Good day everyone. Welcome to today's Nexstar Media Group First Quarter 2020 Results Call. Today's conference is being recorded. At this time, I'd like to turn things over to Mr. Joe Jaffoni, Investor Relations. Please, go ahead, sir.

Thank you, Kelly-Anne, and good morning everyone and thank you for joining Nexstar Media Group's 2020 first quarter conference call. I'll read some safe harbor language, after which we'll get to management's commentary and your questions and answers. All statements and comments made by management during today's conference call, other than statements of historical fact, may be deemed forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995. Nexstar cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during the call. For additional details on these risks and uncertainties, please see Nexstar's Annual Report on Form 10-K for the year ended December 31, 2019, and Nexstar's subsequent public filings with the Securities and Exchange Commission. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that, it's now my pleasure to turn the conference call over to your host, Nexstar Founder, Chairman, President and Chief Executive Officer, Perry Sook. Perry, please go ahead.

Thank you very much, Joseph, and good morning, everyone. Thank you for joining us to review Nexstar's record first quarter results. Before we get started I want to express our appreciation here at Nexstar, to all the brave frontline healthcare and other essential workers who are serving our country through this pandemic. We are also grateful to all of the employees of the Nexstar Nation for their frontline essential work, commitment and efforts in providing viewers with the continuous access to local news and other services in our communities during these unprecedented times. And, as always, our Chief Financial Officer, Tom Carter, is here with me on the call this morning. As the world continues to address the health and economic challenges created by the COVID-19 pandemic and as our company with our country responds to changes in our day-to-day lives, our priority, as it has always been, is the health and safety of our employees, the well-being of our customers and the communities in which we operate. We take our role in delivering local news and other critical information to viewers very seriously, as we continue to navigate through the unique and evolving challenges related to this coronavirus. Local news and information has never been more essential to Americans. More people are tuning into stations, local newscasts than ever before. And since the COVID-19 outbreak, we are seeing significant year-over-year increases in our already strong local news viewerships, both on air and online. As the nation's largest broadcast group and the top producer of local news programming, Nexstar and our talented and dedicated teams of over 5,400 local journalists are delivering essential life-saving news and information to our viewers across all traditional and digital media platforms. In this regard, 69 stations in 55 markets have aired over a dozen…

Thanks, Perry, and good morning, everyone. As outlined in this morning's press release, the actual results for the three months ending March 30, 2020, reflect the company's legacy Nexstar operations and a full quarter results from Tribune Media stations, which we acquired on September 19 of 2019. Both of these amounts, obviously, also are net of divestitures, which have taken place back in September, as well as another round in early March of 2020. First quarter 2020 revenue from WGN America also acquired in the Tribune transaction is included in core advertising revenue and distribution fee revenue. A full quarter contribution from Nexstar's 31.3% ownership in the TV Food Network and other investments acquired in the Tribune transaction is included in the full income statement under income or loss from equity investments net and in the cash flow statement under distributions from equity investments. The comparable three-month period ending 3/31/2019 reflects legacy Nexstar's operations only. All actual results reflect the impact of $7.4 million and $5.4 million of one-time transaction expenses incurred in the quarters ending 3/31/20 and 3/31/19, respectively. With that, 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 and some points of guidance. On a combined company basis and pro forma for the divested stations, first quarter same-station net revenue was down -- was up 14.2%. Same-station core advertising was down 5%, reflecting solid growth in spending in January and February and a decline in March particularly in the last three weeks of that month, which was due to the COVID-19 pandemic. Consolidated digital revenues were down 13.7% with local station and website revenues up 6.5% as we continue to cycle through prior year's revenue comps that include discontinued lines of business.…

