Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2020 Earnings Call. Please be advised that today's conference is being recorded. I would now turn the conference over to your speaker today, Hilton Howell, Chairman and CEO. Thank you. Please go ahead.

Thank you, Mike. Good morning, everyone. As Mike mentioned, our operator, I am Hilton Howell, the Chairman and CEO of Gray Television, and I want to thank each and every one of you for joining us this morning for our third quarter 2020 earnings call. As usual, on the line with me today are our President, Co-CEO, Pat LaPlatney; our Chief Legal and Development Officer, Kevin Latek; our Chief Financial Officer, Jim Ryan; and our Chief Operating Officer, Bob Smith. We will begin this morning with the disclaimer that Kevin will provide now. Kevin?

Thank you, Hilton, and good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding 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. Now I will turn the call to Hilton.

Thank you very much, Kevin. It may be hard for all of us to remember how strong we began in 2020 in January and February this year, how much optimism we had at the start of this year. And now many months into this crazy pandemic, Gray Television is continuing to recover and recover strongly from a historic pullback in economic activity that this country faced in March, April and May earlier this year. In fact, in many of our core areas, we're returning to normal historical levels of advertising despite the huge displacement of political that has occurred through the course of 2020. Despite all the challenges at the beginning of the year, our total revenues are again increasing by double digits as local audiences absolutely surged, and our content continues to warrant improved compensation terms. All of this is due in large part to the extraordinary efforts of our reporters and sellers and producers and other professionals all around the country. Consistent with this headline, we saw in the second quarter of this year how Gray's business slowed less than anticipated, and it recovered faster than expected. Today's release confirms that the third quarter saw this strong momentum continue. Quite simply, our results in the third quarter were much better than we would have expected that they would have been over the summer. Our total revenue for the third quarter was $604 million, an increase of $87 million or 17% from the third quarter of 2019. Net income attributable to common stockholders was $109 million or $1.14 per fully diluted share, which is more than double this amount from the third quarter of 2019. Broadcast cash flow was $271 million, an increase of $79 million or 41% from the third quarter of 2019. Our adjusted EBITDA for the third quarter of 2020 was $261 million, an increase of $80 million or 44% from the third quarter of 2019. Our core revenue continued with sequential improvement from the troughs of April, reflecting better business conditions at both the national and the local levels. The big story, of course, is political, which surpassed our most wildly optimistic models. We began the year predicting political revenues would top our all-time record from 2018 of $234 million on a same-station basis. In late February, we predicted full year political revenues in the range of $250 million to perhaps $275 million. Last month, we publicly increased our estimate for political revenue to be between $275 million and $300 million. Political somehow managed to pick up even more momentum soon thereafter. Now as we all still adjust to the ongoing election process and the results of Tuesday's election, it appears that our political revenue will significantly exceed $380 million. And since we know that there is at least one runoff election in one of our significant states and markets over the next 2 months, our political revenue could well end the year significantly higher and may even touch $400 million. I want to share some interesting statistics with each of you. Two of these years appear in our investment deck, and I would like to share that data with you and then also bring you up to date on the data for 2020. In the last presidential election year in 2016, our total revenue had dropped precipitously because President Trump did not advertise, and Hillary advertised but not in the right places. And so our total revenue was $118 million, but we still had the highest revenue of any operator on a per television household basis of $9.63 per TV household. In the midterms of 2018, our political revenue, then a record, was $234 million, and a once again, industry-leading number of $8.80 per TV household. For 2020, using $380 million, which we know we will exceed, yields an all-time record at $15 per television household, which we believe will be industry-leading. I also want to remind you that Gray Television, unlike nearly all other affiliate groups, does not route its political orders through a third-party rep firm. We instead directly sell to all national and political buyers. We can operate in this manner because buyers typically cannot reach our markets without finding and buying our strong local stations. We started this direct model at the beginning of 2016, and we have implemented it in every station we have purchased since then, including all of those stations acquired from Raycom and Schurz. This business model has saved Gray and therefore, has saved you, our shareholders, over $25 million in rep commissions just on political revenue alone in 2020. Our 2020 savings are even higher when we add in the saved commissions on our national nonpolitical revenue this year. In addition to these real savings, we also have stronger relationships with our customers and more efficient order execution. We believe that this allows us to pick up incremental dollars from agencies when those become available. In short, Gray runs a lean ship, not just because we don't like bureaucracy, we run a lean ship because it works. For that reason and many others, we remain optimistic about our business over the long term, especially in light of the portfolio, the assets and most importantly, the people that comprise Gray Television. Last quarter, we again took advantage of what we believe was a significant mismatch between the value of Gray Television and the price at which our company's common stock has traded by repurchasing a further 649,000 shares of our common stock before we were blacked out from trading. During the first 9 months of 2020, we repurchased approximately 4.5 million shares of common stock in the open market at an average price of $13.23 per share, including commissions, for a total cost of approximately $59 million. We remain quite frustrated with GTN's share price and the multiples at which GTN trades, given our impressive performance during this difficult year compared to many of our peers and to many other nonbroadcast media companies. We are taking 2 steps to try to eliminate this mismatch. First, Our Board of Directors yesterday authorized a $150 million increase to the November 2019 stock repurchase authorization, of which we had already repurchased approximately $80 million in shares of our common stock through the third quarter. With this additional Board action, the company now may repurchase up to $220 million of outstanding common stock and/or Class A common stock through December 31, 2023. Second, as part of our expanded stock repurchase program, in addition to typical discretionary stock repurchases and consistent with all SEC requirements, we intend to enter into a trading plan in accordance with the SEC's Rule 10b5-1 rules, which will allow Gray to execute trades under that rule during periods when it would ordinarily not be permitted to do so under applicable trading blackout periods. Together, these actions will allow Gray to buy back our shares in an orderly meaningful manner over the next few quarters depending upon market conditions and other considerations. Gray Television remains committed to reducing our leverage even as we return capital to shareholders more regularly going forward. We continue to generate significant, robust free cash flow each and every quarter. And we will end the year with a substantial amount of cash on the balance sheet. In fact, barring something unusual, our cash may approximate $0.75 billion on our balance sheet by year-end. And I can assure you if and when we deploy it, it will be done wisely. As we allocate free cash among debt paydown, stock buybacks and investments, our highest priority remains paying down our debt, just as we have said and just as we have done since we announced the Raycom transaction slightly over 2 years ago. As part of our keen focus on our balance sheet, we recently refinanced our 2024 senior notes in a tremendously successful new private offering. We sold $800 million of senior notes due in 2030 with a coupon rate of 4.75% at par. We are exceptionally excited with this outcome. It means that we have replaced not only somewhat near-term maturity notes with 10-year notes at what we believe was a record low rate in the TV broadcast sector for a 10-year note. On top of that, demand for these notes was so strong that we upsized the offering from $550 million to $800 million and still had to turn away huge numbers of orders. We now have no maturities prior to 2024, when our term loan B matures and all remaining debt expires in 2026, 2027 and 2030. We could not be more pleased with the outcome of this offering. And we are grateful for the support and faith of our credit investors, who subscribe to the offering and to the teams at Wells Fargo and Jones Day, who managed the offering. Pat, Kevin, and Jim will now add additional color to today's earnings release. Thereafter, I will open the line to any of your questions. Pat?

