Q1 2020 Earnings Call
[music].
Okay.
Good day, and the ones come to talk about first quarter Twentytwenty earnings call.
Our goal is being recorded.
Our speaker for today would it be Dave Nucci, President and Chief Executive Officer, and Victoria Harker, Chief Financial Officer at this time I'd like to turn the conference over to document head of Investor Relations. Please go ahead.
Thank you and good afternoon, and welcome to our first quarter 2020 earnings call and what Josh today, our president and CEO.
And our CFO, Victoria, Harker or taking that's financial performance and results after that well open the call for questions. Hopefully you've had an opportunity to review. This mornings press release, if you're not seeing a copy of the release, it's available TEGNA Dot com.
Before we get started I'd like to remind you. This conference call and webcast include forward looking statements.
Actual results may differ factors that may cause actual differ.
I see filings. This presentation also include certain non-GAAP financial measures.
Reconciliations of those measures for the most directly comparable GAAP measures and it really.
With that I'd like to turn it over to Dave.
Thank you, Doug and good morning, everyone.
Our country continues to navigate the challenges presented by the Coke 19, pandemic well spacing unprecedented disruption to the way we live work and serve our communities.
Second we're proud of our financial performance in the first quarter and the way that our stations have delivered central information their communities. However, as you would expect our comments today. We're also focused on a broader environment.
Response to the public crisis, it's clear that the near term outlook for the economy.
This is dependent on many factors, including the duration of federal and state government stay at home restrictions.
Well make every effort you addressed the issues that we know are important for you.
It's one of them obstacles presented by called the 19 are poised at rhythm City occasion, we moved very quickly to protect our colleagues a news release by moving to remote work very fast.
I'm very innovative ways to deliver trusted news and substantive content. It brings clarity context, and hope to our audiences I could not be more proud of the leadership resilience in character of our employees, but they've shown during this time of uncertainty we're gratified by the performance of each of them across the country and continuing to provide local news and information.
The viewers during this crisis.
On one hand, we're experience enormous increases and audiences and traffic across our platforms. Our local news you didn't like 60 to 75 carried in the month of April is up 70% over last year. Our late news is up 44%.
Had 180 million visitors to our digital sites a record in the month of April.
We had.
100 million plus video on demand plays as well all enormous increases.
Around 100% year over year.
The other hand, it for obvious reasons, many businesses that decrease or in some cases pulled their current advertising and marketing campaigns, because a corporate banking, which I'll discuss in more detail shortly.
On the wash our rating strength.
Okay and says reflects the critical roles at local broadcast ways in the communities. We serve further strengthening our value declines in the months in years to comp.
For consumers business owners that American workers Cold chain has obviously, let the confusion and exciting.
We are very focused on returning confusion in the competence and clarity.
And in siding and due in part.
He was are we are sure trough actually not fear philosophy and brand, which is which serves as a guiding principle that all TEGNA journalist here too.
They inform Americans across the country without necessarily praying upon their fierce.
People have never needed trusted local information more than now.
Washington numbers are up on every single platform, whether linear TV or digital as I mentioned earlier.
Local broadcast news remains the most trusted source of news in the country.
Colleagues have returned to the occasion despite unprecedented challenges.
We noted in our pre released last month.
Continue to execute well in the first quarter against our five color strategy, achieving all of the first quarter guidance metrics. We initially provided in February.
Intermediate and long term drivers that are reflected in our first quarter results, including strong subscription and political revenues.
Well as the continuing benefit from recent additions to our strategically constructing portfolio together are poised to deliver significant value to protect the shareholders over time.
I'd like to spend a minute discussing further the key drivers of our first quarter performance later I'll discuss our thoughts on the near and intermediate term light at the current situation or 38% subscription revenue growth in the first quarter reflects the impact of significant rate increases on both our existing stations and those that we recently acquired.
He subscription revenues have grown substantially in recent years and can drink continued continue to drive cash flows that are less economically sensitive.
Political revenues of $47 million were well above the levels were seen in the first quarter of 2018, almost tripled the amount in 2010, we had in 2016 and thus far all indications are that political will slow reached record levels for the full year.
