Gray Television Management Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 8.13 | About: Gray Television, (GTN)

Gray Television (NYSE:GTN)

Q2 2013 Earnings Call

August 08, 2013 12:00 pm ET

Executives

Hilton H. Howell - Vice Chairman, Chief Executive Officer, President and Member of Executive Committee

James C. Ryan - Chief Financial Officer and Senior Vice President of Finance

Kevin P. Latek - Senior Vice President of Business Affairs, General Counsel and Secretary

Analysts

Aaron Watts - Deutsche Bank AG, Research Division

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Davis Hebert - Wells Fargo Securities, LLC, Research Division

Barry L. Lucas - Gabelli & Company, Inc.

Operator

Good day, and welcome to the Gray Television Second Quarter 2013 Earnings Release Conference Call. Today's teleconference is being recorded. At this time, I would like to turn the conference over to Hilton Howell, President and Chief Executive Officer. Please go ahead.

Hilton H. Howell

Thank you, operator. And thank all of you for joining us for lunch this afternoon, and welcome to our Q2 presentation for Gray Television. As is usual, I will be making a few brief comments followed by Jim Ryan, our Senior Vice President and our Chief Financial Officer; and then by Kevin Latek, our Senior Vice President for Business Affairs. As usual, we will take questions at the conclusion of our comments.

Overall, we are very pleased with our operating results for the second quarter of 2013. Our revenue, excluding political, remains strong and our expenses remained in check. Our total net revenue decreased $10.4 million or 11% to $84.3 million for the second quarter of 2013 compared to the second quarter of 2012. As all of you know, comparisons between odd number and even number of years are very challenging due to the highly cyclical nature of political advertising revenues of which Gray receives more than its fair share.

Overall, Gray Television had another excellent quarter. Our total net revenue of $84.3 million is the highest level in our company's history with the sole exception of the politically fueled second quarter of 2012. We previously hit a high watermark for the second quarter in 2011 when we reported $76.2 million in revenue. In other words, this quarter's revenue is an impressive 10.6% higher than our previous nonpolitical record set in the second quarter of 2011. It's important to appreciate that we generated 10.6% higher revenue with essentially the same stations and markets that we owned in the second quarter of 2011.

Our core business remains strong and continued to grow in the second quarter. Local and national advertising revenue and retransmission consent revenue increased due to increased spending by our advertisers in a slowly improving economic environment. Fully 8 of our 11 core advertiser categories were up year-over-year and 3 categories were up by double-digit percentages. Two categories were essentially flat, while only 1 category decreased, meaningfully, from last year. Retransmission consent revenue increased again primarily due to increased subscriber counts and rates.

Turning to noncore revenue. Everyone on this call and everyone who follows our industry understands that political advertising revenue is highly cyclical and most of you know that Gray earns a relatively higher percentage of political revenue than most, if not all, of their publicly traded television groups. Moreover, last year's saw a record amount of candidate and issue advertising placed much earlier than before in the presidential and other campaigns. In contrast, we see very few campaigns occurring this year in our markets and political revenue has largely evaporated as a result. All of this makes year-over-year comparisons very difficult for a company like Gray with strong stations in key markets. In particular, political revenue for the second quarter of 2013 decreased $11.6 million from the same period of last year. The lack of this political revenue largely explains the decrease of $10.4 million in total revenue between second quarter last year and the second quarter this year.

Let me turn briefly from revenue to cash flow. For the second quarter of 2013, we reported $32.3 million in broadcast cash flow and $28.3 million in broadcast cash flow less corporate expenses. This morning's earnings release explained that, again, due primarily to the absence of political revenue. The second quarter's results represent a decrease from the cash flow reported in the second quarter last year. What I think is equally, if not more important, is the comparison of the second quarter 2013's cash flow to the corresponding period in the last off-cycle year. Our broadcasting cash flow this quarter represented a healthy 21% increase over broadcast cash flow in the second quarter of 2011. Even better, broadcast cash flow less corporate expenses, increased an impressive 22% over the same quarter of 2011.

My final note on finances concerns our earnings. This morning, we reported earnings per share of $0.09 per share during the second quarter. These results represent a tremendous improvement over our last odd-year second quarter earnings when we reported just $0.01 in per share earnings. This achievement is even more impressive when you consider that we increased earning per share from $0.01 to $0.09 with essentially the same stations in the exact same markets that we had in the second quarter of 2011. We are very pleased with our performance in this off-cycle second quarter.