Thank you, Hilton, and good morning. As you've heard for years, this company is superbly positioned to benefit from political revenue resulting from our high-quality local news operations located in politically important markets. This year has proven that thesis once again. Our political revenues also confirm another critical fact. When you need to promote your product, service, candidate, or issue, there is no better and no more efficient medium to reach consumers than the trusted, brand-safe, universally available, strong local television station. Our job at Gray and throughout our industry has continued to demonstrate this fact to more nonpolitical advertisers at the national and local level. One thing that political and nonpolitical advertisers alike recognize is that their audiences trust their local news anchors and news teams more than any other media. And at Gray, we're fortunate to have both very talented journalists and prestigious recognition of their efforts. On August 24, the National Association of Broadcasters Leadership Foundation selected several of our television stations as winners and finalists for this year's coveted Service to America Awards. The Service to America Awards recognize outstanding community service by local broadcasters and selects local, radio and television stations and one group owner each year for their exemplary service to their communities. Gray's WJHG-TV in Panama City, Florida, received a Service to Community Award for small market television for its enterprise series, Remembering the Forgotten. In addition, Gray's WNDU in South Bend, Indiana received a Service to Community Award for media market television for Never Again: Preventing Bus Stop Tragedies. Both of the finalists for awards in the small market television and one of the three finalists for awards in the media market television category were Gray stations. Moreover, Gray Television itself won NABLF's Broadcast Ownership Group Award for service to the community in honor of the investigative series, Measure of Hate. They aired across our stations. The series of reports by lead investigator, Lee Zurik, exposed significant flaws in the FBI's reporting of hate crimes. This investigative reporting led directly to changes in the way the FBI and law enforcement measure and report hate crimes. We're also privileged to have local stations' impressive work highlighted by the Radio Television Digital News Association. Recently, the RTDNA announced and selected four of Gray Television local stations as National Edward R. Murrow Award winners for excellence and journalism in the small market television category. Congratulations to WDBJ in Roanoke, WCAX in Burlington, Vermont, WAFB in Baton Rouge, and KWTX in Waco, Texas. National Murrows are a very big deal, and we're humbled by the strong showing this year. In fact, in May of 2020, RTDNA awarded a combined 49 regional Murrows for excellence in journalism to 21 of Gray's local television stations. The news, investigative, and community focus of our television stations fueled significant ratings increases in the spring when the pandemic began and have helped hold our ratings at elevated levels as the year has progressed. We've also seen large increases in already impressive digital traffic, which continues to grow month after month. We're about to surpass 10 billion yearly pages this month, and we are pacing to finish the year with 1 billion more page views than the record we set in 2019. In terms of operations, we have aggressively rolled out live local OTT systems to 50 markets this year. These systems allow stations to go live online, 24/7 with local news reports. In fact, it was this system that allowed KPLC in Lake Charles, Louisiana to continue their coverage during and in the aftermath of Hurricane Laura. We also completed the rollout of Premion across the entire company in the last few months. Our resale agreement with Premion already has enabled us to book several million dollars of new OTT ad revenue this year, and we expect that number to grow significantly in 2021. In 2020, we also took our digital agency services in-house. By replacing an outside group with a skilled in-house team, we've reduced our costs by another few million dollars, increasing our digital margins and improving client outcomes. On September 1, Syncbak announced the launch of VUit, a new, free, ad-supported national streaming service built in partnership with leading local television groups, including Gray. Syncbak aims to be the Netflix of live, local, and free, featuring a wide range of local, regional and special interest programming produced by leading television stations from across the country, along with thousands of VUit originals. VUit has had a strong launch, and we are excited to see its quick adoption by consumers as well as other local media companies who want to add their local content to the app. In fact, Gray is such a big believer in Syncbak and VUit that we raised our investment in Syncbak in August to a sizable though still minority interest. I'm also happy to report that our production company has gone from essentially shut down in the spring to very busy today. Raycom Sports has produced many college football games in September. And Tupelo's picked up and produced a number of games as well as nonsports live productions in recent months. This summer, Gray invested in bringing a new sport to the U.S. called World Chase Tag. WCTV combines the dynamic athleticism of parkour with the age-old game of tag. The first competition began only in 2016, yet it already has built a cult following around the world. On September 28, the NBC Sports Group announced it had secured the exclusive U.S. distribution rights for this rapidly growing sport. In October, our production company, Tupelo, began filming the first WCTV U.S.A. competitions of the season at the Roxy right here in Atlanta. The first matches of this year's season actually debut on November 12 on NBC Sports Network at 11 p.m. Eastern, and they'll run through December 23 when the NBC Sports Network plans to air a WCTV marathon, appropriately titled World Chase Tag Day in the U.S.A. I also need to mention Swirl Films, which is the leading independent TV and urban film production company. Swirl returned to live studio live production, and it's as busy as it's ever been. Gray this year increased its investment in Swirl Films, and we now own just over 50% of this very impressive company located in the heart of America's new video and film production capital of Atlanta, Georgia. Swirl has a large and growing book of business that will keep it busy well into next year. And with the lack of available studio and sound stage in Atlanta actually creating the biggest obstacle to execution. This is a high-class problem to have and in this crazy year, one we will accept without complaint. Finally, the entire management team is to recognize the spirit and strength of our colleagues in markets that have suffered historic weather events in the last few months. In August, Cedar Rapids and Quad Cities were hit with a quickly developing major storm called the Derecho that produced widespread damage to homes, businesses, and crops well beyond that experienced in the 2008 highwall flood. In September and October, many of our Louisiana and Mississippi markets were hit with multiple hurricanes and tropical storms. Many of our employees in affected markets experienced significant losses, especially in Lake Charles and Biloxi. Thankfully, every one of our employees in these markets was personally unharmed. During these historic weather events, our television stations and the impacted markets covered the storm and their aftermath in wall-to-wall coverage. Many of our crews reported bravely from the field, and some of our stations had to move their operations to other Gray markets just to get their life-saving reports on the air and on pay TV systems and online. In these terrible circumstances, Gray's employees once again rallied to serve their local communities first. Meanwhile, their colleagues in other markets stepped up to assist our fellow Gray employees in this time of need with generators, tarps, food, water supplies, and cash donations. These experiences, while never enjoyable, are part of what makes local broadcast stations such valuable, valued and trusted institutions in their local markets. In short, Gray's reporters, sellers, producers, engineers, all of our employees are working hard to ensure that in 2020, Gray continues to grow, continues to serve and continues to invest, all of which allows us today to continue to turn in solid numbers. I'll now turn the call over to Kevin.

