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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to the TEGNA Fourth Quarter and Full Year 2019 Earnings Call. This call is being recorded. Our speakers for today will be Dave Lougee, President and Chief Executive Officer; and Victoria Harker, Chief Financial Officer.
At this time, I’d like to turn the call over to Mr. John Janedis, Senior Vice President of Capital Markets and Investor Relations. Please go ahead.
Thank you, Shelby. Good morning and welcome to our fourth quarter and 2019 full year earnings call and webcast. Today, our President and CEO, Dave Lougee, and our CFO, Victoria Harker, will review TEGNA's financial performance and results. After that, we'll open the call up for questions. Hopefully, you've had the opportunity to review this morning's press release. If you have not yet seen a copy of the release, it's available at tegna.com.
And before we get started, I'd like to remind you that this conference call and webcast includes forward-looking statements and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release.
And with that, let me turn the call over to Dave.
Thank you John and good morning everyone. As you saw on our earnings release this morning, TEGNA ended the year with significant momentum across the business as we execute against our five pillars of value creation.
As a reminder, these are, one, being the best-in-class operator; two, aggressive yet discipline pursued M&A opportunities; three, innovation and expansion into adjacent businesses; four, maintaining a strong balance sheet and rapidly delevering; and five, commitment to free cash flow generation and balance capital allocation.
The results we announced today reinforce our continued progress on each of these five pillars, as well as the strength of all our key long-term growth drivers. As we enter 2020 with a strong momentum, we are on track for a record year, which is reflected in our bullish first quarter and full year guidance.
Beyond just this year, we have increased conviction of how our strategy will drive long-term growth and shareholder value. As Victoria will discuss in greater detail on her remarks are prominent outlook for 2021 shows how well-positioned we are to continue to generate tremendous financial performance.
As we move forward, we remain open to all avenues for creating shareholder value, we will always staying laser focused on execution of our near and long-term strategy. 2019 was a pivotal year for our company as we executed on both organic and inorganic growth. We met or exceeded all of our key financial guidance metrics for the year.
For the fourth quarter, TEGNA's total revenue was $694 million, up 8% year-over-year. Revenue growth was driven by strong growth in subscription revenues, and advertising and marketing services that are benefiting also from the first full quarter of our recent acquisitions. This more than offset the expected reduction in political advertising compared to 2018.
Subscription revenue continued to contribute to our growth as the distribution agreements we just completed in the fourth quarter repriced half of our subscriber base. Combined with expected repricing of an additional 35% of subs in 2020, this equates to 85% of subs having been repriced by the end of this year. Increasing the predictability of our future cash flows and supporting our ability to secure top-of-market retrans rates for our portfolio of Big Four affiliates.
A final comment on the fourth quarter. And that is that our advertising and marketing services revenues continue to grow with solid demand from traditional advertisers and added dollars from new advertisers as we continue to diversify our advertiser base. This improved trend provides a solid underpinning to advertising as political begins to pick up steam. Victoria will go into more detail on our financial results later.
M&A remains a core element of our strategy, and we completed $1.5 billion of strategic acquisitions in 2019 at attractive multiples, which were immediately accretive to free cash flow, and are expected to be accretive EPS with nine months well ahead of schedule. Through these acquisitions, we have continued to deliberately expand our reach in the markets that will benefit disproportionately from political spending in even years, and further reinforce our ability to achieve top-of-market Big Four retrans rates that I referenced earlier.
Our disciplined approach to acquiring new assets generated significant value without impacting our flexibility to acquire additional stations in the years ahead. Our recent acquisitions are expected to provide approximate annualized revenues of $500 million, adjusted EBITDA of $200 million and free cash flow of $100 million on a two-year average basis, all while owning only using three points of headroom under the FCC household ownership cap.
Our strong free cash flow enables us to rapidly delever falling transactions, while continuing to pay an attractive quarterly dividend. This active management of our balance sheet includes the recent completion of two debt refinancings, taking advantage of low rates to reduce interest expense and improve our financial flexibility. We plan to delever to approximately 4.0 times by the end of this year, enabling TEGNA continue to play a key role as an industry consolidator in the years ahead.
We maintain a disciplined approach to M&A, acquiring high-quality broadcast assets as well as compelling adjacent businesses. We seek to acquire assets that are synergistic and expected to be accretive to earnings and free cash flow, while producing attractive returns. We are well-positioned to take advantage of additional consolidation and continually analyze opportunities to create shareholder value.
The strength of our balance sheet, ample headroom under the ownership cap, and a reputation as a partner of choice to independent broadcasters all position as well for future M&A opportunities.