Thank you very much, Tom. In our more than 23 years of business and over 16 years as a public company, Nexstar's management team, board and employees have weathered the storm of the dot-com burst 9/11, the 2008 financial crisis and the recession that followed. Throughout each of these times we worked to support and sustain our employees, our local businesses and the communities in which we operate. Nexstar has always been – this has always been our approach to business and it is more important today than ever before. In each case, we came out on the other side stronger and better equipped to deliver outsized returns to our shareholders and our long-term record of value creation would support this. As we address a pandemic that will no doubt become a chapter in the history books, our commitment to all of our constituents remains unwavering. While we've endured the challenges set upon us by the COVID-19 outbreak, I hope our comments today reinforce the fact that we remain confident in the strength and resilience of Nexstar's scales and diversified business model. Our business is less impacted than it was some 11 or 12 years ago during the recession because we took the steps necessary to create significant new contributing revenue sources. And our focus over the last decade in expanding our scale is serving us now as a leading platform for political candidates as well as national regional local advertisers looking to reach nearly every demographic in the United States. Our leverage is very manageable and coming down. Our liquidity is great and we intend to remain free cash flow positive while continuing to pay our quarterly dividend. This focus combined with our time-proven operating integration strategies will enable us to overcome the near-term challenges and extend our long-term record of shareholder value creation. We look forward to reporting on our continued growth and accomplishments throughout 2020. And on behalf of the entire Nexstar Nation, our Board and Management team, thank you for your continued interest in the company, your support and for joining us today. Now let's open the call to Q&A to address your specific areas of interests. Operator?

[Operator Instructions] We'll hear first today from Dan Kurnos with Benchmark Company.

Great. Thanks. Good morning. You guys had crushed our street high retrans carriage estimate here. I'm just trying to get a sense of if there was anything – I know Tom I think you'd mentioned some kind of pushout from AT&T that bled into 2020? Or if there was some noise there? And then Perry in your prepared remarks you talked about kind of confidence in that net retrans number. I don't know if you mentioned expectations near-term around sub declines. Obviously, it feels like you guys believe they'll come back. But just any thought on if that upside just outweighs any potential near-term choppiness? Or just kind of your views there?

Well, sure. Listen as far as sub declines go in our internal models Dana Zimmer and her expert team produced a model that projects sub attrition and which is how we develop the guidance that we give to all of you. I can just tell you that all reported sub declines this year have been less than the assumptions we have in our model. So it is not like sub declines are sneaking up on anybody here. But I will say that – obviously two schools apart, one is that in an economic time people look to cut expenses. There are other folks who think that since cable and the bundle is kind of the cheapest entertainment that that is one of the last things to go. And I think time will tell. But I would say in previous recessions what we have seen is, there has been sub – some sub churn because people are unable to pay their bills, that however has not yet been factored in because the MVPDs have made a commitment to no disconnects to the non-payment at least for the next few months. But our long-term view would be that the bundle providing internet and video as well as convenient navigation is a pretty – movies may suffer but people will stay home and watch television. Our viewership would certainly sustain that. And I saw a report yesterday, where people were prioritizing cable over utilities because of other disconnect – no disconnects for non-payments that have been made. So I think as far as looking forward, we think that what we have projected in our models are consistent with what we think will happen and we don't expect any significant variance to that. There was no real AT&T effect that pushed over from fourth quarter to first quarter. That will manifest itself in the third quarter of this year, where we'll be up against zero history for a period of time. But, no, the numbers are real, the numbers are solid and we expect the numbers to continue throughout the year.

I would say Dan, if there was any – we beat our budget in the first quarter by 1% or so. So that's $5 million on a – call it around $550 million distribution fee. Some of that was just truing up subscriber numbers with Tribune et cetera. So there may be a little bit of over performance there but not a lot. But you will see a slight – we obviously, as Perry mentioned, attribute attrition every quarter. So you'll see some attrition between Q1 and Q2, especially in light of the fact that the repricings at the end of Q1 were pretty nominal. But we're very confident in our numbers and continue to see a strong growth in the retrans through the year.

We did have a significant pricing happen in Q2 with a not insignificant MVPD and we are very pleased with those results. So the beat goes on Dan.

Super helpful. And then, Perry I'm sure, there's nothing you'd prefer to talk more about than core but just if you could give us just your sense on pacings or maybe conversations you're having with advertisers to inform your kind of optimistic we come out of this stronger and budgets' shifts to TV once we get out of this?

Sure. Well, sitting here in Dallas, we probably have a little different perspective than folks that sit in the northeast on what's going on, because businesses here in Texas are opening. Even my barber is going to open on Friday, and I hope to be one of the first in line after two months…

You don't have to go to Georgia for a haircut anymore.