Good morning again, and thank you, Pat. As most of you know, the U.S. Supreme Court recently agreed to review the decision of the Third Circuit Federal Court of Appeals that overturned the SEC's very limited relaxation of the local broadcast ownership rules adopted in the summer of 2017. Gray Television followed an amicus brief, urging the court to take the case earlier this year. Our brief explained how the FCC's antiquated ownership rules have actually harmed local communities' access to local news sources, which is contrary to the public interest. We are optimistic that the Supreme Court will confirm that the FCC has the legal authority and the binding obligation to actually deregulate its antiquated rules, precisely as Congress directed the FCC to do way back in the 1996 Telecom Act. In terms of timing, the court will hold oral arguments in early 2021 and issue a decision by the end of its term in June of next year. A favorable ruling would restore the modest rule relaxation enacted in 2017 and represent the first small step in responding to the radical changes that the media market has undergone since 1996. We hope that such a ruling will also facilitate further relaxation of local rules by a new FCC that understands the importance of enabling local broadcasters to compete more fairly with the unregulated big tech giants. In terms of retransmission, today's release reported that our retransmission revenues grew at a faster year-over-year rate than the prior quarters this year. Specifically, retransmission revenues increased 4% in the first quarter this year on a year-over-year basis and 9% in the second quarter of this year on a year-over-year basis. And now in the just completed third quarter, we booked an 11% year-over-year increase in the third quarter retransmission revenue. These revenue increases are the result of both annual escalators in all of our MVPD and OTT agreements as well as the repricing of a portion of our MVPD subscriber base in the first quarter of this year. Our next set of MVPD renewals occur in January 2021. We are now beginning renewal negotiations covering hundreds of MVPDs that quarterly represent approximately 43% of our total subscriptions. Next summer, Gray will negotiate its agreements with the remaining roughly 23% of our subscriber base. We expect that this round of retrans renewals will again demonstrate the value of our leading group of local television stations on cable and satellite platforms. In terms of subscriber levels, we reported on our previous call that we anticipated noticeable subscriber declines in the first half of the year. Our assessment was based largely on what all of us were seeing in the public MVPDs' quarterly reports. Over the past 2 weeks, we have seen the public MVPDs report better-than-expected subscriber levels, and for the most part, stabilization in their subscriber counts in the third quarter from the losses at the height of the pandemic in the second quarter. We're very encouraged by these public reports. We find that the stabilization of subscriber levels in the third quarter that they reported is generally consistent with what we are now seeing in the subscriber reports that we have received so far this year in the third quarter. If the trends hold for the rest of the third quarter for subscriber reports that yet to arrive, we will need to book some modest positive billing adjustments in the fourth quarter, reflecting these stabilized subscriber levels. Finally, because this is an election year, there have been very few, if any, leading local news stations offered for sale over the last 12 months or so. With the election now largely behind us, we expect some opportunities to arise in the coming months. We do not have a crystal ball, of course, and we therefore cannot predict for you who, what, when, where, how much, how big future M&A opportunities may be. But as we have done previously, we plan to take a close look at any #1 or strong #2 ranked local television station offered for sale regardless of market size. And we will evaluate each such opportunity with a close eye on our balance sheet and market conditions. This is not to suggest that we have not been making any strategic investments or moves in recent months. To the contrary, we've probably never been as busy with evaluating and in many cases, pursuing strategic opportunities as we have been in 2020. So far, however, each of our completed acquisition or investments has not been material to the company, although I can tell you it often seems that these smaller deals take more time and effort than the big deals require. So as Pat mentioned earlier, Gray this year has made strategic investments in Premion, Syncbak, Swirl Films, and World Chase Tag. Each of these investments includes the cash purchase of some equity interest as well as a new or expanded operational relationship between the target and Gray stations or Gray production companies. We have also entered into some immaterial television station transactions this year, including the following transactions over the last roughly 16 weeks: we added a CBS affiliation in one market, we added a FOX affiliation in another market, we purchased a full power Telemundo affiliate in Honolulu, where we already own the NBC and CBS affiliates, we purchased a full power independent station in Odessa, where we own the CBS and CW affiliates, we purchased the non-license assets of the NBC affiliate in Columbus, Georgia, and began a shared services agreement with the licensee. We entered into an agreement to purchase The CW, MeTV, MyNetwork and Telemundo affiliate stations in Waco, Texas, where we already own the NBC affiliate. We also reached an agreement to purchase a non-licensed asset of that market with FOX affiliates and thereafter, began a shared services agreement with the FOX licensee. We purchased the NBC and CBS stations in the tiny market of Juno, Alaska, which provided us with our 94th local market and our 20th state capital market. And we are currently working on a few other immaterial deals. While none of these transactions will move the needle for Gray as a whole, they deliver meaningful scale to our stations in these markets. And that will allow us to better serve those communities, viewers, and their local businesses. Thank you for your time, and now I'll turn the call over to Jim Ryan.

