Ladies and gentlemen, thank you for standing by, and welcome to the Gray Television Inc. First Quarter 2020 Earnings Call. Please be advised that today's conference is being recorded.

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

Thank you, Hilton, and good morning, everyone. Certain matters discussed in this call may include forward-looking statements regarding, among other things, future operating results. Those statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the company's most recent reports filed with the SEC and included in today's earnings release. The company undertakes no obligation to update these forward-looking statements. Gray uses its website as a key source of company information. The website address is www.gray.tv. Included on the call will be a discussion of non-GAAP financial measures, and in particular, broadcast cash flow, broadcast cash flow less corporate expenses, operating cash flow, free cash flow, adjusted EBITDA, and certain leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in their analysis and valuation of our company. Included in our earnings release as well as on our website are reconciliations of the non-GAAP financial measures to the GAAP measures reported in our financial statements. I now return the call to Hilton.

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

Yes. Actually, Hilton, I'm going to take it from here. It's Pat. No problem. Thanks, and good morning, everyone. The first quarter started out well. In January and February, our core advertising was close to flat compared to the prior year as significant political revenue rolled in. Of course, come March, we saw a significant slowdown in the economic activity across the country due to the public health emergency as well as slowdowns in the oil and gas business in some of the states in which we operate. For the quarter, our core advertising revenue was down about 4%. Due to the strong political revenue this year, our total ad revenue, that is our core ad revenue plus political ad revenue, finished higher by about 8% compared to the first quarter of last year. The video production companies, while much smaller, are significantly more impacted by the current crisis than our television stations. Recall that this group comprises Raycom Sports, RTM Studios, and Tupelo Raycom. RTM generally produces evergreen content. Raycom Sports and Tupelo, however, primarily produce video content around live sports, concerts, and other public performances. Needless to say, with the suspension and cancellation of live public events, especially sports, the production companies' business largely dried up in March. To be candid, the impact of the shutdown in significant portions of the economy had a bigger impact on April than we saw in March. Like everyone, we're cautiously optimistic that the gradual relaxation of state stay-at-home orders will be successful. If so, pent-up demand from consumers and businesses could improve our advertising and production businesses later in the second quarter and beyond. We will, however, need to wait and see just like everyone else. It's important to recognize though that our television stations are alive, well, and serving their communities as local markets are under varying degrees of lockdowns. Our stations rose to the challenges presented by both the public health crisis and unfortunate springtime severe weather. Our sales managers and account executives have worked with our clients to preserve buys that clients had tended to cancel. Sales teams actively courted businesses that remained open to get that message out to local communities, and our training team was busier than ever, coaching our sellers on business development efforts in this unique environment, digital products, and Premion. Our guys sold clients new spots, thanking their first responders or otherwise burnishing their brands rather than promoting their own goods and services for sale. Our sales professionals continued to bring in new business throughout this crisis with over 700 new clients added in March and more than 800 new clients written in April. All of this great effort helped us preserve revenues that otherwise would have declined even more. In early April, Gray stations introduced interactive online business directories to help residents locate open businesses and their new hours. These directories also permitted online visitors to place orders for pickup or delivery, obtain coupons, and apply for jobs. By the end of April, over 14,500 local businesses had joined the online directories at no cost across Gray's markets. As of last night, we surpassed the 15,000 local business mark. Meanwhile, our news departments have been exceptionally busy. March and April felt like covering a prolonged hurricane rather than a brief event. During these months, our stations added several hundred hours of additional regularly scheduled local newscasts, along with news specials, fundraisers, telethons, educational lessons for children at home, and live coverage of press conferences and town hall meetings. Furthermore, our stations aired over 2,500 extra hours of network special reports in March and April to ensure the local community received the information they sought from their most trusted news source. Initial ratings data suggests that most of our afternoon, evening, and nightly local newscasts experienced significant ratings increases in March and April compared to the previous year. While all stations gained viewers, the top two stations notably performed the best in many cases, showing remarkable increases in viewership. Depending on the market and the newscast, viewer increases of 30%, 60%, and even 100% or more compared to the previous year were observed. Not all of these viewers will stay around when summer arrives or when the current crisis abates. We've established the value of our local news franchise to our loyal viewers as well as large groups of younger consumers who rarely watched local news previously. That's not all going to disappear once people return to work and school. Our digital usage also experienced huge gains recently. We had 4.1 billion page views across all platforms between January and April 2020, a 24% increase over the same period last year. The year-over-year increases were significant in January and February before the COVID-19 crisis, but they really soared in March, with page views hitting 1.26 billion, a 45% increase over our previous high set just in January of 2020. In March, we had 191 million users and nearly 600 million sessions, figures that were around 60% higher than our previous record set again just this past January. Our news, weather, and OTT apps also set records for users in March. Beyond sales and news, our television stations responded to public health and economic challenges by using their time and resources in March and April to help support local food banks and relief organizations. These efforts ran the gamut from telethons to on-air and online fundraisers to musical concerts and other events, lasting from one hour to a few weeks. We are humbled to report that their collective efforts helped raise roughly $12.8 million in just a couple of months. All these efforts are always the right thing to do for our local communities. Supporting local businesses, charities, and viewers is always a smart long-term investment for the future. We're optimistic that our country has now started to turn the corner on this public health crisis.