Nonpolitical advertising revenues improved in recent quarters and party to covert tag team. This positive trend continues in the first quarter aside from a 6 million dollar Delta in Super Bowl revenues, because the yield on our smaller Fox portfolio. This year compared with our larger CBS portfolio last year.
At the coping 19 crisis segment. However in March we experienced cancellations. The final two two to three weeks of the quarters.
Revenues are now being impacted by a wide variety of control measures in place, including the state of emergency mandatory quarantines required business closures shelter in place orders and travel restrictions et cetera.
Duration or the impact of a coping 19 pandemic, particularly with regard to the broader advertising industry remains uncertain.
And as you would expect we anticipate that non political advertising revenues will continue to face significant significant headwinds in the near term.
It is unprecedented circumstances it was prudent for us to suspend full year 2020 guidance in 2021 preliminary outlook as we care carefully monitored business impacts.
Better visibility ended the timing and pace of we opening up the economy.
Well there are a number of factors outside our control, there's a lot insider control and we're not sitting still since the onset of the crisis, we moved quickly and decisively to reduce all nonessential costs.
Our services and our employees as well as a long term health of our business underlying our ability to respond and whether the impact of this pandemic or the strong foundation built over the past several years, including a carefully constructed infrastructure. We continue to evaluate organic investments that support the ongoing growth of our business. We've taken several options to stay.
And the balance sheet, providing liquidity and flexibility.
Through a number of actions overtime, we deliberately focused on growing subscription revenues and political advertising, which are less sensitive to macroeconomic factors.
Thank you good key drivers or revenue and cash flows.
Also diversified our advertising business into digital with our premium over the top platform and end of expanded the number industries that now advertisement.
Together these successful efforts to diversify our revenue streams.
Far more durable position.
When we were in a recession of 2008 and nine one the vast majority of our total revenues with non political advertising.
Looking at our medium term outlook there are several encouraging drivers of our business this year and beyond.
See a tailwind from the 50% of our subscriber base that was repriced at the end of last year and as a reminder, we have an additional 35% of subscribers to be report repriced later this year equating 85% of subs, we priced between the fourth quarter of 19 in the ended this year.
These multiyear deals include material increases in person insert and per subscriber retrans fees in the first year and sizable EPS escalators for future years as well.
Increasing the predictability of our future cash flows.
Well I was modeled a continuation of video subscriber losses within the pay TV ecosystem.
We don't have any data from our distribution partner he asked us to suggest an acceleration of this trend.
Wouldn't be surprised at least some minimal impact on overall sub trends during the cobot 19 crisis time will tell but increased rates from our recent and upcoming repricings will be the far greater determinant of our growth in sub subscription and net retrans and our ability to create shareholder value in the near and intermediate term.
Political advertising began the year with an incredibly strong start.
As we've said before we strategically construct in our portfolio to take advantage of increasing even year political spending was stations in many high standard political states.
First quarter once again demonstrated that local TV.
Prostate and proven way to reach voters for political advertisers and coupled with premiums capability to address over the top.
And outside of Tech the markets. That's what we did not have for the last presidential election year, we remain well positioned for this year and all future election cycles. Thus far we are unaware of any reason to believe that political spending will see any material impact from the government 19 crisis and.
Continued limitations on large gatherings will likely mean that local advertising will be an even more critical path to reach voters and thats coming election.
Nonpolitical advertising revenues revenues will clearly be to part of our business most impacted by the crisis. However, the improvements that we've managed the business over the past few years position us well for whatever the economy begins to reopen.
Our recent proactive increased in the breadth of our advertisers and our focus on specific categories of growth across all our platforms.
Asset for us in any environment.
As we work to support our plants will be carefully monitoring the performance of local media in locations, where shelter in place and travel restrictions are lifted earlier than some other states. Additionally, digital advertising through our premium LTC platform will enable faster and adjacent growth in the years to comp.
Notably in February we jointly announced a strategic partnership of which Gray television would acquire minority ownership interest in premium as part of this new partnership great will serve as a reseller of premium services across all of their 93 television markets. Our partnership with Gray will further accelerate claiming on already exceptional growth.