That's exactly right. But I mean, Q2 will be the worst of it in our view. We have two models running internally. One is the base case of what we expect to happen, and one is a worst case, which is significantly worse than that. And in -- under all of those scenarios, we remain profitable in every quarter. And as I say, this COVID-led recession can put a big dent in the door, but it's not going to come anywhere close to totaling the vehicle. We will manage through it. Our pacing for third quarter core revenue was significantly better than Q2. But again, that's a small sample size, but we've also had a number of folks that have canceled advertising out of Q2 and pushed it into Q3 and in some cases with increased budgets. Now these are all anecdotes, but we are braced for a pretty sobering Q2 and in line with I think kind of chatter you've heard from other operators and projections of what people have made on core, we think Q3 will be better than that, but we're also prepared if it's not.

And also I would say, as we progress through Q2, we see better pacings towards the end of the quarter than we saw in April. We -- and obviously some of this has to do with just the general reopening of some markets. And given the breadth of Nexstar's footprint, we participate in a lot of those; Texas in a meaningful way, Ohio in a meaningful way Florida as well. So I think we'll enter -- I'm sorry we'll exit Q2 in a better pacing position than we entered Q2.

Got it. That is really super helpful color guys. Thanks very much.

We'll move next to John Janedis with Wolfe Research.

Thanks. You guys talked to net leverage around four times at year-end. Understanding you pulled the guidance. Does that mean in the base case assumption you still feel reasonably good about your initial EBITDA expectations for the year when you factor in, I guess, your non-advertising revenue and expense initiatives? And then maybe as a follow-up to Dan, on political, I know you said not much of a COVID impact, but to what extent did that or has it impacted timing of money getting put to work? And understanding it's going to be a good year, has your outlook or shape of the year changed at all?

I'll speak to the political question first. With the out-performance in Q1 primarily related to Mayor Bloomberg's participation in the presidential process, we did not expect that Q2 would necessarily be better than Q1 from political. Now with the movement of primaries from April and May into June and July, we've seen a shift of money there, but we don't think it will have any impact on the money that is -- will ultimately accumulate by the end of the year. Q4 is where the game is played. 50% of the political revenue will come between Labor Day and the general election, so it's September and Q4 and we do not think there'll be any change to our guidance our projections or our expectations for our political revenue performance in 2020.

And with regard to EBITDA budget, obviously, with the impact of this and we expect it to impact Q2 and Q3 and potentially Q4 depending on which model and how the rollout works, it will affect our EBITDA. So EBITDA will be down for the year, but some of it is offset. We really quite honestly have more levers to pull between EBITDA and free cash flow than we do between revenue and EBITDA. Revenue and EBITDA, obviously, were subject to the market's experience with regard to reducing core advertising and we can offset that to a degree, but not to a large degree. But if you look at the difference between EBITDA and free cash flow, our cash taxes are going to be substantially less, because of some -- because obviously our EBITDA and operating income will be down, because of reduced revenue. Our interest expense will be down by 20-plus percent because of reduced interest rates particularly LIBOR rates and our ability to be -- to manage -- actively manage. Capital expenditures will be down. So all three key areas between EBITDA and free cash flow can be positively affected by management, and so our free cash flow expectations and the amount of variance in that is a lot less than the amount of variance in our EBITDA. I don't know if that's responsive to your question or not John, but that's kind of the way we think about it.

Yes. That will do it. Thanks Tom.

We'll move on to Kyle Evans with Stephens.

Thanks. You guys referenced double-digit net retrans growth for the year in the release. Could you maybe at a high level talk about how we should think about the year one rate hike on that 70% that you just renewed versus accelerators in years two and three?

Well, I -- that's why I pointed out the growth between Q4 and Q1 of 23%. So our growth was 23%. 70% of those subscribers repriced, 30% may or may not -- all of the remaining 30% had an escalator at year-end. So you can -- there's an arithmetic equation in there somewhere where you can try and assign a value on the increase of the 70%, but I would say, generally, it would be above the 23% that we saw on the portfolio as a whole between Q4 and Q1.

Got it. And Perry you mentioned, you've gotten a sizable renewal done in 2Q and you're happy with that. I guess with probably saying blackouts are off the table kind of how does that shape the game theory on renewing?