Thank you, Pat. We are very proud of the tremendous community service that our stations have provided during the crisis that Pat just relayed. We owe much to our employees, most of whom are not only essential to us, but are also essential to keeping their communities informed, protected, and prepared for the future. Therefore, I want to spend a few minutes highlighting how we as a company and as an employer of about 8,000 individuals have handled the crisis so far. Early on, we adopted mandatory work-from-home protocols for all employees who could safely do so. We essentially ended business travel, banned nonessential visitors, and imposed new health screening protocols for those entering our locations. We announced that we did not anticipate that we would need to furlough employees, lay off employees, reduce hourly or salary compensation levels, reduce paid time off, health care, other benefits, nor suspend, delay or reduce contributions to the employees' 401(k). We adopted self-quarantine requirements where appropriate as well as physical distancing rules for employees within workspaces and out in the field. We adopted a new benefit that ensures continued pay for salaried, hourly full-time, and hourly part-time employees who cannot work due to the coronavirus. We added telehealth and telemedicine options, relaxed health benefit caps, and waived certain insurance charges and fees. We provided thermometers, face masks, and lots and lots of hand sanitizers for all locations. Thankfully, our efforts have now turned toward working with each station and office individually to identify the physical and other changes that they will need to make in order to begin transitioning some employees back to work at that location. We're hopeful that some of our facilities will begin to bring back a portion of their remote workers starting as soon as June 1, with others to follow in the weeks thereafter. It may be a long and complicated road back to some version of normal. We are, however, comfortable that Gray Television proactively took the steps necessary to protect our employees, keep them focused on doing great work, and ensure that this company retains the loyalty of our employees that they have provided to us. Turning now to retransmission. We are very close to concluding renewals with two very large MVPDs. The public health crisis did not impact the outcome of those negotiations, just simply the timing. We're pleased to say that these negotiations, like all of our negotiations, have been conducted quietly, respectfully, and in good faith by all parties. In the fourth quarter, we will begin renewal negotiations covering most of our roughly 500 MVPD partners. We look forward to our next round of retrans renewals so we can again demonstrate the value of our leading group of television stations on cable and satellite platforms. In terms of subs, it is too early for us to know how the macro situation has impacted our subscriber counts. On the one hand, we are concerned that the economic contraction and the loss of sports may negatively impact subscription levels. On the other hand, we know that viewers are tuning into local TV stations at remarkable rates. With the programming and information we offer and with less competition for attention and for disposable income, it seems reasonable to assume that the pay-TV bundle will be more popular in this environment, not less popular. As usual, we will have a better handle on subscriber accounts when we receive actual sub reports for the current period in the next two quarters. Turning to political advertising revenue in our release this morning. You saw that we maintained our full year 2020 political advertising guide of $250 million to $275 million. Quite simply, we believe that nothing has occurred in the last two months to shake the willingness of political donors to donate nor has anything occurred to reduce the interest of potential voters in this year's election. To the contrary, we believe that interest in this year's election is and will be higher than we could have anticipated earlier this year. The relevant issue set for many voters has changed, and that changes how candidates stack up. Voters are more aware than ever who their governors, mayors, and senators are and just how much their political leaders can impact their daily lives. All of this means that political advertisers will likely have a larger pool of both likely voters and of persuadable voters than we would have anticipated earlier this year. Because broadcast television is by far the best medium for persuading voters and getting out the vote, we remain very bullish on political ad revenue this year. Moreover, social distancing could be with us until a vaccine is widely deployed. In that case, campaigns will not be able to rely on many traditional ways of reaching voters and gaining attention, such as political rallies, door-to-door canvassing and working the crowds at county fairs and sporting events. Television advertising should, therefore, be even more indispensable for these candidates and campaigns who actually want to win in 2020. To be sure, the pacing of political advertising will be a bit different than anticipated. March political ad buying slowed for a few obvious reasons. We see plenty of signs, including significant recent activity in numerous markets to convince us that political candidates, parties, campaigns, and super PACs will make up for lost time in the remaining months, with probably an even greater share of political ad revenue materializing in the fourth quarter than in recent years.