In other news, as all of you know, in late June, Bob Prather, our long-serving President, resigned. Our board accepted his resignation and appointed me as President. Shortly thereafter we announced a new management structure that we believe will enable us to continue to grow Gray Television in efficient and prudent ways. I'd like to personally thank Bob for his years of service to Gray Television, and to wish him absolutely the best in his future endeavors.

I'm also very pleased to report that on August 2, we announced that we had entered into several agreements that will result in our first ever shared services agreement. In particular, Gray agreed to purchase the tangible assets of ABC affiliate, KJCT in Grand Junction, Colorado from the News-Press & Gazette Company. The newly formed company called Excalibur Broadcasting, which is owned by former regional Vice President of Gray Television, will purchase the FCC license programming agreements and other assets of the station. The transactions are obviously subject to FCC approval, and we anticipate the closing will occur in the fourth quarter this year. After closings, Gray will provide certain services to Excalibur through our local NBC affiliate in Grand Junction, KKCO.

Finally, I want to highlight that on Tuesday of this week, we received the final payment from Young Broadcasting under our now expired management agreement. The payment totaled $7.1 million. In accordance with GAAP, we will recognize this payment as revenue in the quarter ending September 30, 2013.

This brings my formal comments to a close, and I'll turn it over to our Chief Financial Officer, Jim Ryan. Jim?

James C. Ryan

Thank you, Hilton. Good day, everybody. Talking about the quarter first again, we're happy with quarter revenue. Local was up 5%; national was up 5%; Internet was down slightly, which was a bit of a disappointment to us, and it's something we'll be focusing on, as the year progresses. As Hilton already mentioned, retransmission was up $1.1 million and 13.5%. Auto was up 8.5% for the -- in the quarter and it represented about 24% of our airtime buy. Legal was up 15%; communications up 13%; home improvement, 11%; supermarkets nearly 7%; furniture, department stores, entertainment, all up between 4% and 5%. The only softness we've continued to see, and it's been a trend for the last several quarters, is in finance and insurance, it was down 9%. Medical was almost flat just down 1% and restaurants were essentially flat. And as Hilton already mentioned, broadcast cash flow -- cash corporate expenses, Q2 '13 to Q2 '11, so it's off-year to off-year, is up 22%.

On the 6 month numbers, again we're pleased with the overall local national core revenue. It was up 3.5%; local up 3%; national actually in Q2 up a little bit more at 4%. Again, retrans is running at about 13%, 14% increase, $2.3 million for the first 6 months. Auto for the first half of the year has been up 10%. And again the trends that I just discussed for the second quarter, are very similar for the 6 month. Legal, supermarkets, all up double digits; department stores, 7%; furniture and appliance is 5%; home improvement, entertainment, communications all up lower single digits, as well with just finance again continuing to show a negative trend. Medical also a slight negative trend.

Our guidance in the earnings release, again, calls for a strong core growth of about 5% to 6% in Q3. We're up against very tough comps in Q3 going against the $5.1 million of Olympic-related revenue in Q3 last year. That's going to probably dampen our national a little bit in Q3. We expect it to be down slightly, maybe about 2%. Again, strong continuing growth in retransmission. All in all, a very strong Q3. And as Hilton mentioned a minute ago, we'll be booking the $7.1 million of the final incentive fee payment that came in from Young this week.

Turning to the balance sheet, our debt to trailing 8 quarter average cash flow ratio was 5.84 against a 7.75 covenant. Our first lien ratio was at 3.69. Really, the debt had not changed. We're still $835 million total debt. $535 million of the term loans were outstanding, and we have $300 million of our unsecured notes outstanding. Cash at the end of the quarter was at $23.4 million. Our CapEx for the quarter was $6 million, with year-to-date number of about $12.5 million. Cash taxes for the quarter was just over $400,000 and year in 6 months year-to-date, it's just at $500,000. And as we talked about many times, we don't set ourselves to be as being a big cash taxpayer any time and in the near future.

Program payments were $2.8 million for the quarter, $5.7 million for the 6 months and that basically tracked the same for program amortization as well. Reverse comp to various networks was $1.8 million in the quarter and for 6 months it's $3.7 million.

At this point, I'll turn it over to Kevin.

