our models and guidance for the deals have assumed a leverage of approximately 5.5 times at close, with covenant compliance leverage decreasing by about a full multiple by the end of 2016. We continue to be comfortable with that guidance. Most notably, as Perry mentioned before, our year end covenant leverage expectations assumes no proceeds from the Incentive spectrum auction, and we've used conservative expectations for the asset sale proceeds and the cost of the financing of the senior notes. As I mentioned before, there has been an improvement in the borrowing environment since we established our original Nexstar Media Group free cash flow projections of over $500 million of annual free cash flow or an average pro forma free cash flow per share of approximately $11.15 per year over the 2016-2017 period. I'll remind everybody that those projections and that guidance with regard to free cash flow and free cash flow per share was set back in the December-January timeframe, and also obviously the financing markets are in a better place now than they were then. I'll remind everybody that a 100 basis point change in the average cost of the borrowings or debt is equivalent to approximately $45 million of interest expense savings and would equate to approximately $30 million of free cash flow. Approximately $30 million of free cash flow is equal to approximately $0.64 per share of free cash flow assuming a 47 million share, share count upon the completion of the transaction. Once we've finalized the balance of the financing we'll provide an interim update on free cash flow guidance. As it relates to management focus on free cash flow generation, our record second quarter and strong outlook for Nexstar standalone and Nexstar Media General, we'll follow the successful approach we've used in terms of building the top line, maintaining close control of fixed and variable expenses, and optimizing the balance sheet. This plan will continue to support our goals of generating significant free cash flow growth while allowing us to reduce leverage, pursue additional selective accretive acquisitions, pay dividends, repurchase shares, and take any other actions that can enhance shareholder value. As noted earlier in the call with our operations balance sheet, capital structure, and cost of finance – cost of capital in great shape and a strong 1H political retrans and digital, we remain fully on track for 2016-2017 Nexstar standalone guidance of annual free cash flow of approximately $250 million over the 2016-2017 period, and again that equates to $8.15 per share. In summary, Nexstar continues to execute precisely on the operating, M&A and integration fronts, which has driven significant growth and consistency and visibility to our results. We're moving quickly towards addressing the remaining pieces the Media General transaction, while at the same time our existing operations continue to meet our expectations. As such, we remain highly confident in the Nexstar Media General 2016-2017 average free cash flow projection of $11.15 per share and the value to be created with shareholders. That concludes the financial review for the call, and I'll turn it back over to Perry for some closing remarks before Q&A. Perry A. Sook - Chairman, President & Chief Executive Officer: Thank you. Again, to echo Tom, we believe our record second quarter and first half results continue to highlight the value of the operating, acquisition, integration, cost management, as well as our strategies around capital structures that we've successfully deployed since our founding in 1996. Today Nexstar is an industry leader and broadly diversified local media group. (26:15) Our growing on air, online and mobile platforms deliver the reach and influence local businesses need, and the valuable local and most in-demand network content that viewers view the most. Consumers brand awareness and purchasing decisions are strong, if not stronger locally where businesses operate and transactions take place and brands, advertisers, and agencies are reaffirming the supreme importance of local TV in the overall marketing mix. We're highly competitive in today's multi-platform world because we provide superior local content that is unique and relevant to each of the local communities we serve across the United States, while at the same time offering local businesses, advertisers and brands unparalleled 24/7 marketing opportunities across all screens and all devices. With our television and digital properties about to reach more local communities across the United States than almost any other platform, advertisers and brand managers will increasingly rely on Nexstar to deliver result oriented multi-platform marketing solutions. Our teams consistently leverage localism to bring new entertainment, information, services and value to consumers and advertisers through our television, digital and mobile media platforms and their dedication is reflected in our strong standings in our local communities where we operates as well as in our positive near and long-term financial outlook. Our commitment to localism, industry leading innovation, and our focus on distribution, digital and political revenue growth combined with meticulous M&A integration and enterprise-wide cost management have positioned Nexstar for near and long-term growth, including our fifth straight year of record financial results this year, and tremendous prospects for continued growth in 2017 and beyond as we integrate those assets being acquired from Media General. With that, I'd like to thank you for your continued interest and support, and for joining us on the call today. Now let's open the call to Q&A to address your specific areas of interest. Operator?

Thank you. And we will take our first question from James Dix with Wedbush Securities.

