Ladies and gentlemen, thank you for standing by. Welcome to the Scripps Fourth Quarter Earnings Call. At this time all participants are in listen-only mode, later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] Also as a reminder, today’s teleconference is being recorded. And at this time, I’ll turn the call over to you host Vice President of Investor Relations, Mrs. Carolyn Micheli. Please go ahead.

Thanks, Tony. Good morning, everybody and thanks for joining us for a discussion of The E. W. Scripps Company’s fourth quarter 2017 results. A reminder that our conference call and webcast include forward-looking statements, and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. You can visit scripps.com for more information, such as today’s release and financial tables. You also can sign up to receive e-mails anytime we disclose financial information, and you can listen to an audio replay of this call. The link to the replay will be up there this afternoon and available for a week. We’ll hear first this morning from Scripps President and CEO, Adam Symson; then Chief Financial Officer, Lisa Knutson; Local Media President, Brian Lawlor; and National Media SVP, Laura Tomlin. Also in the room, our Vice President of Radio, Steve Wexler; and Controller and Treasurer, Doug Lyons. Now, here’s Adam.

Good morning, everybody. Last August we began a comprehensive effort aimed at creating a stronger more streamlined and higher performing company. As I’ve said before a company with equal energy on superior near-term performance alongside our consistent strategy of long-term value creation. Our plan has five key components that have begun to play out over the course of the last few months and already delivering tangible results. The first key component of this plan is the work we’re doing to reduce our cost structure. We expect these cost reductions to yield more than $30 million in annual savings by the time we’re finished executing them. This move gives us a meaningful boost toward our goal of margin and cash flow improvement. The second key component is our new approach to television station acquisition, what we refer to as buy-sell swap aggressively engaging in a strategy to get deeper and even stronger in the markets where we operate. This will allow us to assemble the best performing portfolio possible. The third component of this plan is to further refine our asset portfolio by initiating the sale of our radio division, allowing us to focus on our core local TV opportunity and the growth opportunities in our national segment. Selling the radio stations also gives these stations and their employees a better home with a radio industry focused owner. The fourth component of our plan is creating a long-term growth engine by investing in our National Media businesses. Last year, we acquired the for niche audience Katz Broadcast Networks, Bounce, Grit, Escape and Laff. We expect the Katz Networks to maintain a strong trajectory of growth capitalizing on the resurgence in over-the-air viewership. And at around the same time we took Newsy, which was already well established in the growing OTT space…

Thanks, Adam and good morning everyone. We hope, we made it easy for you to think about how the company results in terms of our new reporting segments. Our press release provides historical tables that have been adjusted to the new basis, so you have clean comparisons to prior periods. And we have laid out the prior quarters in 2017 to help you with your forward-looking model. I’ll briefly walk through what is included in these reporting segments then talk about our fourth quarter highlights, cash positions, capital allocation, first quarter guidance and the impact of the new tax law on Scripps. The local media division includes our local and national TV ad revenue as well as digital advertising that supports our local digital assets. These are the dollars that make up core advertising. We also are reporting political advertising and retransmission revenues to complete our local media division revenue line. The national media division includes the results of Katz Broadcast Network, our national news network Newsy and our podcast business Midroll Media as well as a few other businesses with national reach. We’re providing you with revenue for Midroll and Newsy for the first time and you’ll be able to see their strong growth with historical comparisons as well. Our other segment includes the Scripps National Spelling Bee and the Scripps Washington Bureau. Our radio stations are being sold and are presented as discontinued operations and by the way our sales process is moving ahead nicely. On the cost side, we’ve discussed $30 million of savings due to our restructuring work. You can expect roughly $10 million of the savings this year and the full $30 million in 2019. Finally, just a reminder that the guidance we issued in our third quarter press releases last November was given on…