By expanding our local for pet greatly and leveraging brace strong performing stations. We're now accepting orders and pilot markets in gray should be fully rolled out by the end of the third quarter.
Near term macro dynamics clearly remain uncertain, what our first quarter results reflect continued momentum in that resilience subscription and political revenue streams that allow us to better weather, the downturn and non political advertising and invest in the future as we execute on our strategy for signature TEGNA shareholders over the long term our board.
It's been team have led the company for previous recessions and are prepared to once again successfully navigate this environment.
Whenever the current Crexus begins to take we will remain well positioned to execute our strategy to create value for shareholders.
Ill now pass the call over the Victoria to cover our financials in more detail Victoria.
Hey.
Good afternoon, everyone and thanks for joining us I too would like to thank tickets employees everywhere for not only continuing their great work for the current pandemic, but also for their talent and dedication that is provided second solid foundation. During these uncertain times.
In addition to the strategic actions by our board and management team that Dave touched on earlier, we're benefiting from the Cardinal capital structure, we put in place well before coverage.
Underpinning, our near and long term financial and operating flexibility.
To give you some additional insight on us before diving into our operating results for the quarter I'd like to take a moment you touched on some key actions, we Chuck before the onset of province to further strengthen our balance sheet.
As you likely recall, we completed $2.1 billion and refinancings one in September 2019, and then in January 2020.
Very low attractive interest rates about 4.8% on a weighted average basis.
These transactions lowering our interest expense, while allowing us to retire nearer term maturities and fund our acquisitions, which closed late last year.
We also took the opportunity to extend our 1.5 billion dollar credit facility five years to 2024 also at the very low cost of LIBOR, plus 250 or roughly 3.4% as of today.
To provide more color.
For 11, we use the net proceeds of the January $1 billion refinancing to repay the remaining $310 million principal amount of our five in one 8% of our July 2020 does the $650 million principal and a call premium our success rates per Se October 2023 by as well as some.
Borrowings under our revolving credit facility.
As a result of all of those actions. We now have a very limited set of near term maturities.
With only 100 million coming due in 2020.
$25 million switches and Jim and 75 in September and 350 million in 2021.
As you saw in our press release at the end of March our cash position with $35 million.
Which is now north of $100 million as of April Twentyth, We just continue to grow significantly each week, given our very short order to collection cycle of approximately 80 days.
The fact that political ads are paid up front and Retrans is usually pay contractually within 60 to 90 days.
Unused capacity under our revolving credit facility with more than $700 million with 790 million drawn.
As a result, we finished the quarter, but total debt at $4.1 billion, producing net leverage at 4.7 times.
Compared to our covenant cap of 5.5 times based on a trailing eight quarter EBITDA metric.
Please note that our only financial covenant is the leverage ratio as defined in our credit facility, which at 4.6 times is slightly lower than the more frequently reported metric.
Despite profit 19 impacts late in the quarter, we generated $142 million of free cash flow fully 21% of total revenue in the quarter.
Until the second week of March will use cash on hand to repay short term borrowings.
However, since that time, we've been building cash.
And to continue to pay a regular quarterly dividend cash taxes and existing maturity.
Beyond that we've been reducing non mandatory capital expenditures and now the cash outlays for the timing.
Before I cover our consolidated financial results in greater detail I'd like to review of got few special items.
For the first quarter. These include $22 million early redemption fees related to accelerating our 2023 note pay down.
8 million of advisory fees related to activism defense and 5 million of M&A due diligence fees.
These expenses were partially offset by $8 million for reimbursed sites of FCC spectrum Repacking.
$12 million gain from our portion of Careerbuilder sale of its employment screening business.
Now turning to the first quarter consolidated financial results. As a reminder, my comments today are primarily focused on so I guess performance on a consolidated non-GAAP basis.
In order to provide visibility into the financial drivers of our business trends as well as our operational results.
You will find all reported data and prior purity product comparatives in our press release.
Well, we like most businesses have suspended our 2020 financial guidance pending better clarity on covert 19 market impacts over time my remarks that Paul will provide color on our first quarter performance compared to guidance provided in February prior to the Pandemics impact beginning in March.