Good morning, gentlemen. One question on 2Q and then two questions on the third quarter. First in terms of the national weakness in terms of advertising in the second quarter, any color there on verticals or regions or what you think was driving that? In terms of the third quarter – oh, go ahead, Perry, sorry. Perry A. Sook - Chairman, President & Chief Executive Officer: I would say James that national is the most price sensitive commodity that we have and when we exceed our political budget and expectations by the amount that we did, that's the first piece of the category, the first revenue line to go. I will tell you that, you know, as you may have heard from some others, we did see – we saw growth in automotive. It was low single-digit growth, but from our perspective, other categories that were more volatile and down were fast foods and medical healthcare, school advertising and cable. So I mean, thematically not anything different than you've heard. But I don't believe there's anything other than cyclicality in those results, and again, if I look at national, you know, national is roughly 12% of our total revenues right now, and it's about the fourth or fifth most important line of the revenue lines that we track and concentrate on.

Great. That's very help. And then just turning to the third quarter, what pacing are you seeing in terms of your core business there and then any adjustment that you're making for political displacement in that? And then I suppose just part of that, any net impact you're assuming from the Olympics to your overall station group as well as NBC's – NBC has clearly got held, but I'm just wondering whether you're assuming that helps the overall group or whether it's just kind of shifting money from one affiliate – set of affiliates to another? Thanks. Perry A. Sook - Chairman, President & Chief Executive Officer: Sure, James. I would say local pacing as of this morning is pacing better than our finish for second quarter. National pacing for the third quarter is pacing down less than we finished in second quarter. Overall, core revenue pacing is up, and it's interesting your call about Olympics, first of all. You know, we have 21 markets where we have NBC affiliates which mean out of our 54 markets we have 33 markets where we're competing against the Olympics. That said, we will generate, you know, we've already exceeded our Olympic budget for the company, which was a little bit north of $12 million for the quarter, and we still have inventory and weeks to go in those telecasts. So, you know, we view that as a net positive, but again it's 21 markets out of the 54 that the Olympics are a plus, and 33 out of 54 where the Olympics are probably, you know, a net negative. As it relates to political, we again believe that we are comfortable with our $100 million guidance for the year. Displacement would only become an issue in primarily the month of September and, you know, I do want to note that we did receive an avail request Friday from the Trump campaign for 17 states nationwide, 13 of which are states in which Nexstar operates. So we believe that the political will go and continue to go according to plan. And we're obviously very focused on the down market – down ballot races, you know. Top of state, presidential, there are roughly 13 that are leaning one way or the other, and we have presence in eleven of those. We have 34 senate races. I'm sorry, 34 senate races and 21 of those are in markets where we're operating, and a dozen states have kind of been propped up, add to that mix Virginia with Tim Kaine, now Clinton's VP pick, we did not budget for that race because his term was not up. And then if you look at the house races and the governor's races, of the governor's races, 12, the gubernatorial races, we're covered up in eight of those markets and four of those are – six are open seats and four of those are topped ups or leaning. So we are confident. And that money, the down ballot money comes in closer to the election. They don't generally begin to advertise four months out. So that will be primarily a Q4 number. But we believe that we're on track for our Q3, as well as our political number for the year. So – and again, the displacement will be primarily in September if there is displacement and we do believe there will be some based on the number we're forecasting for the quarter.

Great, thanks very much, Perry.

And we will take a question from Aaron Watts of Deutsche Bank.

Hey, guys. Thanks. Just two from me, I guess, first, your remarks on moving along with the timeline of the Media General transaction and a close later this year. Is that regardless of whether the spectrum auction drags into 2017? Perry A. Sook - Chairman, President & Chief Executive Officer: Yes, in a word. However, we would require a waiver from the FCC to close during the pendency of the spectrum auction. Our last divestiture market comes off public notice this Friday. And therefore we will be in a position to go to the FCC starting next Monday to discuss the possibility of a waiver to permit the closing of the transaction, which we intend to do so.

Okay. Great and then second one, maybe this is for Tom. You're generating material free cash. So you'll potentially have some spectrum auction proceeds, and I know you fully expect to grow the business going forward, so given that trifecta, where would you like to see leverage go as you navigate the next couple years from let's assume the 5.5 times pro forma leverage at the close of the Media General deal? Thomas E. Carter - Chief Financial Officer & Executive Vice President: Sure, I think, we've been pretty consistent. We have no aspirations to be an investment grade company. We feel I think most comfortable and obviously all of this is dependent upon interest rates rising marginally over the coming years. If they rise materially we would have to rethink and lower our leverage target. But I would say it's somewhere between 3.5 times and 4 times on kind of a steady state basis in terms of where our leverage target would be on a longer term basis given the current interest rate environment or interest rates slightly above where they are today which is where I think people would believe they've been headed.