Thanks, Lisa. Good morning, everybody. I’ll start with the results from our Local Media segment and our political advertising outlook, and talk about the success of our original program Pickler & Ben and wrap up with some highlights from the Katz Networks. Our core advertising results were a bit better than our expectations for the fourth quarter, up 6.6%, of course, we benefited from the comparison to the fourth quarter of 2016, when $56 million of political advertising would have caused some displacement for our regular local and national advertisers. Our largest category services grew more than 20% in the quarter, our second largest category, auto was off just slightly with a 1% decline. We also saw a nice rebound in retail, which is our third largest category, as well as our strong growth in our home improvement and telecommunication categories. Looking ahead to this year’s midterm election, Scripps is well positioned to capture what is expected to be robust political ad spend. We have 16 governors’ races and 12 U.S. Senate races in the Scripps footprint. It was much at stake for both parties we have every reason to believe to be a very strong year. On the original programming front, our new daytime show Pickler & Ben launch the successful ratings. And we recently announced, we’ve committed to the show for a second season. We’re having tremendous success selling the show in syndication. In fact, just last week we passed 100 markets committed to the 2018-2019 season. The show is growing audiences in our time periods on the Scripps stations and we look forward to similar success in these new markets. Now let’s turn to the National Media segment. I’ll talk about the Katz Networks, which report to me. And then turn it over to Laura to talk about the rest of the segment. As you know, we closed on this acquisition on October 2, so we now have a full fourth quarter of results in the National Media segment. I’m pleased to say that the Katz Networks are fully meeting our expectations. Just a reminder that these are the four over the air multi-cast networks Bounce, Grit, Escape and Laff. They each now reach about 90% of U.S. TV households just over the air. And then there’s additional cable distribution as well. They continue to grow their audience. One recent example of that, Bounce airs the Annual Trumpet Awards celebrating the outstanding accomplishments of African-Americans, when it aired that weekend of February 11, more than 2.5 million people viewed the program. This is exactly the kind of targeted programming combined with continuing expansion of distribution that helps attract general market advertisers, which ultimately grows ad revenue and profitability. And now here’s Laura to talk about the rest of the National Media division.

Thanks, Brian. Good morning, everyone. I’ll start by sharing what makes up our new National Media division. Our segment financials include Midroll, Newsy, the Katz Networks and some other national brand. Well Katz reports into Brian, I oversee the other businesses. And this segment is a collection of brands that operate internationally marketplace. All of them have national reach and leverage target demographics to attract a strong national advertiser base. These bands are fast growing and require investment now to reach the significant returns we expect. Our investment allows us to capture both the greatest possible revenue growth and ultimate profitability. For Newsy, our next generation national news network, the gross is accelerated by our expanded distribution on the cable. Last fall, we successfully negotiated carriage for Newsy, our most of the major cable systems. And by the end of the year, we had agreements covering 26 million homes. This combine with Newsy broad distribution on most of the major over the top television services, gives Newsy strong footing as one of the nation’s most relevant and fast growing news networks and that younger audience. Newsy revenue is growing quickly, thanks to multiple revenue streams, cable advertising and carriage fees, OTT and virtual MVPD advertising and digital ad revenue. Our programming has evolved to serve the multi-platform consumer and as launch shows including The Day Ahead, The Why and 30 Minutes With. These show and upcoming launches can be seen on these Newsy’s new cable channels. Now I’d like to turn to our podcast industry leader Midroll. We see podcasting as one of the most compelling audio format for the future of journalism and storytelling. The podcast industry continues to grow and nearly one in four Americans is listening to podcasts monthly. Midroll is a leader in the industry and continues to expand its reach. Midroll creates its own shows, serves as an advertising network for more than 300 podcast and it runs a podcast distribution and listening platforms Stitcher which has a growing subscription service. Midroll had record breaking revenue in Q4 and served at 1.5 billion ad impression that’s up 15% from Q3. Midroll had recently formed partnerships with the NFL, [indiscernible] and Marvel Comics, three major national brands draw under podcasting because of its growing of affluent and younger audience. Apple’s new podcast analytics are helping to verify just how powerful this medium is and how engages listeners are. At Midroll, we’re seeing listeners that are staying on for about 90% of a given episode. And just as important to our plan, national advertisers such as Microsoft, Coca-Cola and Procter & Gamble. So we want to tap into this attractive audience or following these engage listeners into the podcasting world. You can see that Newsy and Midroll are each high growth businesses. And we expect their strong performance to continue for many years to come. And now operator, we are ready for questions.

Thank you very much. [Operator Instructions] Our first question comes from John Janedis with Jefferies. Please go ahead.