I noted earlier how the continued growth of our sub revenues helped us achieve such strong results for the quarter and full year. TEGNA has been successful in generating these durable revenues in recent years and as our guidance reflects, we expect another strong year ahead. As a result of our success in the current subscriber fever pricing cycle, we expect to generate at least mid 20s percentage growth in 2020 in terms of subscriber revenues. And after renewing our CBS and Fox affiliate agreements in 2019, we enter the year with financial clarity of our Big Four relationships into 2021 and beyond.
On the political front, we are more confident than ever of our expectations as the 2020 election spending cycle is off as you can probably imagine to a very strong start. Our portfolio has been strategically constructed to take advantage of increasing even year political spending, with new stations and many high spend battleground states.
Coupled with Premion’s capability to address OTT viewers in and outside of TEGNA markets, a tool we did not have for the last presidential year, we are well-positioned for 2020 and future election cycles. We had a record fourth quarter for an odd numbered year in political, and we have seen an earlier than anticipated level of spending this quarter, further increasing our confidence that we will generate more than $300 million in high margin political advertising this year.
With strong momentum in both political and subscription revenues, we continue to expect the combination of these two revenue streams to make up approximately half of our total two-year revenue beginning with this 2019 and 2022 year cycle, and an increasing percentage thereafter, the key element of our durable strategy to drive shareholder value in any environment.
Now I'd like to share a couple updates on our strategic content program initiatives. In the fourth quarter, we continue to see growth and recognition for high-quality content and initiatives across our portfolio. A couple of examples, TEGNA’s VAULT Studios launched a five-episode podcast series titled Amy Should Be Forty, another example of how the studio has leverage local TEGNA stations archive news libraries to create impactful, informative and entertaining True Crime genre content for new distribution paths.
Producing and distributing high-quality news and information is a responsibility we take very, very seriously. Which is why in January, we announced that we have committed to training all of our journalists across the 39% of this country we serve to combat this information. So, key in this age of social media. We will identify false information and help consumers distinguish between what's fact and what's fiction in their social and digital feeds.
In summary, I'd like to highlight several key milestones that we achieved since the beginning of 2019. We announced and closed acquisitions reaching $1.5 billion that are immediately accretive to free cash flow and expected to be EPS accretive within nine months of the close, an acceleration from the previous announced 12 months.
We successfully reached multiple key distribution agreements, repricing half of our sub base at top-of-market Big Four retrans rates, extending agreements for multiyear terms and providing predictability of future cash flows. We created an integrated in-house national salesforce, embracing automation for a more -- for the more commoditized sides of the business, and creating a capability for more high-tech solutions for our national clients.
And finally, we further strengthened our balance sheet and added financial flexibility by issuing $2.1 billion of senior notes and amending and extending our $1.5 billion revolving credit facility, all on very favorable terms to the repricing as we did in September of 2019 and just this past January 2020. Our commitment to executing on our long-term strategy and the specific actions we have taken to do so over the past few years are generating strong results for our shareholders.
We look forward to abundance of opportunities we see this year to execute against our strategic framework, including the remaining subscriber repricing, the Summer Olympic Games on our large NBC portfolio stations, and anticipated record political revenues across our entire portfolio. We're more enthused than ever about our strong positioning for the future with a clear strategy and the financial flexibility to continue building shareholder value for many years beyond.
I'll now pass the call over to Victoria to cover our financial results in more details. Victoria?
Thanks, Dave. Good morning, everyone and thanks for joining us. As Dave mentioned, we're excited about all of our stations strong operational execution again this quarter, both our legacy stations as well as those we acquired in three highly creative transactions we closed late last year.
Before I cover our consolidated financial results, I'd like to review a few special items with you. For the quarter, these include non-cash charges of $16 million, which were partially offset by two $3 million gains. One for reimbursements for FCC Spectrum repacking, and the other for write up of our previous investments.
In addition, we covered -- incurred severance in closing costs of $7 million related to our recent acquisitions, and an incremental $6 million in activism defense advisor fees.
Now onto the fourth quarter consolidated financial results. Keep in mind that my comments today are mainly focused on TEGNA’s performance on a consolidated non-GAAP basis to provide clear line of sight into the financial drivers of our business trends and operational results.
Also, as a reminder, our fourth quarter results this year are not comparable to the same quarter last year as a result of nearly $140 million of political advertising revenue in 2018. This is also the first full quarter of contribution from our recent acquisitions, most of which closed in late third quarter. You'll find our reported data and all prior period comps in our press release.
As you saw in our release, total company revenue for the fourth quarter was up 8% year-over-year, beating our prior guidance range of us mid single-digits. This was driven by our new acquisitions, of course, as well as strong growth in subscription revenues, political advertising, and the continuing strength of advertising and marketing services offerings through the year, all of which I'll talk about in more detail in a minute.
Total revenue for the quarter was up only 33% over last year, excluding the impact of political advertising. This performance also exceeds our prior guidance of high 20s percent growth.