That's like blended even odd year basis 3.5 times, 4 times is – would be a good (35:19). Thomas E. Carter - Chief Financial Officer & Executive Vice President: Correct.

Okay. Great. Thank you.

And we will move next to Dan Kurnos of Benchmark Company.

Thanks, Perry. Actually you addressed already most of my political questions, although I don't know if you talked as much about issue dollars. I'm wondering if you guys are getting an out-sized benefit given your local focus. And then I guess, Tom, if you could just give us, I think, I missed it, what the same station digital growth was and then just maybe an update, I know, it's really de minimis at this point on the Yashi Digital Mirror launch, if you're getting any traction there. Thanks. Thomas E. Carter - Chief Financial Officer & Executive Vice President: I'll take the digital, I think, in my comments, I said, the same station digital was up 10% as we're seeing very strong growth in our local products, which is not only station websites, but our Tactive Digital marketing services company from that perspective, so 10% same station digital; and I'm sorry, your other questions were around Yashi Mirror and I'm sorry what else?

I was asking about the Yashi Digital Mirror, if you're seeing any traction there, I know, it's really de minimis at this point. And then for Perry, just – I know we talked a lot about the gubernatorial, sort of, down ballot races, but I was curious on the issue front, if you were also seeing an uptick because you guys had a relatively large portion of your political come from candidates spending again in Q2 versus others. And I'm curious on a go forward basis if there's some additional benefit given your local focus from issue dollars. Thomas E. Carter - Chief Financial Officer & Executive Vice President: I think, on the Yashi Digital Mirror product, the reception among advertisers and amongst the market has been very strong, a lot of good interest. I think, your categorization is correct, it's still in the formative stages as it relates to that but we think it's a product that is ripe for the market, and one that will be very accretive over the coming quarters. Perry A. Sook - Chairman, President & Chief Executive Officer: And I'll just add to that that Yashi had its best month of the year in terms of revenue in the just-completed month of July. So, we believe that that product as well as their other execution strategies are beginning to take hold. As it relates to political, you're right; in the second quarter it was roughly 60% candidate, 40% PAC, and party money. You know, we at this point know that the Koch Brothers are putting their money behind key senate (37:46) and Karl Rove is doing the same. We have not yet begun to see money in those races from those entities. So at this point I think it's too early to tell. But we know that the states at which we have competitive senate races, house races, governors' races and then other down ballots, and I think we're very well-positioned with our geographic footprint in the current company and certainly in the combined company to take advantage and maximize that opportunity. And we feel very comfortable reiterating our guidance on political for the full year, and aided by the fact that we were ahead of our internal projections on political for both Q1 and Q2.

All right. Thanks, guys.

And we will move next to Kyle Evans of Stephens.

Can you hear me? Perry A. Sook - Chairman, President & Chief Executive Officer: Yes, sir.

Thank you. If you would please, an update on retransmission subscriber volumes. It was this time last year that ESPN scared everybody. Just looking to see where those are. Thomas E. Carter - Chief Financial Officer & Executive Vice President: Subscriber volumes, for end-market subscribers, continue to be flat to both 2015 and 2014. Where we've seen some changes from the MSOs is some of the MSOs have carried stations out of market historically, and in some of those MSOs we do get paid for that. I think what you're seeing is a tightening of the belt from some of these MSOs where if they're not required to carry stations that are outside of the market, they're not doing so. And so from that perspective, out of market subscribers for us are down, but that's more of a business decision than I think it is a market trend from that perspective. Perry A. Sook - Chairman, President & Chief Executive Officer: And it's really a rounding error. And in fact most new network affiliation agreements do not permit out of market carriage and some of those relationships were severed, not voluntarily if you will, but the – it was a part of the network affiliation agreement that we were required to drop out of market coverage. But again it's a rounding error, and again, as Tom mentioned, you know, retrans fee revenue for the quarter up 40% over Q2 of 2015 and on a same-station basis plus – north of 33%. So I would say that, again, we feel very confident in our position in even the skinniest of bundles because we're the foundational element of the bundle. So we have not seen any significant diminuation in subscriber counts certainly in-market and the only noise would be around out-of-market subscribers, which is a very small percentage of our total sub count.

So no change to the long-term double-digit net retrans growth? Thomas E. Carter - Chief Financial Officer & Executive Vice President: No. Perry A. Sook - Chairman, President & Chief Executive Officer: No, not at all.

Okay. Thank you.

And we will take a question from Marci Ryvicker of Wells Fargo.

