Nexstar Media Group, Inc.
Q1 2021 Earnings Call Transcript

Published: 4 May 2021

[Operator:]

Good day, and welcome to the Nexstar Media Group First Quarter 2021 Results Call. Today's conference is being recorded. I would now like to turn the call over to Joe Jaffoni, Investor Relations. Sir, please go ahead.

[Joe Jaffoni:]

Thank you, Katie, and good morning, everyone. I just need to read the safe harbor language, and then we'll get right into the call. All statements and comments made by management during today's conference call, other than statements of historical fact may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.

[Perry Sook:]

Thank you, Joseph, and good morning, everyone. Thank you very much for joining us to review Nexstar's record first quarter results with our net revenue, profitability and cash flows handsomely exceeding consensus expectations. The first quarter clearly highlights the resiliency and adaptability of our business and the proven ability of our long-term strategies to drive top line growth through increased content monetization and diversification, while at the same time leveraging our scale, reducing debt and allocating our growing free cash flow to return of capital initiatives, which are driving shareholder returns. We're extremely proud of the record first quarter results and the more than 12,000 members of the Nexstar nation across the country, who, while serving their local communities have managed through, and in most instances, overcome the challenges presented by the pandemic, putting Nexstar on a path for continued growth in the current quarter and beyond. Before getting into the quarterly highlights, I'd like to quickly review our progress against our capital allocation priorities and long-standing commitment to enhancing shareholder value. In the first quarter, we allocated $80 million towards debt reduction and returned approximately $151 million to shareholders through dividends and share repurchases, thus reducing our share count to approximately 43 million shares. Nexstar returned approximately $383 million to shareholders in the form of share repurchases and dividends in 2020. So with $151 million in the bank in Q1, we are well on pace to exceed that level this year. Tom Carter, Nexstar's President and Chief Operating Officer and CFO, is also with us on the call this morning, will review the quarter, our outlook, our plans for continued capital returns and our confidence in achieving our pro forma annual average free cash flow guidance for the '21/'22 cycle of $1.27 billion or about $30 per share.

[Tom Carter:]

Thanks, Perry, and good morning, everybody. I'll now review Nexstar's Q1 income statement and balance sheet data, after which I'll provide an update on our capital structure and some points of guidance. Q1 of '21 was a very good quarter for Nexstar. Net revenue increased 2% over the same period of the prior year and approximately the same amount on a combined pro forma same-station basis. Net revenue ex political was up 7% to $1.1 billion and up 6% on a pro forma same-station basis. Core advertising revenue, local and national, was down 1.4% to $411 million, but on the television station side was up 2% on a same-station basis.

[Perry Sook:]

Thank you, Tom. We continue to execute extremely well on our strategic priorities, including serving our local communities and driving increased content monetization, while reducing debt and allocating free cash flow to growing capital returns for shareholders. Looking ahead, we have excellent visibility to delivering on or exceeding our free cash flow targets in this current cycle and a clear path for the continued near and long-term enhancement of shareholder value as we follow the successful strategies that we've established in terms of building the top line, maintaining close control of fixed and variable costs and optimizing the balance sheet. Our disciplines in these areas have added consistency and visibility to our results while creating and enhancing value for shareholders. Our guidance for pro forma annual average free cash flow for the '21/'22 cycle is, again, $1.27 billion, and that underscores the strength and resiliency of our operations and ability to continue delivering free cash flow per share that is among the highest in the market. Our strong free cash flow generation is allowing Nexstar to meaningfully increase its return of capital initiatives, as reflected by our recent authorization to purchase up to an additional $1 billion of shares and our 8-year track record of dividend increases of 20% per year or more. We look forward to reporting on our continued growth and accomplishments throughout the year. And on behalf of the entire Nexstar Nation, our Board and our management team, thank you for your continued interest, support, and thank you for joining us this morning. Now let's open the call to Q&A to address your specific areas of interest. Operator?

[Operator:]

Our first question comes from John Janedis with Wolfe Research.

[John Janedis:]

You've got a good footprint. So can you talk more about the contribution from the gaming category. Can that to be top 5 longer term? And then from a market perspective, did the larger markets lag the rest of the portfolio due to COVID? And if so, how do you see those rebounding as we move into the back half of the year?