Thank you, good morning. I appreciate the transparency on the revenues and I guess that I want to start with local ad revenue. It looks like underlying growth is coming in the head of piers and I’ve assuming it’s partially due to the service category. But is there anything else specific to call out an out of the affiliation or market exposure front, because it also looks like your auto was better than the market that I assume retailers as well. So any color there would be helpful in that. And then secondly, bigger picture shifting to digital you did a lot of work there over the past couple of years. And so Adam, can you talk about your confidence level around those businesses relative to the start of 2017.

Good morning, John it’s Brian. Let me take your first question relative to just where our group was. We were obviously really pleased with our fourth quarter results and I think then on the couple of categories that drove that. Services up 20% was a really strong driver of our success. A couple of sub categories inside of that real estate was up more than 20%, our medical and legal categories were big inside of that. But really the biggest driver was insurance. You’ve been following us now for a while and you remember that for about five or six categories in 2016 and 2017 we were talking about the insurance category being really soft, especially in western region Las Vegas and Tusayan and Phoenix. In that subcategory insurance has come back really strong. It was up almost 70%, health insurance alone inside of that was up almost $3 million. So that was a big part of our driver there and our success. You mentioned auto, auto pretty good quarter. I think our sales teams just really continue to focus on that category a lot of it’s about meeting with dealer groups and local individual dealers and trying to – them along and continue consistently on television. And that continues to work. And then you mentioned retail, retail was up almost 5% in the quarter. So that’s a category that’s really fluctuated over the last couple of years. But I think we had a good back half of the year last year and obviously played itself out with some of their retail results following the holidays. And we’re seeing that continue into the first quarter.

Hey John, I’ll take the second part of your question about the national businesses. Actually you refer to them as the digital business and the reason we actually reorganized the company around marketplaces is because we don’t necessarily see them playing a platform specific role. When I think about Katz and Newsy and Midroll the common thread around all three of those businesses really is the strength they have with respect to scale and reach in the national ad marketplace. And so I’m really confident with what we’re seeing, we continue to see significant marketplace growth with OTT and podcasting and that’s really booing a lot of the growth with Midroll and Newsy. Obviously moving Newsy into the already developed cable marketplace provides us a lot of upside and a lot of opportunity that revenue will continue to ramp through this year as more of the MVPDs bring Newsy online. We’ve got these contracts signed and done but as you know, MVPDs flipped the switch on programming in cycles and so we expect to continue to grow the cable advertising and cable sub piece side of Newsy as well. And Katz obviously delivered over-the-air in non-cable tremendous opportunity ahead because we continue to see growth opportunity with respect to the distribution, but the audiences are growing. And with growing audiences comes higher rates and those higher rates are driven mostly by the transition from that historic reliance of these new networks on DVR on into the ability for them to go out and service general market advertisers because they’re bringing to the table such a good audiences with significant ratings for the brand marketers.

Great. Thank you.

Thank you. Our next question that will come from Michael Kupinski with NOBLE Capital Markets. Please go ahead.

Thank you. I have a couple of quick questions here. Has the company completed the reverse trends for the ABC stations that you had I think come view in the fourth quarter of last year?

Hey, Mike it’s Brian. No, we’re on an extension with them and still finalizing that agreement.

Okay. And then the company appears uniquely position to stations in market. It seems that the company is focused on doing the station swaps. But doing the station swaps can be a little problematic as everybody thinks they have the prettiest child so to speak. And I was just wondering if you can just give your color on how discussions to do swaps might be going and the likelihood that the company might complete station swaps this year.

Well I’m spending a lot of time on it, Adam, I and others. So I’m sure hope we’re going to be able bring some deals to a conclusion this year. Look we have some attractive assets others have attractive assets but I think when you look at the numbers in the synergies that can be gained the results are not deniable. And so we’ve been chatting with other folks and I think they see the same thing the opportunity to get bigger – advance the market to make the market more durable for individual companies. And so as a result I think there’s an open mindedness to this moment of time that we’re in right now and that’s really how we’re looking at it. That we’re not sure these rules will stay around forever, but we do think that this is a good thing for the business, I think it supports journalism, allow us to better serve our communities with a deeper commitment. And as a result we’re trying to take advantage at this time. And I would certainly expect we’ll get some deals done this year Mike.