It doesn't really. I mean, parties are continuing to negotiate in good faith. And obviously, you don't have a deal until both parties agree. So, we don't think that will be any real effect. I mean we expect it will just continue to be business as usual. And from this point forward we don't have any significant other renewals of the approximate 20% of our subscriber base that gets repriced this year until Q4.

Great. How much of that 20% is in 4Q out of curiosity?

We're not going to give you the playbook here.

I would say a large percentage of the 20%.

The biggest piece of it is in 2020, but it's got to be something after the imagination.

All right. Well, I'll go high level with my next one. Could you talk about the interplay between lower sell-through and non-political core due to cancellations and just lowering ad rates and keeping people in those spots and how you plan to balance those two?

Well sure. I mean it's -- we have a fixed level of inventory. So, if there's less demand rates will be lower. And obviously, we're working with advertisers to say I'd love to stay on the air but I need some help. So, maybe we'll add some billboards, we'll do some other things. We're -- we need -- when we're at our best we're partners with our business partners. And so we're working with them. And obviously we have more inventory to use to promote things. And it's been a very good opportunity now for -- to begin to promote WGN America's News Nation because we have some inventory available to do that. But it's -- pricing is supply demand. It's no more difficult than that. I will tell you that obviously with the political revenue we generated in January and February, there were some markets that were at price peaks. Obviously, a lot of that evaporated in many markets not all but many markets in March with primaries canceled no March madness other things that got pushed out to or canceled or pushed out in later of the year or canceled. And so if we look at categories, this is probably fairly intuitive. But we saw declines in auto, travel and leisure, restaurants, and certain retail. Not surprisingly the category showing the biggest year-over-year increases were attorneys, home repair, drug stores, grocery stores, and packaged goods. And that's probably intuitive when you think of people's way of life then and their way of life now in terms of what's going on. But our dealerships are open in Pennsylvania and Ohio and Texas. And so we expect that we'll see those categories begin to rebound here -- the 0% 84-month financing. People are taking advantage of those offers and now if you read NADA daily posts you're hearing about shortage of trucks and shortage of popular [Technical Difficulty]

Gentlemen can you still hear us?

I can hear you.

Okay standby. And everyone please standby as we reestablish our speaker's phone line. And gentlemen please continue.

Sorry. Kyle, sorry about that. We had some technical difficulties. Not sure where in Perry's answer we got cut off.

We lost you at certain truck models are starting to come up short.

Okay. Well, that's certainly true. So, I guess, the end of that came shortly after that comment is that we see the ebb and flow and the supply demand will probably even out. But there is demand and causing shortages in some models, particularly in popular truck and SUV models right now.

Great. Thank you.

We'll move on to Jim Goss with Barrington Research.

Hi. A couple of items. One just a little nit regarding the political spending, will you benefit or be hurt if campaigns are more virtual this year?

I would expect on balance if you're not holding rallies, you're not spending money to fill stadiums and auditoriums that you're going to spend more money on television. And we've heard that from some of the political advertising agencies that this is going to be the primary means of communication through the campaign at least maybe until the late stages when people feel comfortable congregating. So, I would think on balance Jim, it would be a net positive. I couldn't quantify to what extent though.

Yes, I also wonder if any of the old laws about equal time sort of things come into play and whether they buy -- one party will buy a political ad at least on a national level versus another?

Hard to say. I mean equal time is usually -- we have to afford equal time. We certainly do. There's no obligation to buy it and it usually comes into play in terms of candidate's time on air. We will continue to -- as we move into the political season and the focus turns there we'll continue to do debates on a statewide basis with senators representatives governors and those kinds of things. The company has become particularly adept at organizing those particularly where -- in markets where we have a presence virtually in the entire state like in Illinois like in Tennessee, Texas, Pennsylvania. So, you'll see us continue to participate in that and we hope the debate will be vigorous and the spending will be as well.

Okay. And then one other area. I wonder if you could provide a little more color on WGNA blend of local sources versus national overlay like, what are you envisioning? Is it pure news or will it have a political point of view target audience target advertisers? Where do you fit in? What if you – and maybe the expansion potential if it does develop a good following?