[Perry Sook:]

Thanks, John. Well, gaming is in conjunction with lottery and all other gambling spend is already a top 5 category. In fact, it was the #3 category behind auto and attorneys and the -- in the first quarter, and we have every reason to believe that it will be a 9-digit revenue contributor in 2021. As it relates to markets, there's really no hard and fast rule. I would say that New York and its reopening and recovery is lagging behind some of our other markets, New York City, particularly. Chicago is maybe a little further ahead, but still not as open or robust as some of our other markets. While Los Angeles, even though in a virtual lockdown until just very recently, our station there is just absolutely killing it. So I don't know that you can apply any one size fits all to geography or market size, but generally, the larger markets have lagged behind the middle and the rest of the country in terms of reopening. But we did see a fairly broad-based support of our 116 markets, 104 exceeded their first quarter revenue and EBITDA budget, which means only 12 of 116 did not achieve that benchmark. So it's pretty robust. And we're very heartened with the reopening and the city employees and all that's going on in New York City because we think that will flow through directly to revenues at WPIX as the year moves on.

[John Janedis:]

Got it. And Perry, let me ask you, there have been a couple of cases where some of the digital players have paid newspaper publishers for news content. Do you say that as an opportunity at some point for the broadcast space?

[Perry Sook:]

I think we produce a lot of content on our own. And in those partnership discussions, there's never been, in my view, an equitable split of the economics. So at this point, I think, since we are the largest producer of local content across the country, over 300,000 hours a year of local news, I think we have enough content to fund our own platform.

[John Janedis:]

Okay. And maybe one quick one for Tom. Can you give us an update on the buyback for the year? And if there's ultimately not much on the M&A front, does it grow in the deal?

[Tom Carter:]

Sure. Well, obviously, we bought back $121 million in the first quarter, and that was basically in 1 month because we were in a blackout period in the first part of the year. I would say that, that for a month -- for a quarter, that's probably a good representation for quarter-by-quarter. I wouldn't say we're going to buy back $121 million every month. But I would say, if you extrapolated the $120 million for an entire year, that would be approximately $500 million. I would say that's probably a good number, maybe slightly more than that later in the year. But that also has some variance based on if there is some potential M&A. Although M&A, I don't expect to be meaningful, could be a low 9-figure amount in total for the year, but that would potentially eat into the share repurchase program a little bit. But I would say, we're on trajectory to be at or slightly in excess of $500 million for the year.

[Operator:]

Our next question comes from Dan Kurnos with Benchmark Company.

[Dan Kurnos:]

Another nice print. Perry, maybe just first for you. You already kind of talked about this, you guys have a really great visibility setup. But obviously, there pretty prominent public commentary just around retrans. And obviously, there are some tougher comps from the MVPDs in the back half of the year. So just kind of maybe if you want to give your own perspective on the retrans cycle and how much life there is still left on that? And then Tom, look, fixed costs, again, down 4% year-over-year. You've done a great job kind of keeping that down. I think it's hard for some of us to get sort of a handle on how much of the COVID savings are continuing. So just maybe sort of how we should think about expense growth over the balance of the year would be super helpful?

[Perry Sook:]

I think on retrans, and we may have said this on the last call, I think, in my own mind, I've revised the thinking of where the goal line is. I think we've actually moved the gold parks further down the field and that the upside is perhaps more than I thought it might be on a big 4 basis or on a total revenue basis for our company. So we're -- despite protestations to the contrary, retrans is not over. And in fact, we're very pleased with the -- we do a trailing 12-month sub-trends here. And if I go back to the first quarter of last year, our actual attrition was somewhere in the mid-to-high 6% range on an annualized basis. And in first quarter of this year, it's in the low 5% range on an annualized basis. So we think, as we have said, sub-declines would ultimately level off and we're obviously able to -- with our portfolio, achieve our unit rate increases and continue to drive double-digit growth in both top and bottom line contributions. So from that standpoint, there's been no change to our perspective other than I think we maybe have more runway than I originally thought 3 or 5 years ago.

[Dan Kurnos:]

And Tom, on the cost side?

[Tom Carter:]

Oh, on the cost side, I apologize. Yes. No, I think, look, costs are going to be more difficult. It's more -- we're running up against some comps, especially in Q2 and Q3, which were the majority of our cost takeouts last year. So cost takeouts on a comparable basis for Q2 and Q3 of this year will be more difficult. I still think that we will clearly be down on a fixed basis. Our variable costs will be up slightly because we expect meaningful growth over advertising revenues in Q2 and Q3 of last year, but our fixed costs will continue to decline during the year.

[Operator:]

Our next question comes from Jim Goss with Barrington Research.