Kevin P. Latek

Thank you, Jim. Hi, my name is Kevin Latek. This is the first earnings call that I've joined, and I promise, I'll be brief. Hilton asked me to highlight a few of our milestones from the second quarter of 2013 and the past several weeks. As this quarter began, we launched KSNB-TV in Lincoln, Nebraska. It's a full power television station. We're operating as a duopoly with our CBS stations in Lincoln. KSNB is a brand at Central Nebraska News. The broadcast news in high definition and we've already secured carriage and essentially all of the homes in the market.

In early June, we constructed and began operating WRGX, the first NBC affiliate for Dothan market. This new station is running at duopoly with our existing Dothan CBS station, WTVY. We are proud of our team and Dothan for constructing this new station, high definition in less than 4 months, and getting it cleared on every major cable and satellite system by the end of July, which is truly a record time.

June also brought a number of wildfires to Colorado, where as you know, we have stations in both Colorado Springs and Grand Junction. Colorado Springs our CBS affiliate, KKTV, worked tirelessly around the clock. They were on the air continuously for 100 hours to cover the Black Forest Fire. This fire sadly killed 2 people and destroyed even more homes than last year's Waldo Canyon Fire, which at the time was the most destructive wildfire in Colorado's history. On the other side of the state, our NBC affiliate KKCO in Grand Junction had its hands full covering numerous simultaneous wildfires on the western slopes of Colorado. We're very proud of the superb work that our dedicated reporters, videographers, producers and others demonstrate in Colorado and all of our markets when the communities most need them.

And finally, our team in Lincoln, Nebraska, which literally just finished launching -- constructing and launching KSNB, is now finishing up an effort to construct and launch another new station which is KNPL in the market of North Platte in the western side of Nebraska. KNPL will be the first CBS affiliate for this market. For decades, viewers in this underserved market have been able to receive our programming out of Lincoln and Grand Island, but by early September, our news station KNPL will launch as a standalone operation with its own local news, weather and sales force, and this will allow us to create statewide news and information network. These are all opportunities that we have discovered over the last few months, and worked very hard to launch. We thought they were worthy of mentioning here on this phone call.

So with that, I'll turn the discussion back to Hilton.

Hilton H. Howell

Great. Thank you. Thank you, Kevin and Jim both. And at this time, operator, would like to open up the call for any questions anyone may have.

Question-and-Answer Session

Operator

[Operator Instructions] We'll take our first question from Aaron Watts with the DB.

Aaron Watts - Deutsche Bank AG, Research Division

A couple of questions for me. I guess, first just to clarify, Jim, on your outlook for the third quarter, your local up 5% to 6% x political and national up around 2%. That is despite the lost Olympic revenue correct, that's baked in there?

James C. Ryan

That's correct, that's baked in, and actually national we expect to be down slightly because of the tough comps created by the Olympic revenue from last Q3.

Aaron Watts - Deutsche Bank AG, Research Division

Okay, and then secondly, can you just remind us the near-term landscape in terms of your affiliation renewals? And then on the other side of the coin, any large MSOs or satellite distributors that you have coming up for new subscriber deals?

James C. Ryan

Yes, let me take the MVPD first. We have 1 million subscribers coming up at the end of October for repricing, and an additional 1 million subscribers coming up at the end -- in December of '13, at the end of this year, as well for renewal and repricing. And then at the end of next year, at the end of 2014, we have approximately 4.5 million subscribers that will also be on -- at renewal and up for repricing as well. As far as affiliations go, we did our deal with NBC last year. Our ABC affiliations are up at the end of this year, which will work well with the 2 million subs we get to reprice by the end of this year. And then our CBS affiliations are up at the end of '14, which will work nicely with the repricing of, as I said, about 4.5 million subs at the end of '14

Aaron Watts - Deutsche Bank AG, Research Division

Great, and Jim, your total subscriber number right now?

James C. Ryan

It's about $6.5 million.

Aaron Watts - Deutsche Bank AG, Research Division

Okay, got it. And then last one I had just maybe more big picture for Hilton, just as you've seen some of the big transactions that have taken place, consolidation plays, in this space, I know you've picked up a couple of stations here and there, but have you -- as you see those larger transactions happen, Gray hasn't been a participant. How do you think about Gray a year from now, 2 years from now? Do you feel like Gray will participate on a larger scale in consolidation as a buyer, potentially seller? Just curious of your thoughts on your strategic future.