Sure. Well, we start with the fact that WGN America is distributed according to Nielsen approximately 75 million homes. And if you look at the programming across the prime time day part, it's either entertainment or hopefully once again sports or opinion shows there's no real hard news entity in prime time. And so that is the direction that we're going to head. We announced our launch date of September 1, 2020, and it will be three hours of live news. We've hired our main anchor team. We're in negotiations with our weekend anchor teams. We've hired approximately 30 people out of the 130 that we'll be hiring to launch. Construction goes on unabated in Chicago, where the broadcast will originate from. And we're very excited about this. And we've had virtual upfront presentations with probably 100 national advertisers, some of which would never talk to WGN America, because reruns and certain original programming was not the demographic they're trying to reach. So this will be hard news 100% absent of bias. And we're so serious about that, we're hiring a panel of rhetoricians to review our broadcast for unconscious bias that may creep into the words we use and the reporting that we do. And I can tell you from my barter to certain investor's people have said the timing for this couldn't be better. The country just wants straight news, no opinion and they'll make their own decisions and that's what we're going to try and serve. It will be all news using the backbone of our 5,400 journalists plus the 130, 140 people we hire that will be based in Chicago. We have hired network-quality correspondence. There are no names that you would recognize today, but hopefully, names you recognize down the road. And we're working through our promotion plan as well as finalizing all of the technical aspects of it, but it will be absent bias and local and based from Chicago. So we're calling it the center of news and this will be from the heartland and primarily directed for the heartland, which is where WGNA's distribution is the strongest.

All right. Thank you very much.

You bet.

And from Huber Research Partners, we'll hear from Craig Huber.

Thank you. A few questions if I could. This – your retrans subs in the quarter were they down say 4% to 5% year-over-year on an organic basis including the OTT benefit?

We're down at the bottom end of that range.

Yeah.

Okay. Thank you for that. And then I know, this was asked before, but for the month of April can you give us a sense how much your core organic TV ad revenues were down? I mean just so people can get a sense what's going on out there? And also what your – maybe your outlook is for the full quarter if you could?

We're not talking about obviously specifics with regard to the quarter but I would say our experience is not materially different than some other – some of our – other of our peers and with regard to the decline in core revenue that they saw or are seeing early in this quarter.

When you say that does that mean like down say 35%, 40%? Is that what you're referencing?

We just don't give guidance down to that level of detail. We give free cash flow guidance and which we've withdrawn because of the core advertising performance, but we're just not going to give guidance to that level of detail.

No. I understand. I'm sorry, but just – but for the month of April when you referenced to your peers the number you're referencing for your peers is that say down 35%, 40% just for April please.

That is on what you read. But --

But that's the number that I've heard before. Yes.

Yeah.

Okay. Thank you for the clarity there. And then Perry, I'd be curious to hear if you could quantify obviously households are watching the news a lot more out there and stuff? I mean can you quantify the best you can how much your news ratings have been up here over the last couple of months? And I know it's tough, but I mean, how much of that do you help to hold on the back end of this? I mean -

Sure. It depends on day parts, but I would say early morning news is up. If we look at the average and this average in KTLA with our ABC affiliate in Dothan Alabama but we – I would say, morning news is up approximately 15% mid-teens across the board. Some markets more than that. Where we're seeing the biggest increase is in the early evening news and the late evening news, and those numbers have been as high as 40% increases. And I think some – we're hopeful that some new habits are forming that people are realizing that there is value in this product that does keep them connected with what's going on locally. And time will tell, how much of those audiences we actually retain. But I think that, it will be a number greater than zero and something less than 100% of the levels we're performing at now.

Then a couple of cost questions if I could. Can you just help us – how should we think about your use of furloughs here in the second quarter versus permanent headcount reductions?

None.

On either side? A – Tom Carter: On either side.

Okay. That's interesting. And then just my last question. The $40 million of cost savings that you referenced for the second quarter. Just to be clear that's above and beyond anything that you already were thinking you would be able to take out of the system from the Tribune acquisition, and it's also a number versus all else being equal versus your first quarter cost base. Is that true?

It is in addition to the expense synergies that were part of the Tribune transaction and they are specifically related to reduction in revenue and discretionary expense above and beyond, as I mentioned before the Tribune anticipated. It is really relative to our budget.