[Jim Goss:]

First question relates to a comment you made in the text that you had noticed a difference in the pace of recovery advertising and bad geography. I wonder if you might expand on that and talk about any implications we should read into that?

[Perry Sook:]

Yes. As I said earlier, that's primarily pointed at New York, which is New York City, which has kind of lagged behind most of the markets in our universe. Unlike Upstate New York, that is very robust in terms of comps to the prior year. But it's primarily New York City that has lagged behind. And with the announced reopening, we think that business activity will begin to accelerate. Beyond that, as I said, it's pretty widespread recovery, perhaps a little less in New York, Chicago, L.A. But again, as I said earlier, our L.A. station in that marketplace is killing it, both digitally and linear television. And we think the secret sauce there is they produce about 90 hours a week of local content, which is way more than anybody else in the market, and people are very interested in what's going on these days. So that's about the extent of the differences in the commentary.

[Jim Goss:]

Okay. That's great. KTLA has always been a great station. Are you -- in terms of TV Food Network, are you still totally some investor? Or are there programming opportunities on your platform in using some of the content they produce, maybe as a special show or something of that nature?

[Tom Carter:]

The -- Jim, I sit on the Board, that is a possibility. I would say right now, Food Network is focused on maximizing their content with the New Discovery Plus, which we will participate in from the Food Network's perspective. We get a cut of any advertising revenue on the Food Network channel as well as the Cooking Channel. And we get a cut of a proportion of the subscriber fees on Discovery Plus. Keep in mind that there really are 2 drivers on Discovery Plus, it's HGTV and the Food Network. And we obviously own 31% of 1 of those 2. So it will be additive to our financial results this year. It's just that, obviously, they're in a rollout position. There's a large percentage of subscriber base that's through Verizon, and that's currently a no charge subscriber acquisition or no charge subscriber fee there for a period of time. So it will take some time to flesh out exactly what it looks like, but it will be additive from our perspective this year.

[Jim Goss:]

Okay. That's great. Great insight. And lastly, I might ask if you have any expectations as to the FCC with the new group in Washington in terms of ownership caps or 2 stations in a large market or anything else that you think might be important to you?

[Perry Sook:]

Well, certainly, we don't expect much activity in the short term. The Supreme Court basically overruled the third circuit court and now the decision to be remanded to them to remand to FCC to reinstate the old rules. That's all process, and that's going to take a little while. Obviously, as you know, it does nothing to affect the national cap or our ability to add markets on a linear basis, but it does allow some opportunities for us to buy in second stations in the market where we couldn't with the 8 voice test currently in place, that will be a marginal benefit to us. And then all top 4 combinations are still subject to approval on a case-by-case basis. So we don't really know what that bright line looks like or if there is a bright line. So I would say it will take a little while to sort all of that out. But obviously, we have a playbook and what we think opportunities are in every one of the markets that we only operate a single station in. And -- but I don't expect that will play out in a meaningful way. And so perhaps later this year and perhaps -- or later on in 2022 in the cycle. So I wouldn't anticipate anything happening in a material nature in the very short term.

[Operator:]

Our next question comes from Steven Cahall with Wells Fargo.

[Steven Cahall:]

So maybe just a big picture question, Perry and Tom. I think there's now about 40 million homes that don't take any form of the bundle and maybe never will, and that pool might be growing. You've got a lot of cash that you're generating. You've started to make some digital investments. You talked about digital growing and profitability this year. How do you just think about targeting those 40-some million households that aren't going to be participating in the traditional bundle? And how you get your content in front of them and using your balance sheet to maybe grow those assets over time? And then I have a quick follow-up.

[Perry Sook:]

Sure. Well, that's always been -- if you follow this since we went public in 2003, we've always said that approximately 15% of our television households do not consume us via the aid of a pay service. So that number has grown slightly, but not a lot. So maybe we're down to the low 80s in terms of the pay TV universe, which is traditional and virtual MVPDs, that's not a material change. And it's certainly, as I said earlier, the attrition has been far less than anything we have ever modeled. And so we feel confident in our ability to continue to grow. We do reach them every day over the air, and that's -- that was OTT before it was cool. So they also receive and consume our digital -- our diginets. Antenna TV has shown tremendous dramatic growth over the last year. And because when you rescan your TV, you now have a new channel that you can watch if you're only consuming over the air. So we plan to launch a second digital network, which you've seen the press on, called REWIND TV, which will be focused more on 70s to 80s and as opposed to 60s and 70s, which is antenna TV So there's an opportunity for us to mine that in the near term. And then obviously, our spectrum opportunities, which are further down the road, we'll target all households. And obviously, the ones that are most capable to receive a 3.0 signal without any intermediary or the over-the-air homes. And we think that's important over time because if you think about sports betting and all the things, the prop bets that could happen, there is a latency factor of up to 30 seconds in the streaming products that are out there. So if you want to make a prop bet on whether the prop is going to drop, chances are, the and the play is already over before you can get a bet down in a streaming service, which we think will make either the traditional cable broadband delivery or over the air more attractive for those that are attracted to sports betting. So we continue to serve that audience daily. And again, they have fewer channels. Therefore, our advertising is more valuable in those homes because there's less competition. But again, we see incremental change and not revolutionary change.