For the full year 2019, total revenue increased 4% to $2.3 billion, driven again by the continued strength of subscription revenue, growing momentum and advertising marketing services, as well as roughly one quarter's contribution from my new acquisition. This was partially offset by the near absence of political revenue in 2019 and off cycle year compared to $234 million in political advertising in 2018.
In terms of the subcategories of revenue for the quarter, subscription revenue increased 20% for the year, also exceeding prior guidance of high teens. It's worth noting again, as Dave said, with half of our subscriber base repriced during the fourth quarter, combined with another 35% ahead repriced this year, only 85% of our subscribers will be repriced by the end of 2020. These reprice subs at the top of market rates produced strong and newly cash flows giving us both stability and predictability of future cash flows.
Advertising and marketing services finished the year up 11%, driven by the strong performance of acquisitions in 2019, as well as our legacy stations, reflecting growth in most categories all year, partially offset by the loss of Olympics revenue.
Now onto expenses. Our operating expenses for the fourth quarter were 27% higher on a year-over-year basis, in line with our prior guidance range of mid to 20% [ph]. This has driven predominantly by new acquisition and higher programming fees associated with higher subscription revenue. Excluding acquisitions, programming expenses and continued investment and revenue initiatives, operating expense was down 1%.
As a reminder, programming fees include reverse compensation paid to networks. As a result, as reported adjusted fourth quarter EBITDA was $29 million, producing a very healthy 33% margin again this year.
For the full year 2019, operating expense was up 13% also primarily driven by acquisitions and higher programming fees associated with higher subscription revenue. Excluding programming costs and incremental expenses related to acquisitions and investments, operating expenses were down 4% for the year, reflecting our ongoing efficiency efforts. As a result, full year 2019 adjusted EBITDA was $708 million, down 9% from the prior year due to near absence of $234 million high margin political ad revenue in 2018.
We generated $111 million of free cash flow in fourth quarter and $376 million for the full year. For the 2018/2019 two-year period, our free cash flow as a percent of revenue was 19.1%, ahead of our recent guidance range of 18% to 19% of revenue, and well ahead of the 17% to 18% range initially provided.
As a reminder, we also recently increased our guidance range for the 2019/2020 two-year period to 19% to 20% as well due to the ongoing strength of the business across the board. We expect the two-year period 2020 to 2021 free cash flow as a percentage of revenue to be in the 19% to 20% range as well.
As previously discussed, we continue to use our free cash flow and $125 billion revolving line of credit for investments such as new product initiatives as well as to fund acquisitions and reduce higher coupon debt.
We also continuously focus on reducing the cost of financing our business. As you've likely read on January 9, TEGNA successfully completed $1 billion offering of senior notes with the same covenants as our prior debt structure at 4.625% [ph] rate due in 2028, a historically low interest rate. Net proceeds were used to repay approximately $650 million of our October 2023 bonds and $310 million of our July 2020 bonds. We now have approximately $900 million drawn under our revolver, finishing the quarter with total debt of $4.2 billion.
Now, turning to the first quarter and full year 2020 guidance. In an effort to help forecast our near term results, we're again providing several key quarter ahead financial guidance metrics. For the first quarter, we expect first quarter total company revenue to be up low to mid 30s. When excluding political revenue, we expect revenue growth to be in the mid 20s, driven by the same factors previously discussed.
From our first quarter expense perspective, we forecast as reported first quarter operating expense to increase in a low to mid 30s, driven by our new acquisition, higher programming fees and investments in content and digital. Excluding programming, expenses are forecast to be up in the high 20% range, the majority of which is driven by the new acquisition.
In terms of our full year 2020 guidance, on a reported basis, we've also further refined our prior outlook as well. On a full year 2020 basis, we expect subscription revenue to be up mid 20s based on sub trends and the timing of MVPD renewals.
As you may have read Spectrum was our first major agreement successfully closed in the fourth quarter of 2019, which began a process through which 50% of our subscribers were repriced in that quarter, with another 35% scheduled to be repriced by the end of 2020. This is proof positive our ability to work collaboratively with our MVPD partners to complete very successful agreements, which drive strong revenue and free cash flow, both now and well into the future.
And, as Dave mentioned, after renewing our CBS and Fox affiliate agreements in 2019, we enter the year with clear visibility into the strength of our Big Four relationships into 2021 and well beyond.
Beyond this growth in 2020 full year EBITDA and free cash flow will also continue to reflect year-over-year expense improvements resulting from significant cost reduction initiatives that have been underway for the past 24 months. These efforts include implementation of shared service support centers for all back office and transaction processing functions, bringing our companywide financial system consolidation, which will be completed in second quarter of this year, and automation of sales support, Master Control as well as traffic streaming and monitoring function.
As a reminder, here's an overview of our updated key 2020 guidance elements. Corporate expenses expected to be in the range of $41 million to $43 million. Depreciation is projected to be in the range of $66 million to $69 million, slightly below our prior estimates. Amortization is projected to be in the range of $73 million to $75 million. Interest expense reduced due to the benefit of our refinancings is now expected to be in the range of $220 million to $225 million.