Thank you, Kevin. Good morning, everyone. Our earnings release and the 10-Q being filed later today will offer significant information for you all. I'll quickly highlight some key points. As of the first quarter this year, all of our reporting has been on an as-reported basis since our acquisitions have been immaterial to the financial results. We are pleased with our Q3 results. Our total core revenue decreased by approximately 14%, which was within our expected range. Each month of the quarter showed sequential improvement. July core revenue was down 16%, August was down 12%, and September also saw a 12% decline, but we had to consider the significant political displacement in September. Political revenue for that month was $71 million against a core revenue total of $85 million, indicating substantial political displacement. Our total Q3 political revenue of $128 million exceeded our expectations from the last earnings call. For perspective, in Q2, our total core revenue was down 30%, with April alone down 38%; May was down 34%, and June was down 17%. We are clearly seeing improvement from the lockdown lows of the economy in the second quarter. We increased cash on hand by $88 million, ending the quarter with $467 million in cash on the balance sheet and an undrawn revolver of $200 million. Hilton previously mentioned our successful $800 million note offering at a 4.75% interest rate for 10-year notes due in 2030, which we were very pleased with. The proceeds were used to redeem our 2024 notes, with about $250 million remaining for general corporate purposes, including potential debt repayment. Given our strong liquidity position, free cash generation, relatively low leverage, and no debt maturities until 2024, we believe we are well-positioned to navigate the remainder of the pandemic and thrive as the world returns to normal, hopefully during 2021. Due to the uncertainty surrounding COVID-19, we have retracted our previous full-year guidance and will not be issuing formal guidance for Q4 2020. It has been an extraordinary year for political advertising, and Hilton has indicated that our political range of $380 million to $385 million is likely too low, especially with an upcoming special Senate runoff election in Georgia, suggesting we will finish the year with a robust political revenue figure. Regarding Q4, we anticipate total core revenue to decline again in the 10% to 15% range, though, similar to Q2 and Q3, total core appears to be sequentially improving each month in Q4. In October, core revenue is down in the low 20% range due to significant political displacement. However, November looks promising with mid-single-digit declines in core revenue currently. December's core declines are projected to be in the high single to low double-digit range, but we see potential for momentum to improve in December as we move past the election cycle and late-year buys begin to arrive. In October alone, we experienced significant political displacement of core revenue, with $175 million from political revenue compared to a core total of $82 million, explaining the 20% decline in core for that month. At the start of the year, we anticipated around $235 million in political revenue, which we will exceed by at least $150 million. This additional political revenue nearly offsets our expected total decline in core revenue for 2020. The figures I provided are current forecasts and should not be viewed as formal guidance; we aim to be transparent with our limited visibility. Our Q4 broadcast expenses will see a low to mid-single-digit percentage increase over Q3 2019, primarily due to an approximately $20 million increase in reverse compensation year-over-year. We expect our corporate expenses in Q4 to align with the levels reported for Q3. Our production expenses should fall in the mid-teens to upper teens millions, considering the seasonality of that business as it becomes busier with the easing of lockdowns. To give a couple of liquidity updates, we now estimate our cash interest to be $176 million, down from $194 million. Initially, we estimated our CapEx at $80 million, but after prudently reducing it during the second quarter, we are adjusting it back to $80 million as the year finishes stronger than we anticipated. We also expect cash taxes to be around $80 million this year, reflecting improved revenue performance compared to earlier expectations. We anticipate ending the year with $675 million to $725 million in cash on hand, which could increase depending on final political numbers. It's too early to make predictions for 2021 or provide guidance, but we expect core revenue to improve during 2021 as we recover from 2020's pandemic-related declines and political displacement. Our production companies are returning to a full slate of sports events. As Kevin mentioned, by mid-2021, we will have repriced almost all of our retrans contracts covering about 66% of our subscriber base, so we expect significant growth in retrans revenue in 2021 as we reprice that percentage of subscribers. Now I will turn the call back to Hilton.