Good morning. It's Stephan for Marci. The core pace of up low-singles for Q3, is that adjusted at all for political displacement and/or the Olympics? Perry A. Sook - Chairman, President & Chief Executive Officer: No, the pace is what it is and that's what it was as of about 7 o'clock this morning. So we're pacing ahead locally by a greater number than we finished Q2 and behind locally. It does take everything into account. The Olympic revenue is on the books, political is on the books, displacing whatever it is at this point, but pace is just an arithmetic number of this day versus this day last year by category, by local, by national. And so you could say that it's factored in, but it's really just a state of play. So there is no adjusting of those numbers. That's just the raw data.

Okay. And then for political, how much typically falls into Q4 in past presidential elections and does it look like it's going to be the same in 2016? Some peers have noted that it's getting shifted later, possibly more to Q4 than Q3 typically gets. Thomas E. Carter - Chief Financial Officer & Executive Vice President: We don't think it's getting shifted materially different. It's approximately 50%, maybe slightly more than 50% in Q4. And that's a trend that we have seen, and quite honestly sequentially our quarters are falling out as we had expected, maybe slightly better than expected in the first half. But I don't think that that's going to materially affect the percentage by quarter.

Great. Thanks so much.

And we'll move to John Kornreich of JK Media.

Yes, hi. So you're running about $400 million annualized transmission fees. On that $400 million-ish, what do you estimate is your net margin to yourself? Thomas E. Carter - Chief Financial Officer & Executive Vice President: Well, all we've said is our net margin has traditionally exceeded by a significant amount more than 50%, and we continue to experience that...

By a significant amount, right? Thomas E. Carter - Chief Financial Officer & Executive Vice President: Yes.

Okay. Thomas E. Carter - Chief Financial Officer & Executive Vice President: And we continue to see the trends in net retrans revenue, if you want to think about it that way, which is retrans revenue net affiliation expense, that net number to grow double digits over the next three years.

Right. So with significantly over 50% right now, your net retransmission "profit" is more than half of your BCF, and in fact "significantly" more than half of your BCF? Thomas E. Carter - Chief Financial Officer & Executive Vice President: Yes. Perry A. Sook - Chairman, President & Chief Executive Officer: I think that's a fair statement. Thomas E. Carter - Chief Financial Officer & Executive Vice President: Yes.

Thank you. That's it.

And we'll move to Jim Goss with Barrington Research.

Thanks. I was wondering what your capital allocation priorities are post-Media General? And to the extent that M&A is part of that, what do you focus on? Is it station swaps or other business alliance? Thomas E. Carter - Chief Financial Officer & Executive Vice President: Well, obviously there's a lot of moving pieces as it relates to that. I'll give you the steady-state answer, which is post-acquisition, as we had mentioned, we'll be leveraged somewhere in the mid-5x. I had mentioned that our target leverage is 4x or below. We believe that absent other factors that we'll dedicate free cash flow over the first nine months to 18 months to deleveraging. Obviously, we have a dividend that will continue and that dividend should grow and you should expect it to grow at a trajectory consistent with historical growth, but we will continue to deleverage. And then after that, obviously, we'll have the opportunity to evaluate accretive acquisitions as well, but clearly there are a number of factors that can change that; most notably I think the spectrum auction. Again, all of our debt capital and leverage statistics assume no proceeds from the spectrum auction. To the degree there are proceeds, those will be dedicated and basically turbo charge our debt reduction and our leverage reduction, which could accelerate our ability to participate in M&A going forward plus the potential corollary to a windfall from the spectrum auction proceeds would be a reduction in our household cap from the just below 39%. If you assume we sold spectrum and exited markets because of that spectrum sale, then we would have the opportunity to reengage as it relates to accretive new market M&A if you want to think about it that way. So I mean obviously there's a lot of variables that go into that, but I think the first order of priority would be leveraging. Whether we accomplish that through free cash flow and operating cash flow or we accomplish that through asset sales and monetization of some of those assets.

Okay. Thanks. That's a really good answer. The one other thing I was going to ask about was the OTT strategies you were alluding to. Could you discuss any of the relationships with the various network partners, which ones work for you? And I know you've said in the past that none of them provide any serious economics at this moment. Do you think that will change over the next several years? Perry A. Sook - Chairman, President & Chief Executive Officer: I'm not optimistic that there's going to be significant change. The only OTT that we're participating in right now, the only OTT operating right now is CBS All Access and that's with a handful of our CBS affiliates, certainly not all. We've not reached agreement with any network or any other OTT provider on satisfactory economic terms that would motivate us to participate in any offering at this time. So I still think five years from now we'll be talking about it, but it will be the same noise. And I saw an article this morning in Recode saying free TV on the Internet experiment died years ago. Now Hulu is burying it. I think that's pretty good thematic. Another quarter yet again when Apple hasn't launched and may not even be close and so I think it's all noise. And cumulatively all of these offerings add up to something on the order of 5% of total TV households, maybe in five years, but I don't see anything more than that, and so I believe that there's value in the bundle and I like our position in the skinniest of the skinny bundles as the foundational element with the local broadcast stations.