We expect capital expenditures be in the range of $62 million to $66 million, which includes non-recurring CapEx of approximately $20 million to $24 million. And just to unpack that further, this is comprised of repacking, as well as $15 million of non-recurring CapEx for development work in key projects, such as our new Master Control traffic streaming and monitoring platform, as well as our ERP implementation, both of which are well underway.
The consolidation and monetization of these systems allows us to not only continue to reduce significant operating costs in the future, but also to seamlessly integrate new acquisitions at little to no incremental cost.
The effective tax rate is expected to be in the range of 23.5% to 24.5%. And beyond this, as we previously disclosed, we're currently planning no additional share repurchases until we delever later this year.
As you know, TEGNA follows a disciplined capital allocation framework that balances our desire to enhance our growth product profile through strategic accretive acquisitions, with our commitment to a strong balance sheet, organic growth and return of capital to shareholders through dividends and deliberate.
Capital allocation decisions are always tightly aligned with maximizing shareholder value. And we dynamically allocate capital to the options that offer the highest returns as we and our board regularly analyze all opportunities to generate long-term value.
As Dave noted, we were very active participants in industry consolidation in 2019. The $1.5 billion in transactions we closed last year were acquired at or below market sharing multiples of approximately 7.8 times or 6.7 times on a tax adjusted basis.
As results, as reflected in our outlook, these transactions are expected to provide annualized revenue of approximately $500 million, adjusted EBITDA of $200 million and free cash flow of $100 million on a two-year average basis. And we only use three points of our national cap room to achieve this.
Also, all of these transactions were immediately free cash flow accretive and are well on track to be EPS accretive within nine months of close, several months earlier than anticipating. To reflect our strong capacity to leverage opportunities are both a financial and strategic fit.
As we previously discussed, we have ample capacity at the end of the cap to execute on our strategy to the efficiency of our buying power and continue to actively pursue assets that are fit for us within current industry regulatory constraints.
As a result of our recently completed acquisition, leverage temporarily increased at the end of fourth quarter to 4.9 times. Accelerated political free cash flow is currently being used to reduce that debt, decreasing net leverage to approximately four times later this year. Beyond the $1 billion refinancing, we've already retired an incremental $50 million in debt this quarter already, providing increased firepower and further positioning us to benefit as a long-term consolidator.
Now, just put the strength of our ongoing business performance into perspective. While there's a lot of understandable exuberance within the broadcast sector due to 2020 political advertising, here at TEGNA we're even more excited about the future of our business beyond this year as a result of the smart cap collocation decisions we've made over the past three years. Our investments in strategically and financially transformative M&A, as well as operational excellence are providing us with enormous operating leverage, which is clearly reflected in the throughput of our business going forward.
To that end, let me give you some early insight into several key 2021 financial metrics. Keep in mind that while we remain actively engaged in exploring further consolidation opportunities, just preliminary glimpse into 2021 there's not any assume any additional M&A or more than our current $300 million political revenue guidance floor for 2020.
For 2021, we're very confident in mid to high 20s revenue growth in 2021 compared to 2019, driven by our newly renegotiated top-of-market retrans rates, strongly accretive acquisitions, and ongoing Premion growth. And while the strength of these drivers not only creates great cyclical year-over-year [ph] revenue growth comparisons, what's even more remarkable is this. Given the strength of projected 2021, subscription and AMS revenue performance, we forecast this that these revenues will all, but offset 2020 political revenues.
As a result, political and subscription revenue combined will see 50% of total revenue on a two-year 2020/2021 basis, providing for even stronger cash flow trends, improve visibility into future results and a more recession proof business than ever.
Likewise, 2021 EBITDA margins are expected to be in line with 2019 margins, driven by the strength of subscription revenue growth and AMA, as well as roughly $25 million incremental cost savings from the expense initiatives already underway. This will also drive free cash flow generation for the 2020/2021 periods in 19% to 20% of revenue as well. That's a pretty awesome metric too, really reflecting the benefit of increased operating leverage we built into this business and the monolithic impacts of our retrans agreements that have flowed from our ongoing operational performance.
To give this further context, as we previously discussed by the start of 2021, leverage we back to our pre-acquisition levels of four times or below, given our seller delevering during 2020. This provides for significant firepower to continue to invest in our business initiatives, repurchase shares, and opportunistically pursue equally strong new acquisition opportunities.
And on that front, just as a reminder, we currently enjoy seven points under the FCC ownership cap, or 14 points below the cap with UHF discount and have more than sufficient capacity to continue to invest in M&A efficiently and accretively as we've done over the past three years.