Well, thank you, Jim. 2020 has thrown incredible, unprecedented challenges at all of us, personally, and professionally. Nevertheless, our performance this year clearly validates Gray's decades-long commitment to acquiring, investing in, and locally operating the strongest local television stations throughout the country, now in 94 markets. Because these types of television stations declined less and recovered faster than most other types of media companies, we are confident that Gray Television continues to have an exceptionally bright future ahead. The broadcast business for all that you have heard remains an outstanding business. Absent an opportunity for further significant M&A over the next year, deleveraging remains the first priority for Gray with capital returns in the form of stock buybacks beginning immediately, next in importance. On our February earnings call, before the pandemic hit, I told you that our Board believes that we can continue to deleverage the balance sheet and pursue buybacks while, at the same time, reinstituting a quarterly dividend. Our Board has not yet reached the final decision to resume the dividend just yet, but I believe that it will soon reach that decision. As noted in that February call, however, the Board considers reinstating a dividend when our total leverage ratio, as defined in our senior credit facility falls below 4.0x on a trailing 8-quarter basis after netting total cash on hand. Whether our very strong political revenue this year fully compensates for the pandemic's impact on our core revenue remains to be seen. Regardless, when our net leverage falls below 4x, the Board will consider where the market conditions then permit us to return to paying our quarterly dividends and at what level we would initiate that dividend. So operator, at this time, we ask that you open up the line for questions.

Your first question comes from Steven Cahall from Wells Fargo.

That $15 per household in political is pretty outstanding. I was wondering if you could help us think about maybe the split between local versus presidential as well as the split between candidate versus PAC or super PAC on that? And you mentioned the runoff in Georgia. I was wondering if you're also seeing any expressions of interest from PACs or super PACs as some of the vote stuff goes to court and whether we could see a continued sort of long tail if the election process runs out a little longer and how that's factored into your updated political guidance? And then maybe just on net retrans, I mean, you talked about the really good visibility you have on 2021 on the growth side as well as some of the expenses based on the Q4 guidance. So I know that the timing for net retrans sets up this year to be, I think, down a little bit. So I was just wondering if you have any expectations at this point for 2021?