Hilton H. Howell

Sure, Aaron, I'm delighted to answer that question. I think that Gray Television has really a vital and integral role to play in the consolidation of this industry. As you saw, we really have the first opportunity that we have had as a company through the foundation of Excalibur and the acquisition with the station in Grand Junction to really expand our duopoly footprint. As you could tell also from Kevin's comments, we expanded a lot from de novo stations that we have opened in our markets. I think that there is a great deal of opportunity for us to pick off stations that fit our profile. I think there's been a lot of players and certainly a lot of press discussion about scale. Certainly, I understand that from everyone's perspective, but everybody sort of talks at their own book. The way I look at scale in this business is very simple. I mean, it's scale within our markets and Gray, I think, over the last 20 years, has built a remarkable portfolio of stations with or without duopolies. We have a dominant share in every market that we play in. And consequently, in any negotiation with any MVPD, with anyone, we're going to be in a very, very strong position. So scale is something that I think is critical, but everyone sort of looks at it from a different standpoint. I will say in terms of acquisitions, we have looked at things, and in all of the earnings calls since I have participated in, the mantra from us is that the company was in a delevering mode. And we still are. But there are certain stations and there are certain groups that are perfect fits with the Gray Television portfolio. And we will make every effort we can in a reasonable and prudent fashion and in a fiscally sound fashion to add those types of stations, what we think of as Gray TV-type stations, to the portfolio of this company. I also think, quite candidly, there's a lot of family-owned businesses and family-owned television stations that are looking for someone that shares our corporate culture. But that's similar to theirs with regard to our commitment to local news coverage, with regard to our commitment to our communities, with regard to our commitment to what we're doing in terms of creating really valuable content that goes in those markets. And so I think that Gray as a company has a long road ahead of it in terms of being able to add those type stations to our portfolio. Now I will say our company, you ask about potential sales, really there's been tremendous amount of speculations about acquisitions, us being sold, everything else. First, I want to say the company is simply not for sale. But, let it be known that I'm certainly aware that a lot of people would love to buy us. And I am not and would not say absolutely never, but where we stand today, we have a long road ahead where we can grow and expand and increase the shareholder value of all of our shareholders. And that is what our duty is, that's what our fiduciary duty and that is what we plan to do. I do think that you're going to see us. We have nothing we're working on, there's no contracts, but if you get around the business much, I think it's fair to say that we have been in contact with every principle, with every group of almost every size in one level or another. And there are a wide variety of different permutations that we're looking at. And who knows what the future's going to be. Our plans are to stay independent, but that doesn't necessarily preclude almost anything because there's a large number of ways to structure transactions to make sure that we enhance the shareholder value of the Gray Television shareholders. Does that answer your question, Aaron?

Operator

We'll move next to the site of Marci Ryvicker with Wells Fargo.

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

I just wanted to dig into a little bit on core trends. Curious as to how the months trended in the second quarter and how they're trending in the third quarter, specifically September just as we heard from a small market billboard operator who said that September's soft from a couple of movement of some national contracts. I know you're comping against the Olympics, but anything you talk about there. And then the second question is have retransmission consent negotiations gotten tougher over the last couple of months, and do you think that Time Warner Cable-CBS dispute is going to wane at all when you go up to negotiate?

James C. Ryan

Marci, I'll take the trend question first. Overall, Q2 was a little bit mixed. April and May, where April was about 4.5% up. This is x political, not -- let's make it clear, it's x political. May, we actually had a strong May, up about 6.5%. June came in at about 5%, but actually it would be fair to say June actually slowed up on us as we got into June, which is -- was a little bit of a surprise to us. What we saw there was auto being very strong in the first part of the quarter and in June it tapered off to a mid-single digit up. Looking ahead through the third quarter, obviously, we've got really tough comps in August because of Olympics. September is right now pacing slightly down to about flat. It's a little early to tell, but we think all in all, local will do well in September. Again, it's a little -- the actual amount in that we've already got booked for September is actually only about 60%. So it's -- we've got ways to go yet. It seems to be tracking okay, though. Auto though does, at least for us, look a little bit slower, definitely slower in Q3 than it has been the first 2 quarters of the year.