So just to calibrate the math for you. A hypothetical $750 million acquisition in 2020, with similar financial characteristics to our most recent deals, including a buyer multiple of roughly eight times, would add approximately $300 million in revenue and $100 million in annualized adjusted EBITDA to 2020/2021, without constraining our remaining cap space or debt capacity in any way. And all of our platforms, systems and organizational streamlining work done to date allows us to integrate any new acquisition with speed and ease, adding little to no cost even during the transition as shown in the fourth quarter of 2019.
In summary, both our 2020 guidance and 2021 key metrics reflect the transformation of our business over the past three years for our operational excellence and our ability to acquire and integrate financially and strategically strong assets into our existing portfolio. Well beyond political, these drivers have an outsized impact on the strength and predictability of TEGNA shareholder wealth creation into the future.
Before we open up for questions, I'd like to turn it over to Dave.
Thank you, Victoria. Before we begin the Q&A, I want to refer you to our January 21 letter to shareholders, which addresses a number of topics including standard general, a topic we will not be discussing today. For today's Q&A, we ask that you keep questions to the company's performance and outlook.
With that, we will take your questions. Operator?
Thank you. [Operator Instructions]
We'll take our first question from Vasily Karasyov from Cannonball Research.
Thank you. Good morning. I have a couple. First, do you mind giving us an update on how ad sales are pacing in key categories so far this quarter?
And then the second question I had is on the successful renewal that you had. So, could you please give us a little more detail on the drivers of the first year step-up? And then how did these new deals compared to your historical deals in terms of duration as escalators and second, third years and things like that, anything that you think would be useful for us to dimensionalize this?
Sure. Good morning, Vasily. Yeah, let's start with ad pacing, an advertising pacing is well, we've continued to see sequential incremental improvement from quarter-to-quarter now for four quarters. And in the first quarter -- and keep in mind for us we have one of the biggest deltas on the Super Bowl year-to-year, because it was on Fox last -- on CBS last year for which we have a sizable number stations and Fox this year for which we don't have a lot of household, so that's about a $6 million incremental bogey year-to-year. But even not adjusting for Super Bowl, our pacing looks pretty good.
Automotive is up for the first time in a while for us and that's driven in part by Premion, which is really expanded our advertiser base in auto. Media and telecom is up very nicely. Home improvements up, travel and tourism is up a lot, medical dental, optical up nicely; banking and finance up, entertainment up, auto aftermarket up, retail slightly down in low single-digits and services category continues is about flattish for us, but that's because we had a couple large whale, we call them advertisers, last year that aren't in this quarter, but we actually continue to expand that base and that continues to be a very strong category.
So, we're pacing up even adjusted for the Super Bowl. Actually, when you -- and when you adjust for the Super Bowl, we're pacing even better. But it -- we're very pleased with the outlook on advertising.
As it relates to the renewals of our subs to your questions, if I think I've got them all. So, the first year step ups are significant. I'll leave it at that. I think just as a bit of commentary for -- we have a very -- not just a very concentrated portfolio of Big Four stations. What I mean by that is very few CWs and MyNetwork, but they're also very strong, large market, big force and a lot of them. And as we referenced in my script, we've even added more stations like that through M&A. The benefits of stations like KFMB in San Diego and THR in Indianapolis and BNS in Columbus are very strong stations that are very important in the MVPDs. So, we come to those negotiations from appropriate position of strength.
The first year step ups you ask about, a very, very strong. Second and third year step up into double-digits. Duration of the deals vary. But we -- we intentionally don't do very long deals, because the market continues to move appropriately in our direction because there's still, as I've talked about in previous calls, still a gap between the viewership of Big Four affiliates generally and the overall cable marketplace in general.
Thank you.
We'll take our next question from Alexia Quadrani with JP Morgan.
Hi. This is David Karnovsky for Alexia. Assuming that your plan in TEGNA exit the four time leverage that you've laid out, how do you see the pipeline for potential M&A at that point? Are there still large station groups that are available for deals, or do you think you might have to look at more smaller targets?
Look, I'd answer the question this way. We are -- in we -- we know all the players in the industry. And we are opportunistic on deals that make sense for our portfolio under the financial metrics that and discipline that Victoria and I have outlined today and on other calls. So, it's not -- it's not a large or small criteria, we can do both. But all under the methodology we've talked before, if you think about our space under the ownership cap, we want to maximize EBITDA, given every point we have underneath the ownership cap, which has Victoria also mentioned academically, if we bought all UHF stations will be 14%. So really it's that criteria. That's the most important criteria along with location, network affiliation, all those types of -- all those types of criteria.
Okay. And then may be a little early to ask this question, but given the NFL may go into negotiations for television rights this year. Is this something that is coming up in your discussions at this point with either your network partners or distributors?