Let me start by discussing the political situation, then I'll invite Bob Smith to share his insights, as he has valuable information to contribute. We talked about an estimated $380 million, but we expect that figure to exceed that amount, although we can't determine by how much just yet. We have a runoff between the Democrat and Senator Kelly Loeffler, the Republican, which has already started and will conclude on February 5. We anticipate significant spending from both parties, but the overall impact will depend on voter turnout and the specific states involved, which remains uncertain. If the Senate balance persists, the financial stakes could escalate dramatically. As of this morning, Georgia has not yet released its final voting numbers. Incumbent senator David Perdue was above 50%, while his opponent Jon Ossoff was around 47%. If Senator Perdue's numbers fall below 50% once the final totals are made available, Georgia will have two runoffs for its Senate seats. Our company has a strong presence in every market in Georgia except for Atlanta and Macon, and we cover areas like Augusta, Savannah, Thomasville, Tallahassee, Albany, and Columbus. Therefore, Gray will benefit from any runoffs throughout the rest of the year and into early 2021. I don't want to overshadow Bob’s insights, but our investment in Maine has proven to be very successful. Recently, we sold our most valuable 30-second spot during a Patriots game for a six-figure sum, reflecting presidential ad spending. The spending on Senate and House races, as well as presidential campaigns and issue-related ads after the passing of Senator Ruth Bader Ginsburg, has been remarkable in every instance. Bob, would you like to add anything regarding the political landscape?

Sure, Hilton. I'd be happy to. You asked a little bit about the breakdown as how it went with Gray. And approximately, the presidential race accounted for about 23% of our overall revenue. The House, nationally about 16%. And the Senate, as Hilton just mentioned, was extraordinary, and that's roughly a little over 40% of our overall revenue. And that's where some of the biggest numbers were in terms of rates and issue money. We're in those Senate races. As Hilton described what happened in Maine, we saw similar situations in Wisconsin and Iowa as well and Alaska for that matter. So really record rates in certain programming areas, record cost per points and really just robust in a lot of markets in a lot of states.

Yes. Since you had two questions, Steven, are there any further follow-ups on political before we turn it over to Kevin?

I didn't address Hilton, maybe I should quickly. He asked about Georgia, and I wanted to mention that we are already seeing financial contributions in Georgia for the January 5 runoff.

That's great. Yes, Georgia on my mind and would love to hear from Kevin on the retrans side.

Yes, Steven, our growth will see a significant increase next year. It's difficult for us to provide guidance on that because we have not yet started discussions on some of the renewals. While some conversations have begun, it remains challenging to predict their outcomes. On the other hand, we are aware of the fixed fees from CBS and Fox, but we don't know the fees for the other two retransmission reverses since those are based on percentages. The performance in retransmission directly impacts what we can expect from ABC and NBC. Without knowing the top figures, I can't give you details on gross revenue, net revenue, or net retransmission amounts. We need an input regarding growth retransmission to make predictions. We have a lot to accomplish in the next couple of months, and after the start of the new year, we will have more clarity. Right now, any guess would not be very meaningful, and we're trying to provide forecasts based on reality. My guess would just be a guess, which isn't constructive.

Your next question comes from Dan Kurnos from The Benchmark.

Jim, you're performing significantly better at this point in the range for initial Q4 pacings, even considering the substantial political revenue you recorded in October. I wonder if you can share your thoughts on why you are exceeding the performance of your peers, even beyond the election impact.

Go ahead, Hilton.

Go ahead, Jim.

No. I believe it reflects what we have consistently stated. It's about the quality of our portfolio and the strength of our local stations. They are the preferred choice in all those markets, which is aiding us in the recovery from the pandemic. We are very encouraged by the pacing we are seeing for November, which is only down by low single digits. December is showing a more significant decline at the moment, but it often happens that as we progress through November and into early December, we can expect a surge of last-minute purchases that will boost December's results. Ultimately, I think it comes back to the strength of our news coverage and the overall presence of our stations in the community, which provides us with a competitive advantage.

Yes. I'd also add that we've invested in and implemented a very strong training program for our stations that has been running for over 18 months. I really think that's having an impact. We're equipping our sellers with the best tools available, including Premion, and I believe that also contributes to the numbers.

Got it. That's helpful. Is there any general category you could share with us, Jim, regarding what's improving?

Everything is improving across the board. September and October are somewhat exceptions due to political factors, but July, August, and November show sequential improvement in all categories. Although the automotive sector is still down, the decline is much less severe compared to the depths of the second quarter, and we're seeing consistent month-over-month improvement. The financial and medical sectors have shown strong performance recently, and when combined with legal services, these categories are holding up well this year and continuing to improve. While we can overlook October, November indicates positive trends in home improvement, services, and supermarkets, all performing well. The automotive sector, once down significantly, now seems to be in the low double digits range, reflecting considerable progress. As supply and inventory levels continue to recover, we anticipate further improvements. Where there is inventory, dealers are selling vehicles effectively, although some still desire increased inventory. Overall, the trend appears to be encouraging.