Got it. And if those discussions are not going to go well, I understand that maybe you are probably swapping out some of your smaller market TV stations and trying to double up bigger one – bigger markets. If those don’t go well, can we anticipate that you might have further asset sales and look at selling those assets rather than trying to swap them?

That’s not really our plan Mike. I mean, I think at the end the day our goal is to be bigger not smaller. But I think hopefully through the years of swaps we’re able to realign our portfolio to a stronger more profitable and as I said more durable portfolio.

Got it. In terms of retrans, can you provide some guidance in terms of the cadence of revenue growth in the retrans through 2020 especially now that seems like you guys completed the Comcast negotiations? So I was wondering if you can just give us some visibility there.

So in 2018, we have price resets about 37% of our subs 2019 41% and 2020 about 17%. So typically these are three year deals that may fluctuate by three months or so but most of them were three year deals. We’ve got kind of an evenly spread renewal cycle here over the next couple of years.

Last question, the company indicated that it plans to achieve $40 million in subscribers for Newsy. Will the company be willing to use retrans negotiation to gain additional subscribers for Newsy going forward?

Hey, Mike this is Adam, I’ll take this question. I actually think there’s been a little bit of confusion in some of the analysts reports that we’ve been reading. So let me make sure I’m really clear on this. There are really no parallels between what we’ve been subject to as a result of the Comcast in the SNI deal with now how we’re negotiating carriage for Newsy. Last year when we acquired the contracts for carriage for RLTV, I think I said that we would pay up to $0.93 of sub and work with the MVPDs to reprogram it from RLTV to Newsy. So any expense involved in flipping programming from RLTV to Newsy is being amortized over the life of the Newsy carriage agreement in Newsy’s plan. So if we had any expense as a result of working with the MVPDs to do that programming flip it also would have lowered the cost of our acquisition of that sub from RLTV by up to about 40%. So that’s why when I was saying last year that we paid up to $0.93 of sub, how could you have an acquisition with an up to cost. Well that’s because if there was going to expense going in the direction of the MVPD that expense would be amortized and flow through Newsy’s P&L and would also lower the cost of the RLTV sub acquisition. I would say, I think that still leaves us in a position for this to be the most efficient cable flip in history.

Okay. Thank you.

Thank you. Our next question that will come from Dan Kurnos with Benchmark Company. Please go ahead.

Great. Thanks good morning. Brian, just quickly on local pacings. I mean, we can kind of back into it now there is a little bit of noise from the local digital stuff shifting over. It still does seem a little bit better than the peer group, auto was also down slightly less then I think what we heard yesterday for you guys, it’s been a focal point for investors. Can you just talk about some of the puts and takes in the automotive category. And then obviously a lot of people have been talking about crowd out from the Olympics and lack of advertising on non-NBC channels. Just how that you think that impacted your results in Q1 and if you’re seeing any sort of pick up with early book heading into Q2.

Hey, Dan, it’s Brian. Obviously we said auto was down about 1% in the fourth quarter. I think it’s pacing a little softer than that right now in the first quarter probably because of what you spoke about really the Olympics. We only have five NBCs, it’s a small part of our portfolio. Our NBCs are performing well up double digits for the quarter between the Olympics and the Super Bowl combine those two things $8 million a little over $8 million and so our five NBCs are performing well. But when you have a footprint that SBGI and ABC as well as CBS or FOX, we do see some advertisers kind of pulling back or sitting out against those 17 days. And so auto it’s been a category that’s been a little bit softer there. For the quarter, I think we’ve given out some guidance here that we’re looking at revenue being up mid-singles, our pacing is up low singles, digital is a small part of that. But I think our categories look a lot in first quarter like we did in the fourth quarter. So auto owns off a little bit more – if I spoke of the strength of services of retail, home improvement and I think we’re seeing those same categories kind of drive our first quarter as well.

Got it. That’s helpful. Thanks for the color. And then just one more sticking with TV, I know you guys are probably not going to give a number on political. So maybe just sort of your thoughts on how you are feeling heading into the balance of the year. And sort of where you could shake out – I know you talked about the competitive races you have. But if there’s any way that you could give us sort of some color on how you’re feeling relative to 2014 that would be helpful.