[Steven Cahall:]

Thanks. And then maybe just on the balance sheet, the comment of staying below 4x maybe implies that there'll be some upward pressure on leverage as you move through the year. Just wondering if that reflects anything contemplated in terms of uses of cash? Or if that's just a reflection of some more COVID impacted quarters hitting the trailing 8-quarter EBITDA calculation?

[Tom Carter:]

I would say it's even more linear than that. It's losing $400 million in political revenue in Q3 and Q4 of this year. That pushes leverage up, which is a natural occurrence. Obviously, in an odd-numbered year, I don't think it's anything with regard to capital allocation. It's just -- we did a job of backfilling $50 million of lost political revenue in Q1. Those numbers get rather large in Q3 and Q4, and we don't anticipate being able to make up for that lost revenue until 2022.

[Operator:]

Our next question comes from Craig Huber with Huber Research Partners.

[Craig Huber:]

I guess my first question is, can you just talk a little bit about the TV advertising pacing for the second quarter? I mean, last year, you know, I think it was down about 30%, given the -- sorry, 35% a year ago, given the pandemic. I mean, how much that do you think you'd be able to make up this year? How close do think you would get back to comparable apples-to-apples 2019 levels to add revenue in the upcoming current quarter?

[Perry Sook:]

Well, I can give you April results here. And if you look at all ad-supported revenue for the month of April, it was up 62% over the prior year. Broadcast portion of that, including political, was up 73% over the prior year. So if I extrapolate that to 2019, we make up -- we get into the low single digits down versus 2019 on a second quarter based on our internal projections versus second quarter of '19. But obviously, we will make up a lot of what we lost, if not all, or more in Q2 from an ad support basis.

[Craig Huber:]

My next question, please. I believe in the past, you've said you expect net retrans for the year to be up low double digits. Is that still the case? And just on a preliminary basis, do you think it will still be up next year?

[Perry Sook:]

Yes and yes.

[Craig Huber:]

Very helpful. I like that. Okay. And then next, you touched on this a little bit, but your SG&A line up 10% year-over-year, but then you talked about some reallocation of costs in that line. I don't want to get into accounting discussion here because I don't want to waste your time on that. But what should we expect your SG&A line going forward? It seems like the last 2 quarters, it's been roughly around $200 million each quarter SG&A, is that reasonable to expect going forward? How should we think about that?

[Tom Carter:]

I'm really not in a position to talk about specific expense numbers for Q2 or beyond. I will say that I think the reallocation has happened in Q1. So that type of effect going forward. If you look at it versus the prior year's quarter, there will be changes. But if you think about the new allocation of total operating expenses, ex corporate, between sales and SG&A and direct, I think that will be -- Q1 will be representative of about those proportions going forward.

[Craig Huber:]

What was the biggest change you had to make in your reallocation there

[Tom Carter:]

No, it's not really a change. It's just an allocation of cost of goods sold for digital products. When we're selling third-party websites is it a direct operating expense or is it a sales expense.

[Craig Huber:]

And then my other question, if I could ask, just go through the percent of your retrans subs, again, that renewed last year, what percent up for renewal this year? I believe they're all at year-end and what percent is for next year, please?

[Tom Carter:]

It's -- it was 18% last year. It is a high single-digit this year. And it's -- the number moves around a little bit less. I saw between 60% and 70% next year.

[Operator:]

Our next question comes from Aaron Watts with Deutsche Bank.

[Aaron Watts:]

One follow-up on the core ad, specifically auto. It sounds like the category is performing better now. Just to be clear, am I correct to say that auto was still down year-over-year in the first quarter? And then looking forward, can auto return to year-over-year growth in the next couple of quarters given the supply chain headwinds that you mentioned earlier, Perry?