For the first quarter total company revenue was up 32% year over year inline with our prior guidance range of up low to mid Thirtys.
This was driven by our new stations, which closed six weeks before year end as relative continued growth in subscription revenues and political advertising spending all of which I'll cover in more detail in a moment.
Excluding the impact of political advertising in the quarter total revenue was up fully 24% year over year also in line with our prior guidance of mid Twentys percent growth.
Now for some additional color on the subcategories of revenue.
Subscription revenue increased 38% year over year. This reflects the base business as well as a benefit of our newest patients.
The impact of step ups in the Retrans rates from the recent renewals on both legacy stations and those we acquired in 2019.
As Dave reference the $47 million a political revenue achieved in the first quarter substantially exceeded the first quarter above 2018 and 2016.
Taken together, our concentration of subscription and political revenues generate both sizeable and durable EBITDA and free cash flow.
Stark contrast to the 2008 2009 downturn.
Advertising marketing services finished the first quarter up 12% driven by the solid performance of stations acquired in 2019 as well as our legacy station.
These strong results were partially offset by non political advertising cancellation late in the quarter related to covert 19.
Well, the $6 million production and Super Bowl related revenue, which aired on Fox in February.
A reminder, ups comprises less than 6% of titles household.
By comparison in 2019 Super Bowl, Iran, CBS, which comprises more than 30% of taking the castle.
Surprise some further color on specific advertising performance trends the quarter began strong with January finishing above last year before the Super Bowl and covert impacts mentioned above.
As always advertising marketing services includes some puts and takes by sector.
On a normalized basis the category to finish up stronger for flat included home improvement medical media Telecom education and backing refinance.
By contrast, and not unexpectedly given the impact in progress.
The categories, such as travel auto retail services and restaurants reflected lower advertising demand in the first quarter.
Turning now to expenses.
Operating expenses for the first quarter were 30% higher on a year over year basis slightly better than our prior guidance range.
So to mid Thirtys.
Driven predominantly by our acquisitions and larger programming fees associated with higher subscription revenue.
As a reminder programming fees include reverse compensation paid to the networks.
As David already noted, we acted rapidly and implemented certain cost containment measures in light of the carpet 19 pandemic to reduce all nonessential costs and discretionary capital expenditures to protect the long term health of our business and our employees.
In addition to the ongoing streamlining of our business processes and support cost efficiencies that have been underway for quite some time.
As reported adjusted EBITDA was $212 million producing a very strong 31% margin. This quarter EBITDA was driven by new acquisition contributions, including synergies and strong performance of existing as well as cost savings and efficiency efforts.
As Dave mentioned earlier, the full impact of Kobe, 19, Pandemics, particularly with regard to the broader advertising industry remains uncertain.
We'll continue to monitor economic conditions and carefully evaluate whether be possible to reinstate some or all elements elements of our forward looking guidance at a later date.
Before we open up for questions I'd turn it back over to Dave now for closing remarks. Thank you Victoria, we'd like to thank our shareholders for their support in last week's contested annual meeting where all of our directors, where we elected to the board as our independent Chair stated in a press release. Following the meeting we had benefited from the option you speak directly with our investors to hear there.
Feedback in perspective, and we look forward to continually actively engaging with all our shareholders on with that I'll open it up for questions operator.
Thank you if you would like to ask a question. Please signaled by pressing star one on your telephone keypad, if you're using speakerphone. Please make sure. Your mute function is turned off till or you're seeing them to reach our equipment.
In press Star one to ask a question.
We'll take our first question from Doug Archer from Hopper Research. Please go ahead. Your line is open.
Yeah. Thanks, Dave I know you don't want to get a specific near term guidance flock said last night.
That their local affiliates initially or seeing down 50% to 55%.
Declines in spot advertising, new mostly spot.
Im assuming that.
We've not heard debt from others, so I'm assuming.
It's not that severe I'm wondering if you can either be kind of color on that and weather.
We're also hearing.
During the day, there's some modest improvements going on.
Thanks. Good question, so I really don't want to get into numbers, but I will confirm for you it's not quite that severe to the numbers you just gave.