Thank you, Kevin. Good morning, everyone. Our earnings release and the 10-Q that will be filed later today provide a lot of information. You'll notice that starting with today's release, we are no longer presenting results on a combined historical basis because the acquisitions and dispositions that occurred late in 2019 were immaterial, so we will report on an as-reported basis moving forward. Given the significant events that began in March, we are pleased with our Q1 results. As Hilton mentioned earlier, although revenue was a bit lower than we had hoped, expenses were also reduced, resulting in solid EBITDA performance. Our LAQA leverage ratio, net of the $296 million in cash on hand, was 4.23 times, which is a decrease from the December ratio of 4.35 times. In Q2, we increased our cash on hand by $84 million. With the $296 million in cash plus an undrawn revolver of $200 million, we have a robust liquidity position. Furthermore, we expect to continue generating significant amounts of free cash in each quarter of 2020 and for the entire year of 2020. Given our strong liquidity position, free cash generation, relatively low leverage, and no debt maturities until 2024, we believe we are in a very good position to weather the global pandemic we are all experiencing and emerge just as we are today as one of the strongest local broadcast companies in the country. As mentioned earlier, given all the uncertainty around COVID-19, we have withdrawn our previous full year guidance and are not issuing formal guidance for Q2. However, we remain bullish on the 2020 political, as Kevin just mentioned, with our expectation of $250 million to $275 million. That said, I know all of you want to know about more of Q2. And as with our peers, we certainly are experiencing significant declines in core ad sale revenue in Q2, and our visibility is understandably very limited. We are cautiously optimistic that as the states lift stay-at-home restrictions, the core ad environment will begin to improve. As of today, again, cautioning that the situation is fluid and our visibility is very limited, we believe that core ad revenue for Q2 will decline at least 33%, but with each month of the quarter appearing to show sequential improvement. We estimate that our political ad revenue, retransmission revenue, and other broadcast revenue in Q2 will increase over the prior year. With these forecasts, core ad revenue would make up about 44% of total net revenues in Q2, and together with political and retransmission revenue, it would account for roughly 48% total. To clarify, these Q2 figures are based on our current internal forecasts, which are not considered formal guidance. We understand that there is significant interest in predictions for Q2, so we are sharing our forecasts as a reference point, but not as official guidance. Nonetheless, we remain cautiously optimistic about the core revenue forecast's direction. If these projections hold, our Q2 revenue would decline about 33% year-over-year, which is not as severe as some analysts have anticipated. We will do everything possible to minimize these declines by closely collaborating with our advertising clients. We are encouraged by most states where we operate starting to relax or end stay-at-home orders. By tomorrow, approximately 80% to 85% of our stations will be functioning in states that have reopened, while the remaining stations will be in states lifting their orders by June 1. None of our stations are in states with orders still in effect beyond June 1. We expect our Q2 broadcast and corporate expenses to be in a similar range to what we reported for Q1. Our production companies' expenses in Q2 will total in the low millions, partly due to the seasonality of these businesses. A few key liquidity items to update you on. Our current forecast for full year cash interest is $175 million versus our previous forecast of $194 million, reflecting the significant decline in LIBOR over the last few months. Our capital expenditures currently are estimated at $60 million versus our previous forecast of $80 million and our cash taxes are currently estimated at $65 million versus a previous estimate of $80 million, providing an aggregate savings of $54 million in cash. I'll turn the call back to Hilton. Thank you.

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

At this time, we ask that you open the line for questions.

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

Correct.

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

You are correct. We've repeatedly stated that we expect margins to decline over time. You can analyze the margin in Q1, and you will see that to some degree, although we have consistently anticipated that all are reflecting the increases in the reverse comp going forward. Our primary focus has always been on maximizing net dollars and not getting overly concerned about percentage points.