We do talk about it with our network partners very much so, all the time. And you didn't ask me the question, but I'll give you the answer to a question didn't ask me I do believe the NFL will stay strongly on broadcasting. I think at the end of the day, the erosion of cable subs has more than ever shown the benefit the NFL gets from being on the broadest possible distribution mechanism. And while I'm be no doubt that the digital players will probably be brought into negotiations as leverage, feel highly confident that in the end, we will end up with a very strong portfolio of NFL games on our. There may be some shifts between networks, there may be some changes in the structure. But given our portfolio and our network affiliations, I'm very confident the NFL will be a big part of our future going forward, which is a good thing.
Okay. Thank you.
We'll take our next question from Dan Kurnos with Benchmark Company.
Great. Thanks. Good morning. Dave, a pretty healthy look at Q1 here. Obviously, political rather topical. Maybe if you can either frame up either directionally or specifically, higher thinking about political in Q1 and I know, given history, you're unlikely to be pigeonholed into giving us a number other than the floor for the full year, but at least help us think about sort of the variability that Bloomberg is bringing to the race and maybe order of magnitude on a pro forma basis that you could achieve this year.
Yeah, I mean, as for the full year, no change to our guide, Dan. At this point, obviously, it is going to be a very robust first quarter. But I do need to remind you what's still going to end up being true. As it as in every other -- even your election cycle is it will all -- the total revenue will be completely back half loaded to the end of the third and especially into the fourth. So, I actually think you may see a little bit of a pull through forward for the second quarter, the first this year, because so many primaries have moved up, many of our states moved from the second quarter, the first quarter. So between Super Tuesday -- Super Tuesday alone, half of our markets are participating in that. And then the remainder of March, a whole rest of us -- most of our other markets will be participating.
So, I think you'll see first quarter will be more robust than in years past on a percentage basis, but also in a truce -- just a true level spending basis. I mean, even without Bloomberg, I think first quarter would be very, very strong. And so Bloomberg, obviously, has been additive to the primaries.
I think it’s a good thing about Bloomberg going forward, if Bloomberg stays in the race or let's imagine Bloomberg became the candidate, the one thing to keep in context is I think things would still end up near the same because Bloomberg would have a lot of money to spend on his own, but I don't think he'd be getting money from small donors. Right? So he wouldn't have I don't think the same impact on the general election that he is having on the primary season. Does that does that answer your question, Dan?
Yeah. No, that's really helpful. And then -- thanks for all the color guys on 2021. Just housekeeping quickly, Victoria, can you just give us a sense of -- when you gave the margin number, was that on an as reported or pro forma basis flat with 2019? And I'm assuming the growth that you gave was as reported.
And for Dave, just obviously of NBC coming up in 2021, can you just help us frame sort of your view on net retrans? Thanks.
In terms of pro forma -- in terms of the margin as pro forma, but as reported is largely in the same neighborhood, so not materially different.
And on NBC, Dan, yes, what all -- everything we model for 2021 corpuses -- encompasses the new negotiation we will have with NBC and we have a very good idea where that will end up and reminder NBC is 42% of ourselves below reprice 85% of our paying subs by the end of next year. And look we will certainly have some -- our revenues are going up on retread so, we'll -- their revenues will go up too, but the shares are different discussion, right? I think so the bottom line is net reg retrans will continue to grow very nicely.
Got it. Thanks for all the color guys. Appreciate it.
We'll take our next question from Stephen Carll with Wells Fargo.
Thank you. A couple questions on your subscription revenue. I was wondering if first, you could discuss maybe the shift from traditional MVPDs to virtual MVPDs? Is that negative or neutral or positive to your subscription revenue growth longer term? And what kind of sub declines have you baked in to the mid 20% subscription revenue growth that you've got this year?
And just as it relates to it, are you seeing an increase in viewership at your OTA assets? And you mentioned seeing auto driven on Premion, so as we do see a bit more of a pickup and cord cutting and a shift to more of these alternative distribution models, are you seeing kind of a back end benefit from your other businesses? Thanks.
Okay. I'll start with subs. So subs have been down low to mid single-digits. Our finance team has done an awesome job over the last two years on modeling literally by month where subs are going to end up and I'm talking about net subscribers, right? Losses in traditional offset by positives in virtual. Virtual it's not a one for one replacement. I think numbers out there about marginally around half is sort of the current rate.
I actually am somewhat optimistic, not predicting, but a little bit optimistic that that conversion rate will continue to improve. So I think the early users -- nearly cord cutters were probably the least loyal television viewers. But now I think as older viewers and more -- becomes more commonplace, more easier, the kids come home at Thanksgiving and explain to mom and dad how to do it, et cetera, et cetera, that I think you're going to see now the cord cutting on go forward basis being more traditional viewers who will seek out another virtual -- a virtual MVPD to make sure they have their local channels as a service. So, we're -- that that low to mid single-digits is what we're modeling with some -- moderate acceleration through the year. So, we've got very realistic numbers built into our model.