Okay. Thank you guys.

We'll hear next from Aaron Watts with Deutsche Bank.

Hi, guys. Thanks for getting me on here. Perry, I'm sure that even after all this time away from the barber the hair is still looking tighter and sharper than 99.9% of us. So I'm not worried there.

Well, thank you for your support.

I'm curious maybe in some of your smaller markets, what you're hearing from the SMBs there. Encouraging to hear that you're seeing auto dealerships open, but more broadly are you feeling that the pullback in advertising from SMBs is temporary in nature as more of a permanent tilt this time? Or maybe somewhere in between? And maybe also how important that group of advertisers is to your overall ad pie?

Sure. Well it's hard to give a one-size-fits-all answer to that. I would just tell you that obviously if businesses were mandated to close, there's really no percentage in advertising. What we saw was the uptick in grocery stores and drugstores and people thanking first responders and kind of pivoting their advertising that way. Businesses that open -- some that were maybe marginal but probably weren't advertising that much anyway might be on the brink, but we -- I send a note every month to all of our 140 vice presidents in the company including all of our general managers. And I said and this was literally a month ago at this time and so listen as we begin to talk about reopening you should be visiting with every one of your advertisers every one of your accounts every business and not asking for an order but just sitting down and talking about ways to reopen strong and gain market share in your segment in your vertical from competitors that are not going to take that tag. And I said don't ask for an order just come up with ideas and we've been doing that. And we've been around the horn. Our regional vice presidents as well as the COO and the President of Broadcast Division have divided up the top 100 advertisers in the company. And everyone is getting a phone call and it's not so much how are you doing but how can we help you as things reopen what ideas can we bring to you here are some we have what ideas do you have as a way that we can help you rebound strong and be ahead of the curve in your space and gain market share. So I can tell you that we -- the feedback has been a, none of our peer group appear to be doing this; and b they appreciate the time and the goodwill created by spending the time to focus on their business and how we could be helpful and an agent of change going forward. But again, if it's a one location hair salon or one location restaurant they may not have been spending a lot with us anyway. And there is no question that some people will throw in the towel. But and there'll be fewer businesses in these markets than there were pre -- beginning of the recession but I would say that's true in every recession. And so they make up a small piece of our -- it depends on how you define SMBs, but obviously if they're not if they're living right at the water level then they're probably not spending money on advertising to begin with.

All right. That's helpful context. Thank you and stay well.

Thank you. You too.

We'll move on to Zach Silver with B. Riley.

Okay, great. Thanks for taking the question. The first is just around capital allocation. I understand that leverage reduction is obviously a priority this year with all of the economic uncertainty. But clearly your stock is at depressed levels here. And wondering if you could give us a little bit of color on what gives you -- what would give you the visibility to resume the opportunistic share repurchases you've done in the past?

I think we need higher visibility into core advertising revenues going forward. I don't see us doing anything from a stock repurchase perspective for the balance of Q2. And depending on the economy opening back up and that -- its effect on our revenue we could potentially revisit that at that point. But right now, I would say suspended is the best way to put the stock buyback. We do have about 82 -- $80 million to $85 million of authorization left under the Board authorization for repurchases, but I don't see us necessarily being active in that market over the next of the -- over the next 60 days or so.

Got it. And then one more if I could. Just on the non-programming OpEx side, this $40 million in efficiencies in the second quarter I guess in the bare case you guys are contemplating plays out are there opportunities to flex that beyond $40 million? And then longer-term with more your employees working from home more digitization of processes perhaps, do you think that there could be any structural tailwinds to the long-term cost structure from this?

I would say look we dynamically manage our business and are there more takeouts available to us? Yes. We think at that point it starts to hit more into the meat and less into the fatty areas of the discretionary part of our expense structure, but are there more? Yes. We just don't see -- in the current environment we don't see the need to do that. If it's -- I kind of make the analogy. I think we know how -- if you're fording a river how deep the river is, we just don't know how wide it is. And so depending on the pace of the potential recovery and the pace of our core we can dynamically manage our business.