And to your question, we are seeing marginal improvement week to week. The toughest week was the very first week with a quarter and we are seeing improvements on a week by week basis, but I wouldn't want to overstate.
The dramatic necessarily improvements and it's tough to tell a little bit yet. It's a combination of some increased the map I also think we've gotten better week by week. It also going in creating demand and getting people back on the air So probably a combination of both.
And then just as a follow up I mean, obviously political in the first quarter very strong I would assume second quarter its is completely.
I will comment on that front.
You do.
Is it likely that the.
Political this year will be highly concentrated very late in the election cycles. So we'll see sort of.
Tail at the end so to speak.
Yes, you're absolutely right, it's going to go up.
Amazingly like previous years in terms of the percentage of the back then and I didn't hear exactly we said about second quarter, but yes second quarter news relative to the rest of the year by far going to be a lowest quarter in political.
But yes, I think you know the numbers we've used in the past are for the fourth quarter typically around 60%.
And you know say, 25% to 28% in the third quarter, but the real spending comes from labor day to election day and that won't change.
From a distribution standpoint.
We will now take time. That's next question from Steven Cahall from Wells Fargo. Please go ahead your line is.
Thank you David's remarks.
Well it suggested you get interest from what party to those that have been pretty serious discussion on the world changing everything goes down in the new but.
So it sounds sort of an answer perspective, maybe a lot of the worst is now behind you. How do we think about the ability those discussions so it's a compact car. They referred in definitely is there a path break this parties.
Well it yourself what kinda.
How about that process running at a quick follow.
Yes Stephen.
We generally don't and won't comment on M&A.
We did obviously put a press release on March 29 to give any unusual circumstances surrounding.
You know obviously we had.
The activist engagement, but we're going to continue our path of not not discussing M&A.
Okay formal but maybe more longer on <unk> and consistent with what that was on a same station basis in Q1, and then what's your outlook is maybe for the full year on both an important same station basis. Thank you.
Well, we haven't given any guidance on net retrans, though just with other than to say, it's very strong.
Very high margin producer of cash flow, and obviously, giving given the step up and.
Right.
And plus the added benefit of the acquisitions that we took in in the back half of last year, we'll see a very nice increase in net retrans. This year, but we do not guide on net retrans.
Thank you.
Thank you.
We went down next question from Dan Kurnos from Benchmark Company. Please go ahead your line is up.
Great. Thanks, Good morning, Dave we've been talking sort of about you know longer tailed benefits, obviously of the environment in the ratings and you have 35% of your footprint coming up at the end of year, you, obviously posted a pretty strong start.
To the year from a rate perspective, and obviously nexstar has some pretty good numbers to talk about as well do you think that this kind of translates into a bump when you go into those conversations at the end of the year Retrans perspective.
Well certainly won't hurt yet I know we already have.
You know.
From a big four rigs, which is what we care about right thats because that's what our portfolio is as big four and big for us or what you want to from a standpoint of negotiations with mbps. So.
We have some pretty strong expectations already baked in.
But to your point.
That is.
Your your point is a good one that is fairly dramatic increases in local ratings is reaffirming two all distribution partners.
The value of the local side equation, obviously, our network partners are very important too that's why the two of US combined are the most viewed channels and ecosystem and why we.
Shrink that the highest rates in the ecosystem.
And then I'll leave all the funny core and political crisis, others, I guess, maybe I'll just ask you about premium in this environment and you know obviously streaming is seeing the massive uptick we've seen kind of a wide variety of results.
From sort of the body side of the equation.
As far as obviously doing really well, but there's no doubt that viewership on no TT is up significantly I'm. Just curious how you know our advertisers coming to you with a more targeted approach how are you able to hold cpms in this environment and just sort of what's your view when obviously things.
A return to normal do you still continue to see traction there or does that maybe this is a growth ultimately moderate when you know linear comes back of it.
Well, let me just say any regardless of what your platform as to your your.
Were hit by the advertising downturn, whether your premium or or traditional television that said going Creek program. We continuously very strong very strong double digit growth on premium premium has obviously pulled back some but it's I guess, it's pacing is far better than.
Traditional broadcast so to your point.
The increase on streaming consumption is only going to be.