Yes. I think we’re certainly optimistic. It’s early, we believe there will be more money in the cycle across the industry this year than there was in 2014. And then really comes down to just are the races in your markets competitive, and if they are, you have the opportunity to really benefit from that. As I said, it’s early the 2016 governor races right now three of them are tossups Florida, Michigan, Nevada. So those are good spending states. If those races stay close those could be very strong with financed races. On the Senate side, we’ve got five tossup races Arizona, Indiana, Missouri, Nevada and Tennessee. Again I think if these things stay within a couple points we have the opportunity to really benefit from that. Our cadence on our political for this year probably will look a lot like 2014. We did $75 million in 2014 and maybe $10 million of that was in the first half of the year, first quarter was $3 million. I think our first quarter this year will kind of look about the same. But really it’s going to be – after the first quarter – first and second quarter primaries then you hit that third quarter, that heavy third quarter primary schedule. And then I think things are really kick-off. We are seeing decent activity around this. Some of the Senate races in Arizona, Indiana, Wisconsin right now, we expect issues spending to continue probably to burst in the second quarter point levels are moderate at this point. So it’s lying in a nice base. We’ve got a couple of smaller markets that we’re seeing similarly activity right now. And we are seeing some Super PACs lay in a fair amount of money for the fall just to kind of reserve some space. But as we’ve seen in the past, if the races don’t stay competitive, we’ll lose that money if the races are competitive they’ll probably add on to it. So, right now it’s kind of gearing up for a good active healthy year. If the races stay close, we should be in a really good position.

Got it. Super helpful. And then just last one, just kind of higher level. Adam, as we think about sort of Newsy going forward with the incremental revenue streams here. I’m just curious, you are sort of in land grab mode to an extent you’re going to get more carriage, I assume you’re not going to sort of – maybe you can sort of give us at least some sense of like what those carriage fees are nominal or whatever how you want to characterize them. But relative to the opportunity on a go forward – where would you sort of bucket the greatest opportunity. And are you going to do – since that those dollars I’m assuming are effectively dropping straight through to the bottom line. How much of the incremental revenue that you’re getting from these more profitable revenue sources? Are you reinvesting and sort of continuing to drive – with market leading position there.

So let me unpack that question a little bit. As we’ve said earlier, we’ve taken a product that was already developed for OTT, a stream that was already there we’re continuing to develop it out most of the hiring going around additional journalists and content and sales. And we’re now migrating that into cable. And with respect to cable, we’ve said, we think we’re going to ramp our subs up to 40 by the end of the year obviously those things come online in cycles. So we expect cable advertising, which will start out significantly in the DR space to really begin to grow, more I think materially in the second half of the year. Some of the contracts call for Southeast right away, some ramp up over time. And I would characterize that as a good start and nominal. I don’t want you to misunderstand sort of this, not a comparison between the sub fees obviously, that Newsy is getting early on as a new brand and retrans, but it’s a very good start and I think it solidifies the place that Newsy plays on the shelf here. That we have with the MVPDs. With respect to reinvesting the profits, we’ve got a lot of opportunity ahead both of these businesses are growing combined 50% annually we expect both Midroll and Newsy to be able to keep that pace, Katz obviously, as well. And so we expect that we’ll continue to invest some of the profit from the National Media division back into these growth businesses.

Got it. All right, thanks for the color.

Thank you. The next question in queue will come from Kyle Evans with Stephens. Please go ahead.

Hi, thanks. Could you guys give a target leverage number for year-end assuming the radio sale?

Hey Kyle, it’s Lisa. We – looking LA QA, we’re about 3.5 times lever today. We do have a substantial amount of cash and we expect our operations to produce a significant amount of cash in 2018. And of course, we expect net of tax proceeds from the radio sale to hit the bottom line as well. So we’re really sort of comfortable where our leverages today and I think with that cash coming in obviously, it will work its way down into 2018.

And maybe an update on Katz in terms of ad mix and your efforts to upgrade from DR to more general market just – I think – so are we on track there? And what do you think that can get to over time?