Yes, I'm sort of thinking it's a bit of a line in the sand on the part of the networks starting with CBS and maybe you'd agree with that or perhaps not? Perry A. Sook - Chairman, President & Chief Executive Officer: You'd have to ask them about that.

Okay. That's all for now then. Thanks.

And we'll move to Tracy Young of Evercore ISI.

Yes, hi. You mentioned that 45% of your sub base is up for renewal this year, and is most of that back-end weighted? Perry A. Sook - Chairman, President & Chief Executive Officer: Yes, very back-end weighted. We did complete a deal a week-and-a-half ago on very favorable terms, but it is not a significant subscriber contribution, but the remainder of those are December expirations at various points in the month of December.

Okay, great. And then for Q2 can you talk about retail, restaurants, and packaged goods, how those did? Perry A. Sook - Chairman, President & Chief Executive Officer: Sure. The fast food category was down for us. Retail was basically flat. We don't break out packaged goods from retail per se. Retail is kind of the catch-all category for us. But fast food was down and the retail category was just a whisker under flat to the prior year.

Okay. Thank you.

And we will move to Barry Lucas of Gabelli & Company. Barry L. Lucas - Gabelli & Company: Thanks and good morning, Perry. Could you touch on any regional variances and what you're seeing in particularly some of the oil and gas markets that you serve? Perry A. Sook - Chairman, President & Chief Executive Officer: Yes, actually, our oil and gas markets, Permian Basin in West Texas and North Dakota have been some of our best performers. It is true that exploration may have ground to a halt, but production has not, and there are still unfilled oil services jobs, not enough hotel rooms for the folks that are there to service those and restaurants and all of that. So it is true that exploration and drilling of new wells has stopped and the businesses that service that part of the oil and gas industry have laid off. But I think the last I saw there were still something like 400 unfilled oil services jobs in Williston, North Dakota, which is part of our Bismarck market and the infrastructure is just still trying to catch up with that demand. So we have not seen and we kind of look at East and West and then we divide that further by regions and by affiliation, and there's no material difference in revenue achievement across any geography that we have. Some are more impacted by political, but that still has not become a major factor in displacement of core revenue across the portfolio. Barry L. Lucas - Gabelli & Company: Thanks for that. And just a small one on the Olympics, given some of the viewership numbers and the fact that you said you have open inventory, how do you feel about the balance of the inventory with regard to some of the viewing that may be a bit of a disappointment? Perry A. Sook - Chairman, President & Chief Executive Officer: Yes, and it depends on whether you read NBC's press releases or other press releases as to how well the numbers are. I got two yesterday: one before a flight I had early morning and one when I landed, and they told two different stories about the same numbers. My experience is the Olympics build on themselves. People will watch and then they get invested. And NBC just released some inventory to us this week, which our sales people are on in a big way and it's more of an emotional sell than a rating sell at the local level. And for our NBC affiliates we say, well, what else are you going to watch other than preseason football? And for non-NBC affiliates, we're selling the heck out of preseason football. So additional inventory is a good thing. Out of the $12 million, it's something less than $200,000 that is political advertising. I expect that could change, Barry, before the end of the games, and that there'll be more political advertising revenue maybe taking advantage of some of the open inventory. But we priced specifically so that we would have inventory during the course of the games to be able to take advantage of people that get invested and get interested and for political advertising as well. Barry L. Lucas - Gabelli & Company: Great. Thanks for that color, Perry. Perry A. Sook - Chairman, President & Chief Executive Officer: You bet.

And with no further questions in the queue, I'd like to turn things back over to Perry Sook for any additional or closing remarks. Perry A. Sook - Chairman, President & Chief Executive Officer: Thank you very much for joining us today. We are hopeful that prior to our announcement of our Q3 results in November that we're back in touch with you to announce the closing of the Media General transaction, and that's what we're focused on here. So thanks very much for joining us today. And we look forward to talking to you again in the near future.

And, ladies and gentlemen, this does conclude today's conference. Thank you all for your participation. You may now disconnect.