As it relates to OTA, you're right. So when homes OTA viewership is increasing, I don't think it's completely accurately captured by Nielsen has kind of a lag there. But you're absolutely right. When a home goes to OTA, by definition, it has less channels and they're all broadcast. Right? So, the share of viewing an OTA homes increases for us when that happens.
Great. And then maybe a quick follow-up. I was wondering if you could maybe give us the pace of your programming expense growth for the year. Thanks very much.
Give us a minute on that if you would, Steve.
Sure.
You are talking about the pace of growth from 2019 to 2020?
Just maybe what like the quarters look like in 2020 in terms of what programming expense, or reverse compensation expense looks like through that period?
Yeah, they're not going to vary -- they're not going to very much at all. They'll be related to the top line. And because we don't -- we aren't going to be renegotiating other subs until the back half of the year, there won't be much variability on that until -- actually that the subs renewals will be almost all in the fourth quarter. So that's -- that's the only time we've probably seen any significant change in that number.
Great. Thank you.
We'll take our next question from Jim Goss with Barrington Research.
Thanks. I've got a few also. One related to political. With your emphasis -- Texas, your dominant, so that market normally I would tend to think that much exposure to one state isn't necessarily advisable that maybe it's warranted by the political opportunity as the tides tend to turn in that state. I wonder if you talk about that.
And then also sort of net political, but the Olympic bump in the third quarter this year, along with the early surge in political after the conventions might balance out Q3 and Q4 a little bit more than it would, do you think? Those are starter.
Okay. Let me take those -- yeah, Jim. Good morning. Let me take those in order. So, Texas has not historically been a huge political spending space -- state, especially in generals, because it's been so republican historically, but that did change some with the senate race in 2018. And now this year, first of all, starting with the primaries, obviously every state that has a primary matters, right, for delegates and Texas has moved -- as you know is now exact date there is Super Tuesday state so we've seen significant spending in Texas on the primary.
As for the general, I -- we're not modeling that it'll be a contested election for presidential in the general. But there's some significant house seat races and big markets for us, some republicans have left their seat and are not running, so there's some -- and house spending will have -- contested house races will have a lot of spending. And we have a lot of those races in Texas.
And to that point, one of the -- one of the strategies behind heading up in Texas from the beginning -- going back to when we bought below in 2013 is that the obvious changing of the demographics of Texas will make it a purple state. And by all accounts, it will be by 2024. So by 2024, we think presidential spending in that state could be very large, and you're right with 80 -- exposure to 87% of the state will take advantage a disproportionately.
On the Olympics, Jim, I think, yeah, the Olympics recall -- realize, though that even though the Olympics are a nice bump for us, we're not as heavy up on NBC as we once were through our acquisitions. We were more diversified than we once were. So, for every NBC station where dollars get added, and especially in large markets on CBS, ABC stations, money gets taken out of the market. So, it's a negative. So there's kind of a -- it's not a wash, but the incremental gets watered down a little bit on a percentage basis.
So no, I -- it -- and to your question about evening out the quarters, frankly, a lot of the Olympic inventory will get used for political, right? Because obviously, it's a very high profile place for political advertisers to be, so that kind of muddies the water a little bit. So, yeah, it might even out a little bit, it does on Summer Olympic gears, a little bit the third fourth quarter delta, but still the amount of political on a real basis in fourth quarter will still completely consume both political and Olympics in the third.
Okay. And to the -- thank you for that. And to the extent that you've been talking about your capacity and capability to acquire additional properties. Will this help in terms of scale? Are there any more significant synergies or benefits to be gained from additional acquisition aside from those specific properties you could potentially acquire?
And since Nexstar has gotten bigger into larger markets, though, they would need real changes to acquire aggressively. Does that change the mix in terms of -- the competitive situation in that acquisition opportunity?
Yeah, to your second question, no, Nexstar being in some larger markets doesn't have any impact on our M&A strategy or opportunity. I think look as -- a couple comments about scale, we don't need additional scale to achieve a lot of what we need to achieve, right? But scale does matter. And we obviously -- given our scale already and the -- all of the backend efficiencies that we bring to any acquisitions as well as how they can help all, so acquisitions continue to be a good opportunity for us, to continue to derive value, but we're no need to do one at any moment in time. We're going to be disciplined to pick up the right opportunities at the right time. We do not -- we do not want to no pressure to do something to hit our numbers. We're fine. But obviously, as our record has shown, opportunistic M&A at the right prices and the right assets works very well for us and our shareholders.
Okay. And lastly, with regard to the FCC, duopoly is probably key meaningful opportunity with clear economic benefits. We have the election undergoing -- underway, of course. Do you need to move quickly before elections? Or is there anything that can be done to prod anything along at this stage and as the dynamic change a lot if democrats take over?