Hey Kyle, it’s Brian. We have – we’re very much on track, as I said, Katz is meeting every one of our expectations on the distribution side, on the rating side, and on the revenue side, since we acquire the company. A lot of our 2018 strategic plan and budget is around the success that they would have in the upfront which concluded recently, they hit all of their upfront target numbers, I can tell you that across our four networks of portfolio. We grew our upfront revenue over 50%. So I think what we’ve said in the past is the balance is the one that – you’re right now about 50% of their – all of their advertising comes from the general market. The rest is either DR or Hybrid DR and then Escape, Grit and Laff are obviously, they’re newer networks and they’re building toward that but they’re a good at behind that. So it’s a year-by-year process, but we hit all of our financial targets from the upfronts which lay in that foundation of the general market advertising.

But you look at – it sounds like, you’re doing a lot of work on the buy swap front, when you look at swaps that could end in big-four to our believes? What kind of margin lift you think you get from station stacking end market.

We’ve done it, and we’ve modeled it a couple different ways. Obviously, it really depends on whether you’re looking at an ABC in a Fox, or you looking at – in ABC and CBS or even ABC in a MyNet and we’re seeing in our model of lift anywhere between 7 to 15 margin points just really depending on the circumstance.

Okay. Maybe last one, Brian, you mentioned that the local digital was small, since we’re all about to rebuild our models which we hear to be a little bit more specific there in terms of the size and growth rates.

Hey Dan – I don’t think we are – Kyle, sorry, I don’t think we’re sharing those numbers right now.

Well. Lastly, some count in retrans could you give us a look back in Q4?

Yes. I think obviously, on our last call, we talked about our decline of about 3% of our total subs. And that included some seasonality. So I think we talked about watching that a little bit. The good news was as we got the fourth quarter our rate of decline it slowed, it was a little bit of additional decline, but it was all offset by new over the top households. So at this point, no net loss beyond what was previously reported, which is from the beginning of last year about 2% to 3%.

So you are seeing OTT subs revenue come through the door and largely offset the declines you saw in Q4 on the traditional side?

Yes. So we talked about the fact on the last call that we were waiting for that, we were seeing people cutting the cord on the MVPD and we were expecting that – there would be signing on with the OTT subs. We have now seen that, we’re now being paid for that. Obviously it’s not one for one at this point. I still think that marketplace is shaking itself out. But we had a couple of hundred thousand subs that are new OTT subs that now factor into our models.

Thank you. The next question will come from Marci Ryvicker with Wells Fargo. Please go ahead.

Thanks. I have a couple on first core advertising in TV. What invisibility do you have post the first quarter? I know there’s a lot of noise in Q1 and The Streets focused on the slow start to the air, but this is a harbinger for the year? Or is there anything you can say about Q2?

Marci, it’s Brian. Hi. I think obviously, we know the cadence of broadcast second quarter, fourth quarter are typically much stronger. We’re seeing that. I think there were a couple of big automotive clients that made kind of strategic decisions to go light in first quarter and then build on their base for second, third and fourth. And so we seeing that money laid in. So I think that – at this point, obviously, it’s very early. Most of our negotiations have been on a quarterly basis, but our annuals are laid in, exactly where we needed them to be for second quarter. And as I said, I think this is especially because of insurance in auto. We are seeing a lift beyond – that compared to last year. So I think at this point, we remain optimistic that step-up that we would normally see in second quarter looks to be real.

Got it. And then can you give us any color on the progress of the radio station sale, maybe conversations you’re having valuation, timing, and anything to give us senses, perhaps our thoughts about what you could talk us for maybe to low?

Yes. I mean – Marci, it’s Adam. I guess, I’d say right now, we’re in the midst of the process. It looks really good, we’re very pleased with what we think the results are going to be. I suspect we’ll have more to share with you within the next two months.

And then Adam’s that have you. Is it fair to say that you’re prioritizing your uses as cash, when it comes to M&A more on the local side than on the national side at this point?

Yes. Absolutely, I think right now, we’re in a moment of time, where we think there’s an opportunity for us to strengthen our Local Media portfolio. That may take capital, it may not take capital. I think earlier other question about what our net leverage ratio would be at the end of year was a tough one to answer, because we’ve got the cash that aside right now, that we think we might need in order for us to strengthen that Local Media portfolio. And so that’s really where our priority is.