Hilton H. Howell

Marci, let me just stress just a little bit and then, Kevin, I'd like for you to follow up behind me as well because as some of you guys may or may not know, Kevin in his private practice led our retransmission negotiations on behalf of Gray a couple of years ago. But let me just say with regard to the CBS-Time Warner controversy, as it stands today, we're the largest CBS affiliate, and we very much stand behind CBS in its effort to get a fair payment stream for the quality programming that they put out. Are those negotiations going to be tougher in the future? I think the headlines clearly indicate that, that's going to be the case. To date, Gray has never had to take, at least to my memory, any of our stations off the air to reach any sort of agreement with any of our cable operators. And I hope that, that stays true in the future. But I think that negotiations may be tough in the future and I think we're going to have to be steeled and prepared for them, and because I think everyone has to -- the viewing audience that we bring to bear in each of those markets is enormous. And it's tremendously large. And our company needs to receive payment for it as do our network partners. And so we want to stand lockstep with CBS in their negotiations. Clearly, I'd be delighted to be the beneficiary of anything that Les Moonves and his CBS team do because they're really the best in the business in a lot of ways. And -- but our company is prepared because I don't think any of our cable operators can simply do on a local basis without our television stations. I don't think there's a chance of that happening. Kevin, do you want a follow up from there?

Kevin P. Latek

I think Hilton hit all the high points here. The Time Warner dispute is, with CBS, is almost a repeat of what we seemed to see a lot. I think CBS had an interesting fact in one of its releases that this is the first time in history CBS has been dropped from any cable system, while Time Warner has dropped more than 50 channels in the last 5 years. So I think the negotiations have always been tough with certain operators. I don't think they're going to get any easier as broadcasters continue to seek fair compensation for the program that we're delivering, eyeballs that we're bringing to the table. For Gray, in particular, going back to Hilton's comment earlier regarding scale. We have, over the last 20 years, consciously built a company with the strongest brands in its market. And that we think helps us with our negotiations with all vendors and employees and talent. In terms of retrans, while we may not have a coverage at 30% of the country in any local market, it would be extremely difficult to operate a MVPD without diluting newscast, or without the best programming, the leading weathermen, et cetera. That's the way that we have focused on scale. That's the business that Gray has built. And so we're very -- I was -- I enjoy doing the retrans for Gray. Before I came here, I'm sure that our next conversations are not going to be a walk in the park, but I suspect that Gray, in our good relationships with the MVPDs will result in improved retrans contracts without the public rhetoric that sometimes has to accompany these negotiations.

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

I just have one follow-up. Do you anticipate any change in regulations around retransmission consent? And what are your views there?

Hilton H. Howell

No, short answer.

Operator

We'll move next to the side of Davis Hebert with Wells Fargo.

Davis Hebert - Wells Fargo Securities, LLC, Research Division

Back to your comment on leverage, I just wanted to get a sense for if anything has changed as far as your target. I know Bob has had historically talked about you guys would get below 5x and then sort of look at shareholder returns or -- and/or M&A. Is that -- has that notion changed at all?

Hilton H. Howell

No, the notion and the goal has not changed, Davis, but I will say that there are -- our industry has changed in the last 12 months. And so we have had targets out there that we were planning to hit, but things are moving very, very quickly in the broadcast space. And I think it would be inappropriate for us not to pay attention to that change. Acquisitions that we make, for instance, Grand Junction, that is clearly going to be a deleveraging acquisition for us across the board, as you look at it. Everything that we have done in terms of the de novo stations that Kevin referenced and then actually 3 or 4 more new stations that we haven't talked about that much were immediately accretive to our cash flow. And in fact, in some of our meetings with investment bankers around, some of you may have been on the phone right now, a statistic that I did not know, our company post-refinancing in October brings a larger percentage that gets cash flow to the bottom line than any other publicly traded comparable that people have been able to track. What I think that, that means as -- assuming the economy remains stable and improving, that we will be able to delever in a continually aggressive way while at the same time looking at potential acquisitions that fit us. I think in terms of acquisitions, you need to know that we're not interested in numbers for the sheer sake of numbers. We're interested in stations that deliver what our stations deliver. And there's only a handful of those left in the country. And we're not going to ignore those opportunities, but we're going to make sure that those opportunities, if we succeed in that transaction, are helpful in our effort to get to the goal that Bob had mentioned to you because personally, the way I run every business -- and my rules are simple: It's solvency, profitability and growth. And so I very much want to have a solid and comfortable balance sheet. And I do want to be able to return in time to paying dividends to our shareholders. But there are certain times in the world when one needs to step out. And so we are looking aggressively at partners and at deals. And we will make sure that we do our absolute best to keep that leverage in line in terms of all of those acquisitions or potential ones because I have nothing here to share with you with regard to anything we are looking at. Is that answer your question at all, Davis?