Got it. That's really helpful information. And then maybe just one last question for Hilton. You provided a thorough overview on shareholder returns and your capital usage. Historically, you've mentioned the need to grow or that in the absence of a significant M&A deal, you would focus on returning cash to shareholders. I'm curious how much the pending FCC court case influences your decision on how much liquidity you should keep on hand versus potential market opportunities. Additionally, do you believe you can manage both aspects effectively?

Dan, to address your question, yes, we can manage multiple priorities simultaneously. The reason you haven’t heard much from us lately is that we're currently facing significant uncertainty in the broadcast sector. We're unsure about the appointments to the FCC and the differing regulatory approaches of the two political parties, which will affect all mergers and acquisitions. We’ve never encountered a situation where the Third Circuit's decisions have been brought before the U.S. Supreme Court, and it's unclear how that will influence ownership regulations, whether within local markets or beyond. On election night, I hoped we would get some clarity, but that hasn't happened yet, and this uncertainty complicates our decision-making process. Many issues remain unresolved, such as the status of the UHF discount, the 39% ownership cap, and regulations regarding owning multiple stations in specific markets. One certainty in this period is that cash is extremely valuable. We have built a company valued at $2.5 billion over 30 years that generates significant free cash flow. This year, we've spent nearly $100 million on stock repurchases and have also invested hundreds of millions in small, accretive acquisitions outside of television stations. We expect to finish the year with around $750 million in cash. We're initiating a stock repurchase program on two fronts: one based on 10b5-1 and the other being discretionary buybacks when not in a blackout period, both of which were approved by our Board yesterday. I personally believe that continuing to grow this company is in the best interest of our shareholders. There is still plenty of opportunity for growth, and we are focused on making strategic acquisitions, even in these challenging times. We're not going to let our stock price remain at these low levels; it simply isn't justified. I've invested millions in stock when the price was in the 20s, and I believe we are significantly undervalued. Our financial performance and strong portfolio speak for themselves—our local TV stations are excelling in their markets, generating substantial free cash flow, which puts us in an excellent position. Did I address your question?

Yes. I'd say so, Hilton. That was a very comprehensive answer to that, and I really appreciate your insight there.

Your next question comes from Kyle Evans from Stephens.

Congrats on political, and I like the sound of that cash balance at the end of the year. Kevin, I think you said that CBS was a known expense on the reverse side for retrans. I thought you guys had a renewal with CBS in 2021. Am I wrong on that one?

CBS renews at the end of 2021.

And you guys give the cleanest look at gross reverse and net retrans, and therefore, you should expect noxious questions like the one I'm about to ask. What do you think the right steady-state net margin is for that revenue segment? And if you don't want to answer it, asked in a different way, should I start with a 4 or 3?

Our retransmission revenue is driven by the fact that our local stations attract more viewers than any other channel in their respective markets. While I don't want to be overly simplistic, we believe that retrans should primarily compensate us for our local investments, programming, and teams. However, we take many factors into account when negotiating network affiliation agreements, just like everyone else does. As we've mentioned before, our focus is not on margins but rather on how much money we can secure. I won't commit to a specific figure for what Gray believes the net retrans margin should be, as it truly depends on various negotiation factors such as the amount of time allocated for local commercials and the level of promotion we engage in. There are many elements to consider, and focusing solely on margins only gives a partial view. Each network affiliate relationship involves multiple layers, and we carefully consider all aspects during negotiations. Ultimately, the rate is just one aspect of a broader discussion.

Would you say that the blended average relationship for the big 4 is the same as it was a few years ago, better or worse or more contentious, not worse?

We haven't had a network renewal negotiation in a while, so I can't really comment on what are things may be today versus where they were when we last did them a couple of years ago. And our next negotiation is with CBS at the end of next year. So I think you need to ask somebody else.

Okay. Jim, I really appreciate the monthly granular detail on core. Glad to hear auto is improving. What's your early read on legalized sports gambling as a category?

Yes. It's very promising and has become an emerging category. Currently, there are legalized gambling options in 19 states, with 6 more having passed legislation. This means that half the country will soon have legalized gambling. Initially, we had a few accounts spending money in some of our markets related to this, but now we expect about 4 or 5 different gambling firms to be operational in the first quarter. We're very optimistic about the growth in this category throughout the year. We anticipate even better results at the start of the first quarter and throughout all of 2021. It is undoubtedly one of the most exciting categories for us right now as it is progressing rapidly, and the amount spent in our markets is quite substantial.

Your next question comes from Jim Goss from Barrington Research.

Hilton, you just mentioned your interest in growing your franchise. Given that you have a strong presence in your existing traditional Gray territories, if you needed to expand beyond those markets, what criteria or characteristics would you consider when identifying potential areas for growth? What factors would you be looking for?