[Perry Sook:]

Auto was down in the first quarter, a low single-digit versus the prior year. The -- it depends on the chip shortage. I think at some point, there will be a tremendous pull forward of demand of people that are looking for cars that can't find cars. Whether that bubble exists in the third quarter or fourth quarter, I don't know, but I would anticipate it's there. I don't think it will be in the second quarter. Although our auto is performing relatively on par with the first quarter performance from a comp to the prior year.

[Aaron Watts:]

Okay. Got it. And then second, we had seen some headlines a while back now around some networks intend to prioritize growth of their nascent streaming platforms, perhaps over that of the linear broadcast. Have you had any further discussions with your partners around that? I'm just curious your latest thoughts there.

[Perry Sook:]

We have discussions all the time. They have their corporate priorities, and we have ours. And so I don't think anybody is going to change anybody's mind. I think we'll see down the road how streaming plays out and what the churn rates are on these products. I think they'll be probably 2 or 3 winners and everyone else will be in a less good place. And so we'll see where we are over the long term. We're not too excited about. We don't get too excited about these things because having been in the business 42 years, it seems the more things change, the more they ultimately kind of gravitate back to a traditional model. And so I think that would tend to favor what we do over the long term. But obviously, we all have to work our way through these shiny new things.

[Aaron Watts:]

Okay. Got it. That's helpful. One last one for me. We had a notable announcement yesterday in the space from Gray and Meredith, the latest several consolidation transactions over the past couple of years, and certainly, Nexstar has taken part. Does all this consolidation change the competitive dynamic at all on a market-to-market basis for you? And then, I guess, more holistically, do you view a more scaled local TV space overall as a positive relative to the evolving video landscape and some of the pressures facing the traditional distribution channel?

[Perry Sook:]

Well, I think that we are a big believer in scale, not only nationally, but for example, we're in every market in the state of New York now. What unique content and advertising opportunities that we -- can we create that no one can compete with. You can say the same thing about the states of Tennessee and Illinois and Missouri and California, and so we see real value in that, and we think we're just beginning to unlock some of that value now that we have all of our stations and digital properties under 1 roof. So I think it's good for the business. I think healthy companies are good for the business. And there's no question in negotiating video distribution. It is a business of scale, scale matters. And in some cases, it's the only thing that matters. So it's important to be important, as we like to say. Commentary, listen, I congratulate on their announced acquisition of the Meredith stations, and we did some internal work here. And obviously, if all goes according to plan, they'll constituted broadcast company will be approximately half the size of our company, which, again, I like to say that we're unique -- no one has been able to create a company like ours and no one will be able to create a company like ours in terms of linear television because there just aren't that enough available transformative transactions out there. So again, we're happy with our scale and again are beginning to mine the economic benefits of that on a regional level, on a state-wide level and ultimately, on a national level, more to come.

[Operator:]

Our next question comes from Kyle Evans with Stephens.

[Kyle Evans:]

Tom, thanks for separating out Best Reviews in digital. Could you update us on the rough percent split between national and local in the digital segment? And then maybe give us some high-level thoughts on M&A in that segment?

[Tom Carter:]

Kyle, I don't even -- I'm not sure I have at my access a local versus national splits for digital. We don't think about it a lot that way. It is by far significantly more locally than it is nationally. I don't have that exact percentage.

[Kyle Evans:]

Okay. Fair enough. And then maybe just some early thoughts on the 2022 political cycle.

[Perry Sook:]

2022 election cycle?

[Kyle Evans:]

Yes.

[Perry Sook:]

Okay. Well, listen, we got our first orders over the weekend for the recall election in California. So don't discount 2021 in terms of being a political year, that is maybe ahead of our expectations. But we obviously think that both the House and the Senate will be in play in 2022 who controls those. I think if you look at some of the early elections here, the incumbent party usually loses seats in the midterms, and we think this will be no exception. And losing enough seats means losing control and the balance in both houses is per carious. So we expect a lot of spend in those races. We also have several visible gubernatorial races in 2022. So we think it will be a very healthy year. There is a number embedded in our guidance. It is somewhat less than 2020, but maybe not as far down as you would think. But we anticipate the political cycle to continue to grow and be robust in the off-cycle years as well as the presidential election years.

[Operator:]

Our next question comes from Alan Gould with Loop Capital.

[Alan Gould:]

Numbers are excellent. I was wondering if you can talk strategically about our big picture, what's happening in terms of ratings, particularly ratings of the local news? And are you able to capture how much of the audience is moving from your local TV stations to your digital properties?