Davis Hebert - Wells Fargo Securities, LLC, Research Division

Absolutely, that's very helpful. And then on the mobile TV front, I know with the Time Warner Cable and CBS negotiations, that Aereo has been sort of brought to the forefront. Maybe or maybe not a point of leverage but whether Aereo is legal or not is another conversation, but do you feel like the presence of Aereo has resulted in a sense of urgency around the mobile TV effort for the industry? And where does Gray stand in that?

Hilton H. Howell

Let me say that and then I'd like both Jim and Kevin to join in as they see fit. I certainly hope so. My standpoint is that our industry needs to get itself moving on mobile television. And I don't think there needs to be any interfraternity sort of fights about this because mobile is the way the world -- it isn't moving. It's there. And so my standpoint is if we're not there now, then that's a problem. And so we need to move. And if Aereo is an impetus to our industry broadly to move towards that, then I applaud it, because Gray has been, I think, almost unique among its market size companies as a true pioneer. In many instances, this is because of Jim Ocon, who is the Head of our technology, who has pushed so hard because we've been out there on every front. As you know, we had the announcement about SyncBack and what was going on there earlier in this year. But we have looked at every different thing and tried to do really progressive things and forward-thinking things. And so we're there with regard to mobile. And if Aereo is an impetus for everyone else, then that's something good that comes out of Aereo despite its illegality. Kevin or Jim, do you have anything to add?

Kevin P. Latek

I'll just address the context you may know Gray Television put 4 stations up in the mobile DTV platform a number of years ago. We -- 2 CBS, 2 NBC. It was literally a test. We constructed and spent a couple of million dollars constructing mobile DTV platforms at these stations, smaller markets to help the networks, help our partners, help other broadcasters and ourself figure out, how does it work and how well does it work and what do we need to improve. And Gray has been -- Gray was not part of the Pearl Group. It's not we participate in some of the mobile 500 initiatives, but we did not sign up without a technical standard, and we have experimented with this now for a number of years. And I think the -- Bob's original vision was, we'll just step up to the plate, spend the money, get our station, get some stations up and the rest of the broadcast industry will meet us at the altar. And it didn't entirely work out that way for a couple of reasons. What we have, sort of shifting our focus now to SyncBack. SyncBack, as you probably know, is an Internet delivery protocol, so you can receive a TV station on mobile devices, iPads, tablets, mobile phones. It's geocoded so that you see only the stations within the market. And it's initially authenticated so the station only streams the content that it has the rights to stream. We were approached by some networks about this, a lot of broadcasters were talking about this a little while ago and even some syndicators have asked about it. So earlier this year, we did -- we signed up 2 of our markets for an internal test. The SyncBack technology worked extremely well. We rolled it out to a couple more stations, it worked just as well there. So we then pulled all of our stations and asked if anyone else would like to rollout with the SyncBack. And actually every one of our GMs raised their hand and said yes, and some called and say how can I get to the front of the list. So we have rolled out SyncBack now with all of our stations and technologies there. We are currently streaming in a closed environment. In the next couple of weeks, we will be able to sort of lift the veil on that and launch all those stations commercially. At that point, we will be streaming to the viewers in the local markets only. I would say our local content, a fair amount of syndicated content, and at this point none of the network content. I'm hopeful that we will see that very soon. Obviously, we need to be sure that network content is behind the TV everywhere wall, so we're not giving our content away for free. So those discussions are now in the works. You probably know Nielsen is rating the SyncBack viewership, so I think all the pieces are here. And since we announced the day of the CBS affiliate meeting in May that we would be launching all of our stations on SyncBack, we've personally gotten a lot of phone calls from other broadcasters who have asked us about our experience and are joining it. So I think mobile is certainly in everyone's mind. I think Aereo is part of the impetus. SyncBack seems to be working well and getting a lot of traction. And it seems that, that's probably going to be a solution in the near term for mobile delivery. Whether the broadcast mobile platform works or not is something we're still very interested in and we're still committed to seeing through to the end, but at this point SyncBack seem to kind of have the lead in as a solution for broadcasters.

Operator

[Operator Instructions] We'll take our next question from Barry Lucas with Gabelli & Company.

Barry L. Lucas - Gabelli & Company, Inc.