Well when for the business on the other side of the so I think Brent I would argue that premium is going to be even better positioned than before.
As a consequence of this particular.
You know.
This particular.
Change in behavior love it.
Got it and I could actually you know exactly going to sneak just one more R&D because you've been pretty.
Talk out there about just talking about changes from a regulatory perspective, obviously, we've got any be breaking perhaps you'd see changes I. Just don't know as you know given that we're you know I've been gray said, you're pretty close to an election. So they were not anticipating any movement on that front just lucky here. If you have any sort of updated thoughts on further de rag in this environment.
Yeah, I think we're I think were the combination of between the courts and.
When the ended election and everything else I think we're not a moment of paralysis about any regulatory change for the time being.
I agree with that.
Got it perfect. Thanks very much.
We will now take our next question from Alexia Quadrani from Jpmorgan. Please go ahead. Your line is open.
Hi, Thank you I, just kind of thoughts on some of the call. You gave me the advertising weakness in Q1.
Just to be auto category with one or weaker categories. I'm curious its fell off really jumped from the last few weeks of March or you saw thing or weak throughout the quarter.
Yes. Thank you.
I understand your question a little trouble on the phone Alexia, but you're asking about first quarter. There kind of work there was definitely two pieces. The first quarter. There was sort of Premark 12 than Postmarks 12. So when you go back and look that we normalize that pre mark well.
Click out the impact for the Super Bowl.
Oh was down but it wasn't that much.
And probably the best it's.
Thats bets that performance sense that before 19, so it was still down for the style marketing so as retail by the way we felt was down.
I'm very low low single digits.
This was auto so overall AD climate was pretty good.
Our advertising a market services numbers were fairly good, but but the hit and Alaska.
And to an athlete.
It was enough to put a debt and albertson categories.
I know you don't want to go into specific guidance given how fluid is for the rest of the year, but how do you guys internally maybe gotten some work looking at your advertising categories or advertisers in general on sort of isolated what percentage of them I might be a bit more permanently impaired and that's on Sept may not recover quite a quick.
Great if somebody I couldn't be others on the Honda comes back.
No I appreciate the question we have right I think the good news is.
Categories that maybe.
Theres the most aren't necessarily huge categories like now airlines and crew ships right are not big parts of our business.
We remain there remains business seemed like no.
Entertainment has been a decent sized part of our business and one that we probably have concerns about where it comes back.
I think my probably go a little better than people think.
I'm not sure about Q3, but I think the Oems that got type crash are going to want to get back to gain market share impact in the first quarter.
Sure one was doing was much stronger than tier three for us.
So I would think that that may.
Inside you auto category, it maybe better than people think once things start to open up in the other thing I'd point out abroad.
Separate from categories. Alexia is our portfolio were huge in Texas, Texas as you know hasn't really having huge number of places relative to size as population. There's also a pretty strong portable course, both from the state house in Austin and the general population to open up the state. So same thing on Florida, where we had a big.
Same thing in Georgia, as you're probably now so you know on on paper. It would appear our portfolio is going to be opening up.
On a faster percentage basis than the country at large and that should that should be should be good for us.
And.
No no word or truck sell better than in Texas, especially with the asset record low prices. So we felt.
Right. Thank you.
We will take them next question from type assets from Stephens. Please go ahead your line.
Hi, Thank you a few follow ups to the Retrans guidance question that you successfully no I wouldn't answering the.
Percent that you've already renewed can you help us think about the year, one step up versus.
Two and three year accelerators, and then also some clarity on how the 35% for renewals.
This year are going to phase cross the full quarters.
You bet.
So company the.
I'm excited to make it backwards the your two and in some cases, but not all the deals or three year summer two but let's say the second and third year escalators are still are very strong double digit escalators. The euro one escalators are cloud dramatically higher than that and you can almost kind of see those.
And what our first quarter numbers aren't as it relates to the 35%. It's all in the back half of a fourth quarter.
All back half of fourth quarter from 35%.
Yeah, yeah not not.
Well there will have some positive impact on December but not much not any really other parts of the fourth quarter.
Okay, that's super helpful.
Given given the backdrop and given that.