And then last one for me is on the dividend. How did the board, I guess come to decide on the size of the yield, is it percentage of cash flow and how should we think about the progression from here in terms of potential increases?

Hey Marci, it’s Lisa. We size that it was about 1, 1.3, 1.4 yield which we thought, it was a pretty decent initiation, it’s been 10 years since we’ve had a dividend. I think – from the perspective of the board, faith in our strategy – faith in the future that we have laid out. The payout ratio really gives us flexibility to grow the dividend over time, maintaining our ability to be opportunistic with TV M&A and share repurchase.

Got it. Thank you.

Thank you. [Operator Instructions] Our next question will come from Davis Hebert with Wells Fargo. Please go ahead.

Good morning. Just a couple of balance sheet questions. You mentioned 3.5 times being the two-year average leverage and just want to confirm that net of cash into that includes – still include the radio cash flow.

Yes. It does.

Okay. And then if you sell radio would you be required to pay down bank debt?

Actually, we’re obviously pretty comfortable with where the leverage is today. Our debt agreement do require us to use the proceeds of net from radio to pay down debt, if those proceeds reinvested within a specific period of time. But we intend as Adam said earlier, through buy-sell flop we really intend to use those proceeds.

Okay. And then, I think when you announced the Katz acquisition. You had expect it’s leverage to be at 2.5 times by the end of the year I think based on that same to your average, and is that still the expectation?

I think, I just answered that question a few moments ago. I think with the cash that we have on hand, the cash that will build throughout the year and the sale of radio. We really think it is going to come down likely throughout 2018.

Okay. Thank you.

Thank you. Our next question now will come from Barry Lucas, Gabelli & Company. Please go ahead.

Thank you good morning. Brian, will something get a little bit more color on the M&A situation and in granting that were – fair way two months into the year, a lot of people talked about swaps and trades and I’m just wondering what the delay, if there is other way. And does the fact that the Tribune, Sinclair deals hanging fires that impediment to getting these deals done?

Hey Barry, it’s Brian. I don’t think their deal had anything to do with what’s going on with everybody else. A lot of this head to do, we’re just waiting to see what the rulings are going to be from the FCC, where this going to be state in court and these are complicated. And so there’s a lot of work, a lot of companies are talking. I’m sure, they’re talking beyond just us. But there’s a lot of activity in the space going on. So I don’t think there’s anything to read into that anything is keeping deals from getting done other than these rules have changed quickly and as a result of that I think people are moving at an appropriate pace to work through that and find things that are going to make sense to improve their companies.

Great. Thanks for that. Can I ask one on the content side, you said to Pickler & Ben have commitments for 100 markets? What kind of audience reach would adequate to and what do you need for that to be a breakout in terms of preparing to profitability?

Well, look I don’t want to mention the reach. Because we’re not done, I think. By the time, we reach season 2 this numbers are going a lot better than 100. A 100 is just steppingstone on the path to where we want to be. I mean, certainly, our expectation is that – where its 70% to 80% of the country by the time season 2 starts and beyond that. That hopefully season 3 and 4 it’s fully distributed and if we’re lucky we got a hit on our hands. So it’s certainly performing well in the markets that it’s been on now for five months, it’s growing ratings, it has a lot of energy around the show. I think it’s good family value, fun, kind of forget about life type show and people seem to really need that and enjoy it right now.

Great. Thanks for that, Brian.

Thank you very much. At this time, there’s no additional questions. Please continue.

Thanks operator. To summarize, we’re pleased with the progress we’re making and are optimistic about the opportunities ahead. We’re taking cost out of our business to improve profitability and cash flow, while selling a non-strategic asset to optimize our portfolio. We’re pursuing a clear M&A strategy to improve our television station portfolio. And we’re carrying out our mission to serve our communities with journalism and support our local economies with advertising. We’re establishing a long term growth engine by investing and growing our National Media segment, positioning us to attract lucrative general market advertise in dollars and to returning cash to shareholders through our recently initiated dividend. Thanks so much for joining us today. Have a good week everybody.

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