It's just kind of a nuts-and-bolts question for Jim. It looks like you're pretty much over-delivered on the expense comp in 2Q, but fairly sizable ramp in Q3. And just wondering, Jim, how much of that is -- might be attributable to the launch of the new stations and/or the JSA agreement.

James C. Ryan

The JSA really we wouldn't expect anything or any significant activity there in Q3. That will be a Q4 event. Those additional stations we've been building out both in Nebraska and the North Platte, that's part of the ramp-up as people come online to support those operations in Q3. That's part of the -- it's part of the uptick a little bit.

Kevin P. Latek

And in Dothan, as well, where we have affiliated new NBC in Dothan.

Barry L. Lucas - Gabelli & Company, Inc.

And if those stations weren't in the mix, any sense on what the the core...

James C. Ryan

I don't have an exact number on that. Those additional channels and stations aren't taking a huge amount of people. North Platte's probably the most aggressive one and even there, we're talking a staff of probably under 20 people, maybe closer to a dozen, someplace in there. So out of the up 5, 6 in the guidance, I think there's a percent or 2 in that and then the rest is just kind of core.

Barry L. Lucas - Gabelli & Company, Inc.

One other thing, maybe if Hilton wants to polish up the crystal ball and look out towards 2014 political, you did a great job in '12, no doubt about that, and over-delivered there. How do you see '14 shaping up as a nonpresidential year?

James C. Ryan

Hilton, if I could jump in just ahead of you for a second, just to be clear, make it easy then you could kind of frame it a little bit, but '14, obviously, is not a presidential year, Barry, like you said. By my last count, we've got 15 senate seats open in '14. Obviously, it will be house seats, also '14, governorships. And some of the Senate seats and governors are going to be open seats. So we would expect them to be somewhat contested and to put it again give a little bit of historical perspective, 2010 would have been the last off-year nonpresidential, and we came in at $57.6 million. So, Hilton, if you -- whatever your thoughts are for '14.

Hilton H. Howell

Barry, let me -- I think there's a number of lessons that we can take out of the last presidential election. As sort of common investors in the broadcast business and whatever political party you may be affiliate of, President Obama established a precedent that I think is stunning. Brilliantly successful and hugely in the benefit of television station operators, especially those operators like Gray Television who deliver dominant news in a dominant position in the DMAs of their choice or of their service. What we saw was presidential money coming in from the Obama campaign in May. That ran consistently all through the summer right up until the general election. I think that there was a lot of speculation that the Romney campaign was going to deliver a knockout blow in the last 6 weeks, and the truth of it is that's not -- it doesn't work that way any longer. Early voting starts much earlier than it ever has before and market after market and people's minds can be quickly identified. And so I think going forward, I think 2 things are happening or going to happen all in the benefit of our industry. First, I think the window is going to expand dramatically for political advertising in 2014. And the political parties -- and they have the ability to raise that money. And so I think it's going to be there. I think that you have a highly partisan environment right now where both parties are going to be battling to either keep or take the Senate. The entire House of Representatives is going to be up. Jim gave an excellent analysis of the number of Senate seats, all the house seats, obviously, and the governorships that are open in our states of business, which is hugely beneficial to us. And so I think it's going to be a fantastic political year. I really do. I hope that answers your question. If you want to follow up on that, I'll be happy to.

Operator

We'll take a follow-up from Davis Hebert with Wells Fargo.

Davis Hebert - Wells Fargo Securities, LLC, Research Division

Just wanted to ask a quick question on any sort of refinancing opportunity you might have, given the strength of the bank market right now.

James C. Ryan

When we refinanced last October, the term loans came with a soft call at 101 for the first 12 months. So obviously that will be coming off in October. I think that's something that, obviously, when we get to October, the call is off. And if the leveraged loan market is still very strong, it would probably be something we would look at it, so it's all, obviously, going to be rate dependent when we get a few months down the road.

Operator

[Operator Instructions] And I'm showing that we have no further questions at this time.

Hilton H. Howell

All right, well, I just want to take a moment to thank everyone for your attendance this afternoon, sharing your lunch with us. I really, sincerely, appreciate your support of Gray Television and the support of our shareholders. We look at the future as exceptionally bright for this company, and look forward to it with great anticipation. Thank you, and we'll talk to you next quarter.

Operator

This concludes our conference. You may disconnect at any time. Have a wonderful day.

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Gray Television (GTN): Q2 EPS of $0.09 in-line. Revenue of $84.29M misses by $0.88M. (PR)