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

I don't see a significant difference between local and national performance. Local is slightly better by about 5 to 10 percentage points depending on the month and the entire quarter. There isn’t a major difference overall. Looking at it state by state, nothing stands out as we mentioned earlier. While we do have some operations in oil-producing states that are facing more challenges, beyond that, I wouldn't say there's any noteworthy trend.

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

There is a possibility that more revenue will be concentrated in the fourth quarter. This is partly due to several primaries being delayed because of current conditions. We believe that this will lead to a more traditional campaign season. We are already seeing good advertising space purchases for the fall campaign season, and as for the rates, we anticipate that the demand will be so strong that it won’t affect the pricing. Remember, the dynamics of soft money are entirely based on supply and demand. If we see a significant influx of political revenue, which we expect, we only have a limited supply available. Therefore, the pricing will increase accordingly, regardless of the performance of our base business.

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

Yes. As we look ahead, visibility is limited. However, in our base case scenario, we see no necessity to utilize the revolver. We will continue to monitor the situation, but it doesn't make sense to reduce cash on the balance sheet unnecessarily. After analyzing various downside scenarios, we do not foresee a situation where we would need to access the revolver. There is one maintenance test tied to the revolver, which is a first-lien test based on an L8 metric. The current covenant stands at 4.5x and will decrease to 4.25x on January 1. At the end of the quarter, our calculation showed we were at 1.82, so I don't anticipate any problems with the maintenance covenant even if we were to draw from the revolver. Ultimately, we believe we will not need to draw on it, and we are in a strong position from a liquidity perspective.

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

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

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

Yes, I can address the question about the new clients. We are proud of the significant number we brought on, which aligns with non-pandemic periods. We've seen a variety of new advertisers, including many churches and spiritual groups looking to share messages of hope and prayer lines. Additionally, there has been a notable increase in home improvement clients as people took the opportunity to tackle projects they had been postponing. We've also observed auto dealers returning to TV after a long hiatus. We hope to retain many of these clients going forward. As for your second question, I’ll pass it over to Jim or Kevin to respond.

Yes. The reduction in expenses or the expenses coming in below expectations is due to a few factors. While we did not lay off or furlough any employees in the first or second quarter, there has been virtually no new hiring because of the current circumstances. This contributed to the expense outcomes. We typically forecast expenses heavily in the first quarter, anticipating a quicker start to our yearly plans, which often doesn't happen as rapidly regarding operational pace. Additionally, we had some favorable adjustments to our accounts receivable reserves for bad debts. At the end of the previous year, those reserves were higher than desired. We put in efforts to address this in January and February and were able to reduce our reserves accordingly. This also contributed to the positive results you're seeing today. Furthermore, with the onset of the pandemic, travel and entertainment expenses have virtually disappeared. While these savings may not be substantial on their own, they accumulate over time.

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

John, I don't have a clear idea about the direction of the subscriber counts, as I mentioned during the call. Our negotiations over the past few months have followed the same pattern as in previous years and are likely to continue that way for the foreseeable future. We maintain an assertive perspective on the value of our stations, while the other party aims to negotiate the lowest possible cost. This has always been the case. We engage in good faith discussions about what we offer and our viewership in relation to network prime and all other programming. We arrive at terms that benefit both sides. I'm not certain how this situation affects others, but we will be emphasizing our strong ratings during these negotiations. I'm unsure how to respond more clearly to the question of what’s happening with subscribers. We don’t have that information and likely won’t for some time.

Let me add one thing. This is Hilton. The coronavirus has created challenges for our industry and the entire country, but it has also validated Gray's business strategy of acquiring and investing in high-quality local television broadcasting companies. During a time when many businesses are shut down, we managed to gain 700 new clients in the first month and 800 new clients the next month, who had never been on our airwaves before, showcasing our strong presence in those local markets. We've also seen significant increases in viewership, with numbers rising from 30% to 100% across various categories. This is promising news. Regarding retransmission consent, I believe Gray should lead a different approach based on our market share rather than just being considered a national affiliate. The data we've gathered is impressive and serves as a strong validation of our company. I want to emphasize this point, as there is a positive aspect for both our company and the industry. Therefore, I feel optimistic about our future.

Hilton, this aligns with what you're saying. I'm curious about the increased viewership at the beginning of the pandemic, which you weren't able to fully leverage due to lower ad demand and pricing. With the economy starting to open up, you may experience a decrease in viewership as people are no longer staying at home. However, there may be an opportunity to regain some ad demand if local advertisers can resume operations and have funds to spend. How do you see this dynamic influencing the pace and shape of the recovery?