Yeah, no, very good question, Jim. So on the issue of duopolies or in market consolidation of two big force, that's not actually a political issue, right? That's not an FCC problem. It's a court problem, right? It's the Philadelphia court. So, those judges have been tough on the FCC on a number of things historically, and that's the FCC was on our side on that, so that -- I think that issue is sideline for a while, although I think at a certain point in time, and I get the ownership capital minute, but on both topics you are starting to see younger staffers both on the hill and at the FCC starting to realize okay, this maybe nuts, right, these outdated rules on broadcasters.
And what actually brought that to the floor was, when the DOJ actually went a little bit backwards on their definitions of the video marketplace and even held a public hearing about it. And all the participants in the hearing broadcasting cable in the digital world, all agreed that the video marketplace is now fungible. So, the both, the DOJ and the FCC are operating more than DOJ with an outdated definition, the video marketplace. And I have some competence over time, that will take care of itself.
I think the ownership cap, probably with there is no changes prior to the election. And I'm not -- I think -- the frankly, there's uncertainty both ways -- yeah, you're right. If a democrat wins the White House, probably extends the time in which the cap may get lifted, although I think again, common sense will prevail. But I'm not entirely clear what Trump reelection would look like. As to who a President Trump would put in to run the FCC.
So, hard to predict on all that. But I think in our case, what's really worth noting is, we've got 14 points under the cap when you consider the UHF and there's ways we can do some shuffling to be able to do that. So, we don't need the rules to change in the near term to have upside.
All right. Thanks very much. Appreciate it.
Thank you, Jim.
We'll take our next question from Kyle Evans with Stephens.
Hey, good morning. Thanks for taking my questions. You've already touched a little bit about on the NBC renewals beginning of next year. But could you back up and just kind of characterize network relations right now? CBS and Fox were saying some scary things in 2016 and 2017. And with a little bit of noise around the Peacock, streaming moving, late night forward, just kind of step back and tell us kind of where we are as you go into your renewals with the networks in 2021, in 2022 and in 2023.
Yeah, well, look, we've already -- we've already renewed CBS and Fox. So that's behind us. Right? So, we're out several years with both of them. And answer is relations were a little different with -- different with each network. But the one that matters the most to us is NBC and we have a very strong relationship with NBC.
So, they're important to us, but we're important to them. When you look at the delivery of our stations on an aggregate basis and how it actually lifts their overall NTI rating index. And we value them enormously. We think their son football is the best sports asset in the entire TV ecosystem, the way they produce it and the way they've executed against it. So, we feel very good about our particular aggregate relationship with networks and especially given that NBC is the most important to us and we have a strong relationship with our second largest provider CBS as well.
Right. It was not that long ago that everybody was running around afraid of low caste is the new existential threat, you know, that was originally Aereo, it seems like that is absolutely falling off the map. Could you give us your kind of updated views on low caste or any other kind of pending threat to the broadcast ecosystem?
I guess my answer to that question, Kyle, is haven't even thought about it lately. I mean, I think they just -- as we predicted early on, just -- we were talking in preparation for the call, in my time in the broadcast space, the number of theoretical existential threats that turned out to be nothing, whether it was, you know, the retransmission consent regime was going to go away or Aereo or low caste and many, many others. And last I heard, they're just -- they're dialing for dollars for donations, but they have been a non-factor to our business, and I don't see -- we see no scenario where they're going to become one.
Right. Well, crappy products usually go away. Last question. market size differences and retrans, sub trends is something you've talked a little bit about in the past and wondered if you had any kind of updated thoughts on what you're seeing in your large versus your small markets on sub counts. Thank you.
Yeah, for our portfolio that's pretty much evened out that gap -- that -- the distinction we saw between large and small is sort of evened out not really quite there as much, the difference is really between MVPDs as you probably heard from others. I mean, there's a significant difference between -- we'll just say generally, large cable companies and large satellite companies.
Great. Thanks for the update.
We'll take our last question from Doug Arthur with Huber Research.
Yeah. Thanks. Victoria, I may have missed this in the release, has been a lot going on this morning. But is -- the acquisitions, is it fair to say they added somewhere between $100 million and $105 million in revenue in the quarter, is that a ballpark number?
We're not -- we didn't break it out on a pro forma basis. And I'd have to get back to you, because we've actually got them all integrated within our financial systems today. But I think it's -- but ballpark, I think you saw that in terms of -- we showed what it was going to be appropriate -- in terms of 2020 additive and a two-year basis revenue is about $500 million. And EBITDA is about $300 million. So, I think that's pretty clear number in terms of annualized for 2020.
We have no more questions in the queue at this time.
All right. Thank you for taking the time to listen to our call today. To conclude, we're thrilled with the execution against our organic and M&A strategies and excited by the opportunities ahead this year and beyond. If you have additional questions we were unable to cover today, please reach out to John Janedis at 703-873-6222. Thank you again, and have a great day.
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