Brown on blackouts, how how.
As economic backdrop affected the way that you negotiate with.
I know you've got I guess your next year next renewal with them with the network is not until next year, hopefully we're out of them.
But.
I didn't impact we're still struggling.
Well I'm going to make sure I understand your question Kyle because when you referred to blacked out that's really not about network agreements about retrans agreements.
Right and of course from a specific to the specific to the cable satellite guys. The second part was about network or negotiations, which you don't have until next year. So.
Okay that may come back you just to make sure I understood. The second question on the network and on that on the distribution side. The blackout issue is you know again, because we don't have any negotiations and so six plus months from now that's not really concerned we're worried about right now and we always try to avoid blackouts and on it.
Hi, Jason anyway right.
And then.
Caused us crowd.
Specifically again the question about the network renewals was what if we're still in a pandemic driven recession and 21 when do you have to renegotiate with NBC, how would that change the town or tender that negotiation.
No. It's a good question I think that.
If theres a dramatically decreased the amount of original programming or something like that you know, it's obviously, we'll take belt.
All those kinds of crafters would come into play it you know, it's frankly, so far away, it's not on one hand, right, it's only settlements away.
Relative to what either they can foresee or we can foresee at the moment.
Thanks.
Hard to quantify what that what impact that might be but to your point.
Adequately could based on what the what factors are out there in terms of what programming is or isn't being made available.
Okay. One last one when you're dealing with the cancellations that you saw in late March and April you're out there trying to read so loans in the marketplace. How do you balance your thinking on sell through rates versus your willingness to kind of lower pricing.
Thank you.
Yes, so yeah when demand goes down rates go down right, because we we maximize the value of our inventory. So you're right now it's a great sales pitch to say the somebody we get people back on the air what's our sales teams are doing.
To say, hey, you're going to get your best CPM that you're seeing like in forever or the last recession right because you've got you've got record ratings and lower demand. So it's a great for people that half of the Bonnie.
Advertise it's the best return on investment that.
Never have to offer so that's what we're doing I think a lot the cancellations where companies are just simply.
Got to from their own balance sheet standpoint, because they were the businesses, whether shutting down but now we've been able actually to get some new to TV advertisers at the local level.
Because of this opportunity there, saying and then even on the National side, we just saw.
Big Order I think yesterday on sports standpoint.
Concept in the some number of our market so.
You are seeing us you're seeing kind of a switch or categories, even though they continue to be I met negative.
But you're starting to see and we're going after the categories.
Obviously are seeing growth during this time, whether its insurance or credit unions are electricians and plumbers and.
Care services and air conditioning hearing heating or things like that so across across all of our local markets. There are businesses now that are increasing their spend guys are increasing their business and we're going after market.
Great. Thank you.
We will take on next question from Craig Huber from Huber Research Partners. Please go ahead your line is.
Great. Thank you have few questions, Steve maybe you could start with this.
Between side, you're subs in the first quarter downstream, 4% to 5%, including the benefit of the MTT.
Yes, so net net subs you're right in the ballpark, Craig that's right, which were actually all we have right now because as you recall, what remittances are 60 days a little bit plus so we only have actuals through January but they work thats, what they were right in that range and we.
What I said before we've always model declines in total subs and it was actually a little bit marginally better in January them, we've modeled not much but a little bit.
Okay, Great and then I'm on the cost side.
The first quarter, excluding acquisitions, excluding programming costs was a percent change year over year in your cost. Please.
A lot one we have our team will look that one off we're watching things I'd say another question Ron I take your other question, what we looked at up.
Well take our next question from GE, Jim Goss of Barrington Research. Please go ahead Jim.
Okay. Thanks.
Dave given your dominance in Texas, and your strong position in Florida, and Georgia that you alluded to are you getting any early window the.
The potential speed and.
The rebound and depending on demand and pricing you might get errors.
See whether or not similar smaller businesses that my per and never doesn't does come back or still doing it on the slow basis.
Not yet I haven't seen yet Jeff because even if you read like in Georgia last week on the Governor Governor opens it up most businesses actually good and open right. So.
It's not it really hasn't kicked it off yet so I think that it's been too early for us to us to suit to see an impact.