I believe that in times of significant advertising downturns, the strongest stations recover the quickest. Our efforts have demonstrated our value to viewers, particularly concerning local ads, positioning us well moving forward. Automobile advertising, for example, has inventory to clear from dealerships, and I anticipate that advertisers will return to the platforms capable of effectively moving their products—our TV stations. This should positively impact our pricing and demand. Instead of retreating during these challenging times, we chose to invest further. We expanded our news offerings, including late-night newscasts, and our anchors connected with audiences by broadcasting from their homes across more than 90 markets. This connection established during the pandemic puts us in a favorable position for long-term success. I hope that answers your question.

I was also curious if the advertisers who reduced their spending for various reasons will return and show interest in placing those ads and paying higher prices. Or do you believe that some part of your market has been negatively affected, making it more challenging to recover those advertising dollars?

I believe we have not been affected at all. When people return, we've noticed this with our own Board of Directors. The Chief Financial Officer of Haverty Furniture is on our Board. The Board met yesterday and reported that they have re-opened 54 of their stores, which I'm sure exceeds 100, and where they operate in our markets, they are seeking to advertise with those who can attract attention, which includes us. I think we have improved data to offer, and our account executives will have enhanced sales capabilities to make their cases across the board. Therefore, I believe we will maintain our pricing.

Okay. Maybe this is for Jim. Gray tends to manage everything very efficiently. One aspect that has emerged is the reconsideration of physical office space needs, especially showing that people can work remotely to a greater degree. Is there any plan to explore or implement cost savings in this area that could be enduring?

I don't think there will be any significant cost savings, even if we continue to operate in a more dispersed and remote manner since that approach seems to be working well for us. However, I believe the basic costs of our operations will likely remain the same. As mentioned earlier in Kevin's remarks, we are just starting to consider how to transition our employees back to the office at our various locations across the country. This transition will depend on the physical facilities and the size of the teams, with many variables varying by location. We are in the early stages of planning and assessing what that will entail. There may be some costs if we need to modify buildings for social distancing, but at this time, we don't anticipate those costs will be significant. We will provide updates on our progress during our next call.

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

Sure. I'm happy to do that. It's Bob Smith, COO. We keep an eye on our competition. Frankly, as you know, the performance of our stations means that we have a lot of top-performing revenue markets, including in political advertising. So we're quite confident that we're capturing a significant share of the revenue in most of our markets, likely close to 100%. Additionally, we reach out to our largest clients in our markets. The general manager and GSM are involved. I've spoken with several major clients, including seven of the biggest advertising agency owners in the political sector just this week, to gauge their sentiments. We're thorough in our efforts, and we maintain strong relationships in our local markets, which has allowed us to bring in new business. There have been some standout performers in this area across the company. Overall, I would say we're in a strong competitive position.

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

Our leverage at the end of the quarter was 4.23. In our year-end call back in February, we indicated that we expected to end the year somewhere in the 3s. While we've withdrawn full year guidance for obvious reasons, I still believe leverage will likely be in the lower 4s by the end of the year. It may fluctuate a bit quarter-to-quarter. However, when the political impacts arrive in the fourth quarter, I expect leverage to remain in that lower 4s range. Looking ahead to 2021, assuming it returns to 'normal,' we feel optimistic about our leverage position and believe we would be among the lowest in our peer group, with potential to decrease over time. We have some flexibility with our leverage, but we are satisfied with our current position and the trajectory we are on as we approach the end of 2021 and into 2022.

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

Kevin here. The short answer is no. Keep in mind that network sports agreements are negotiated between the network and their respective affiliate associations, which are then presented to the affiliates with a recommendation on whether to enter into the agreement. This means there is essentially a standard agreement for all affiliates across the country, where they pay a proportionate share of the total negotiated amount based on the DMA population. There isn't an individual negotiation over sports with a network as part of the affiliation agreements, as the sports deals are separate. Therefore, I don't anticipate there being any triggers. For instance, with NBC, you pay an Olympic fee every year, even though the Olympics take place every two years. That's how those payments are structured. We will get the Olympics in 2021, but I don't foresee any immediate relief, particularly since our understanding is that networks are required to pay the leagues regardless of the current situation. If there are refunds from the leagues to the networks, that could prompt a conversation, but for now, it appears that networks are still fulfilling their financial obligations to the leagues according to their contracts.

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

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

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