Jim, you can see the opportunities that are out there. Gray has built a strong reputation in mid- to smaller markets, but with the Raycom acquisition, we've gained access to much larger markets, and they're performing very well. We're looking for individual stations, whether small or larger deals that become available. The landscape is shrinking, and in terms of operators and acquirers, Gray remains one of the few still active and ready to engage. We aim to find portfolios that enhance our quality and geographic reach. Our approach tends to focus on having significant presence in the states where we operate. Looking at our portfolio geographically, Gray tends to dominate entire states, allowing us to gather a lot of news. I've lost count of how many local senatorial debates Gray has hosted. We've also significantly expanded our partnerships with Telemundo to cater to the Hispanic market and will continue to seek growth in regions with large Spanish-speaking populations. So, as we examine the landscape, we’ll wait for the right opportunities to emerge.

Okay. That's very helpful, actually. One other thing then. Do you have any ATSC 3.0 update in terms of how many stations you plan to have some impact on over the near term and what type of applications you might be thinking about?

Yes, it's Pat. I can contribute to that. Generally, the rollout of ATSC 3.0 is beginning in larger markets. While I don't have specific numbers, I expect that we will likely have a number of stations in the high single digits deployed over the next 18 months. We are also conducting an experiment where we are equipping a stick with ATSC 3.0 to conduct our own testing and experimentation with it. Regarding the revenue-generating applications for 3.0, it will take time for those to develop, but I believe they will primarily focus on targeted advertising, incorporating data into video for automobiles, and possibly some other approaches that we may not have yet considered.

The next question comes from Alan Gould from Loop Capital.

Kevin, I know the election is not decided, but if it is a Democratic administration and a Democratic FCC, how would you expect that to change the rules for the broadcast industry?

I assume you're talking about ownership rules?

I assume you're talking about ownership rules?

Yes, I don't see much changing. The FCC implemented a one-to-a-market rule in 1940 before television licensing. Since then, the FCC has made some relaxations, allowing two TV stations to be owned in 1999 during Bill Clinton's administration. In 2017, they permitted two TV stations to be owned in midsized markets. Those are the only two instances of ownership deregulation in the TV space since 1940. When it comes to tightening those regulations, it’s difficult to envision a scenario where ownership is restricted further. The cap is already set, with exceptions for large markets under rules that have been in place since 1999. I find it challenging to see how they could worsen the situation. The national ownership cap is dictated by Congress, which instructed the FCC to maintain it at 39%, and it's hard to imagine the FCC decreasing that limit. Moreover, the Supreme Court is only reviewing local rules, specifically regarding newspaper-TV cross-ownership, which does not affect us or the ability to own two TV stations in midsized markets. They’re not looking at national ownership caps or the UHF discount, but their decisions might indirectly impact those issues. Nevertheless, I don't foresee any pathway for the FCC to reduce the national cap or limit the number of stations permitted in local markets from one to none. In large markets, it is unlikely that they would prohibit ownership of two TV stations when there are multiple owners in the area. The only potential area of concern might be joint sales agreements, as the last FCC made these agreements attributable for ownership purposes, effectively rendering them illegal. However, Gray does not have any joint sales agreements, so that doesn’t pose an issue for us. Bottom line, is there a chance? I'm sorry.

Is there a chance that the 39% cap could actually be raised?

There is always a possibility. At some point, people might recognize that broadcasters are competing with companies that operate without regulations. Facebook often takes as much revenue from a local market as the top TV station, and Google usually takes more than all the TV stations combined. If people finally understand that these companies can operate freely while broadcasters are burdened by strict ownership regulations, it might resonate with them. We've observed the consequences of applying outdated rules in smaller markets; local news production is costly. That's why typically only one company in a small market can manage to produce local news due to insufficient revenue. Is it feasible that we could see an FCC under a Democratic administration that understands this and loosens the ownership cap? I think there's a chance, but I’m not very hopeful. The general sentiment from Washington seems to favor regulating everyone rather than reevaluating the regulations to enhance our competitiveness. The focus seems to be on imposing more regulations on big tech instead of easing restrictions on broadcasters, so we can compete with those operating without regulations. However, this is all speculation about future events. We don’t even know who will be the FCC Chairman or Chairwoman or the fifth commissioner. So it's a bit like trying to predict the weather weeks in advance.

And your next question comes from Mike Kupinski from NOBLE Capital Markets.

As a follow-up to that, Kevin, I understand there are discussions regarding regulation on big tech monopolies. Some major tech companies have indicated plans to allocate funds for content, and I'm aware of talks with other media firms about the significance of that. Have you engaged in discussions with any major tech companies about providing content for cash payments? Do you see this as a potential opportunity for Gray at some point?

Well, to be clear, our content is available on every major tech platform. We were early users of Facebook stories about three years ago, featuring Gray Television as a case study for local media on that platform. We've been live on the Fire app since 2017 and on Roku since 2014. We're actively present on tech platforms and operate across all OTT platforms. Our content can be found on Twitter, Facebook, and more. Regarding compensation, those discussions appear to be rather limited.

That was our last question at this time. I will turn the call back over to the presenters.

Well, thank you, everyone, for joining us for the third quarter earnings release. We look forward to seeing you to bring up all of 2020's results in 2021. And so thank you, and we will talk to you soon.

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