Okay.
And nervous on premium premium you had spoken list.
In regard to the great partnership there on a complimentary multiple dynamics, we might expect or is it just an extension of the size of the market opportunity and are you seeking additional partners along those lines.
So to the first question I mean, what they give us is we have.
Given our 90 plus markets, we actually don't overlap and that money markets. So it gives us just a significantly expanded reach.
So and you know accessing local advertisers and their markets like we do local advertisers and ours. So it's just an overall accelerant to the business and we are potentially opens or other potential partners in the business.
Yes.
Okay, and I said them curious.
The production on the CBL accepted in this environment.
Are you.
In new ways to do certain things and maybe even that stands some of your ideas.
Yes, so actually we have heavied up on daily glass why because of the.
Huge increases in available audiences in the daytime it's been a real opportunity for them. So they are they are like our local newscasts are there. There are a combination of most of the people that used to be one very tight studio, they're all doing it from home with <unk> with a handful of on your talent at the at the studio, but like our local local news teams have they really.
Got a fantastic job learning, how to innovate and produce that shell remotely and sort of happen some fun with that because the team themselves is sort of a community and making it very nice up tick in ratings for them.
You you include other markets.
Once in other markets another reason remotely.
Some spot.
Well the staff that is our on your account all live in Denver, So they're all working there were coming in from their homes in Denver, but we've always got guests on all the time from all over the country and we and we did before but you know the use of the zone technology on the other computer based video interfaces everybody.
It's becoming good addict. So the entire industry is learning how to access.
People through.
I see video services much more easily than it used to.
Alright, thank you.
Operator, I think we still owe answer to Craig Huber Yeah. So the question I think was pro forma basis over expenses for the quarter and if you look it's relatively flattish up about one to one of the half percent and if you remove premium, which obviously is a digital driver of expenses down 23%.
[noise] So Craig you hurt your line is now.
Oh.
Thank you I got cut off earlier I'm, sorry, Victoria.
Sure there are up 100%.
Organic did exclude programming.
Yeah Yeah.
Okay. Good thank you.
And then Uh huh.
One of the also ask you guys are no Dave.
I want to talk with the whole quarter. This fall and question from from before but Nexstar as you know when their coal yesterday said the month April that they basically said it was down 35% to 40%. This it was down in line with their understanding for advertisers with it appears where were you guys down roughly 35% to 40% obviously it looks like.
Before I get much better than the Fox, what they're talking about the whole quarter.
Yes, Craig as I said at the very first question I'm not going to talk about numbers I just didn't respond to I simply said the Fox number that was given that I can verify that we said I'm just ticket I think that that number it was given in the first question. Thank Doug ask that is all I said is we had we're not at that number but otherwise I'm just I'm not giving on this not given.
Right now on.
But at that rates are.
Okay.
Oh.
And then also wanted to ask you can you just gives a little sense of what your thought is for the year Capex.
So we haven't provided we guide I said in my remarks, we've taken out but we.
You had it not mandatory discretionary capex for the year.
We may be a better position later this summer to to be able to guide on that studies and as you recall, we previously had fairly streamline capex for the years at wise and we've taken out well.
It will be lower than what we guided to originally were definitely are taken out capex, but we don't we don't know yet Craig exactly how much. We certainly we've deferred some projects that may or may not get spent depending on business conditions later in the year, So thats a little bit of a moving target, but it'll be certainly be lower than I want to what we want said it would be and just the baseline that typically.
Habits. We previously said 60 to 66 in about 20 to 24, if that was not occurring since that.
We decided that guidance when we're looking to take out at that anyone.
Thanks.
Okay.
I think thats it confirms your questions operator, so to conclude I just want to say as the world works through this current crisis I want to reiterate our commitment to protect than our employees supporting our clients and serving our communities in ways that our teams are doing today and great jobs, we are executing on our strategy and on our mission to serve audiences in every.
Possible, what if any additional questions. We were unable to cover today. Please reach out to dump complement our head of IR at 7038 second three.
676 for thank you everyone have a good afternoon.
This concludes today's gone. Thank you for your participation you may now disconnect.
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