I'll just add to that. We have enacted certain cost reductions that will affect the third quarter. And that number will dynamically flex based on how the revenue flexes in third quarter. But we -- as Tom said, we have levers to pull. And obviously you can imagine if there's a reduction in revenue, there's reduction in commission, there's a reduction in travel. I mean none of this is -- should be news to anybody. So -- but we have left our workforce intact because we need them on the front lines and serving our communities and providing the essential services in which we do. We've not asked anybody to take furloughs or have we had any layoffs. As I say on our monthly managers call, I said now if this goes on for a year we're going to revisit everything but at this point we do not see the need to do that so and we've got to keep our businesses robust to participate in the recovery which is by the way already happening. Listen, the governor raised the stay-at-home order as of the end of April, our corporate office is open. People are here, unless they have compromised immunities or child care or senior care issues they have to deal with and we're making allowances for that. And you'll see very -- we've got states that are wide open that never employed any shelter-in-place. Probably the last place that happens in the country will be New York City and for good reason. But even the rest of New York, Upstate may play by different rules and have different flexibilities than Metro New York area does. And, certainly, we are dealing with it on a case-by-case basis. So, I think, that what we're seeing is, the beginning of reopening of economies and obviously businesses that are open that want to grow their business will be our partners going forward. And so, we will -- as Tom says, we will actively manage the cost side of our business and our capital allocation based on the revenue. And as I said earlier in the call, we've got two different scenarios running. One is what we expect to happen over the next second, third and fourth quarters. And then a worst-case scenario that is substantially behind that. And we are managing the business to our base case, but prepared if the worst-case is there, it will not catch us by surprise and we'll pull the other levers that we have available to us.

Got it. Very helpful. Thanks, Perry. Thanks, Tom.

We'll hear now from Steven Cahall with Wells Fargo.

Thanks. Maybe, first, Tom, you talked a little bit about the levers between EBITDA and free cash flow. You've done a lot on cash tax savings and cash interest savings. So if we just think about a lost dollar of advertising, is there an easy way for us to think about what that is in terms of the impact to operating cash flow or free cash flow?

No, because some of it is structural like commissions and sales expense and et cetera, and some of it is more discretionary. That, again, is something that requires actively managed as opposed to just direct sales expense. So it's hard to say. I would say, we're probably looking at somewhere on the order of 15% to 20% direct and the rest is kind of discretionary in terms of sales.

Okay. And then, when we just think about your leverage guidance for the year, how do we think about the EBITDA or cash generation from the Food Network stake as a component of that? I imagine you've assumed a little bit lower from that since they face some advertising challenges as well?

Yes. But keep in mind that, I gave guidance for second quarter. So if you add those two together that will approximate 90% of the cash flow to be realized from the Food Network in 2020. So that score has already been put on the board, for the most part.

Okay, great. And then you talked a little bit about how political is really a game that's played from Labor Day to November. Could you maybe speak at all to what sort of expressions of interest you might already be seeing in terms of ad buying for that period? And I think there was a story last week about the Trump campaign, starting to roll out a couple of wads of ads. The first time they've done that post-COVID. I don't know if on the democratic side, you've already seen a wave of expressions already to start or if they're still sort of restrategizing based on the way things have changed, so just commentary about the level of demand that you're already experiencing for that period? Thank you.

We have reservations of time for political advertisers, all the way up to and through Election Day. That really kind of becomes an options market, because as it heats up people make decision as -- whether they want to stay at the current pricing grid or need to move to where the market has moved. So it's interesting but not meaningful. But, I would say that, the current demand is not atypical to what we would expect in a presidential election year. And, again, the caveat is that, half the money will come between Labor Day and Election Day and that is, as it always has been. And if anything, we obviously were substantially ahead of our internal expectations in Q1. Q2 will be a bit in flux, because some primaries got moved out to Q3. But, again, we don't expect any of that will affect our political revenue assumptions for the year.

Anything further, Steven?

Super helpful. Thank you.

Thank you. And Perry at this time I'd like to turn things back to you for closing remarks.

Thank you very much. Thank you all for joining us today. And it was a longer call than usual. We thought it important to spend time and share as much of our thoughts as we can with you. We look forward to gathering again in early August to report on our Q2 and report on our increased visibility for the remainder of the year. Thanks, again, everyone for joining us. We'll talk again soon.

And that does conclude today's conference. Again, thank you for joining us today.