[Perry Sook:]

I would say the -- if compared to last year, when we saw a tremendous spike in 20-year highs in terms of local news viewership across virtually all day parts, there has been some decline from that -- those high watermarks, although we are still collectively -- and again, this is the sum total of 116 markets viewership, we are still collectively ahead of pre-pandemic viewership levels for our local news products and it's literally across the board. So we're glad that there's some stickiness to that. And we think as we kind of transition into the next political cycle and all of that, there will continue to be a stickiness there. And as far as a rotation or migration from local television to our local websites or our apps, we are beginning to mine data on our digital users. And so we can tell where they come from and where they go, but we can't tell if they were watching linear TV before that. So I don't know that I have perfect data on the migration. Our goal is to serve our viewers and our marketing partners across all platforms, all screens, using a common currency and to be relatively indifferent as to how they access our content, and we access our opportunities to help them sell things. So that's kind of the model we're building and where the puck is going, but I don't think there's any way really that we can efficiently track or accurately track rotation from digital to broadcast or vice versa.

[Alan Gould:]

Thanks, Perry, if I could just follow-up. What is the common currency you're looking at using?

[Perry Sook:]

Well, very simply, it's impressions. And so broadcast television is really the only medium that sells ratings currently. And if we all sold on impressions or better known as thousands across digital, linear, diginet, cable networks, broadcast, and created a common currency, I think it would be a boom to our business. There are initiatives out there, the TBB and the Tip initiative are working toward this. Other companies in our business are working with us towards a conversion of all of our audience metrics to a common currency of impressions it sounds so simple. It's almost counterintuitive that it hasn't happened at this point. But there's increasing momentum as I think everybody sees what we see, why would you sell the smallest number on the page, which is the rating when you have thousands that -- again, every other medium sells impressions or thousands, and we're still selling ratings and television. So we've just got to make our business easier to do business with, and I think the money will follow because, obviously, everyone understands the superior value proposition.

[Tom Carter:]

Before we take another question, I did go back and look up some information on Kyle Evans' question. It's about 65% local, about 15% national and about 20% consumer, which is basically best reviews.

[Operator:]

Our next question comes from John with JK Media.

[Unidentified Analyst:]

I have a few very quick questions. Tom, I noticed that cash outlays for TV programming rights is trending down. Is there anything of -- is that trend going to continue? And why is that happening?

[Tom Carter:]

That's really all around WGN America News Nation using less syndicated programming as are some of our larger stations locally are using less syndicated programming because we're doing more local news.

[Unidentified Analyst:]

So this will continue?

[Tom Carter:]

Yes.

[Unidentified Analyst:]

Okay. CapEx for the year, I may have missed that.

[Perry Sook:]

$135 million, John.

[Tom Carter:]

Right.

[Unidentified Analyst:]

Okay. What is the difference between the 43 million shares and the 45 million fully diluted shares? What does that do to?

[Tom Carter:]

That's really outstanding options and RSUs.

[Unidentified Analyst:]

Okay. Could you confirm for me that stock-based compensation is not part of the free cash flow calculation?

[Tom Carter:]

It is a noncash item. So it is part of free cash flow.

[Unidentified Analyst:]

So it's not part of free cash flow or it's add back to free cash flow?

[Tom Carter:]

It is added back. If you look at the press release that we put out, there is a reconciliation of free cash flow on Page 8. And in that, we add back noncash -- the stock-based compensation expense.

[Unidentified Analyst:]

Okay. Okay. That will be maybe, what, 30 million or 40 million for the year?

[Tom Carter:]

It will be about 48 to 50. Okay. And that's the -- that is the unintended consequence of a higher stock price.

[Unidentified Analyst:]

Okay? Not today. Anyway, lastly, just a quick incidental. Any thought being given to split the stock?

[Perry Sook:]

We've looked at that, John, and I've got studies on my desk that show there could be a benefit in the study saying there's no benefit to no long-term benefit to that. So no plans to do it currently, and we've got other priorities that would be ahead of that in any event. But I'm not convinced that there is a long-term benefit to doing it, although we've certainly asked the question on a number of occasions.

[Operator:]

This concludes today's Q&A. I would now like to turn the call back over to Perry Sook for closing remarks.

[Perry Sook:]

Thank you very much, everyone, for joining us. We look forward to gathering together in 3 months' time to update you on all of our initiatives and our operating performance for Q2. Have a great afternoon.

[Operator:]

Thank you, ladies and gentlemen, this concludes today's teleconference. You may now disconnect.