Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the script first quarter 2020 earnings call.
At this time, all participants are in listen only mode.
Later, we will conduct a question and answer session instructions will be given at that time.
You should require assistance during the call. Please press Star then zero as a reminder, this conference is being recorded.
I would now let's turn the conference over to our House, Karen Caraway Michel <unk> head of Investor Relations. Please go ahead.
Thank you great. Good morning, everyone and thank you for joining us for a discussion of the E.W. Scripps company. Its financial results you can visit script dot com for more information on a linked to the replay of this call.
A reminder, that our conference call and webcast include forward looking statements and actual results may differ factors that may cause them to defer are outlined in our FTC filings.
The cobot 19 pandemic enhances the uncertainty are forward looking statements, we make about our operations and financial condition.
Because of this rapidly changing economic climate, we're not issuing second quarter 2020 guidance and we also are rescinding most of our previously issued guidance with a few exceptions will discuss today.
We did not intend to update any forward looking statements we make today.
We'll hear first this morning from scripts, President and CEO, Adam Symson, and then CFO at least the knutson.
Also on the call our local media President, Brian Lawlor National Media Executive Vice President Lora, Tomlin, and controller and treasurer deadline.
Now here's Adam.
Thanks, Carolyn good morning, everybody and thanks for joining us.
Well those of you have been with US for some time know that 2020 was supposed to be a watershed for a company financially and the year certainly started out that way.
The impact of the Corona virus outbreak on advertising for the last two weeks of March we are reporting attempt straight quarter in which scripts had delivered better than expected results on nearly every measure.
While our full year results will be unlikely to meet the high expectations I had coming into the year I'm heartened to tell you that the plan we have been working over the last two plus years has made us stronger and better performing.
For the first quarter the local media margin is up over Q1 2019 on both the adjusted combined and as reported basis.
National Media segment profit was double last year's Q1.
And the $49 million in total company segment profit for Q1 is the highest profit number for the first quarter that we have seen since we spun off Scripps networks interactive in 2008.
The bigger and better performing portfolio, we have will pay off during the upcoming political advertising cycle. This presidential year and through the upside we are capturing in retransmission revenue.
Even before the impact of the outbreak on advertising those two revenue lines political in Retrans, we are projected to account for more than half of our local media revenue in 2020, and we expect them to hold up well during the crisis.
The changes we've made to the company to make it leaner and more efficient and the significant M&A. We did that doubled the scale of our local media portfolio has also made us more durable and better able to withstand the crisis like the one we're all living through now.
Today, we're in the midst of a business disruption due to stay at home orders shuttered businesses and desktop advertising market.
But the fundamentals of the broadcast industry generally and scripts is local and national businesses, specifically remain sound.
On behalf of the scripts management and board I'd like to thank our shareholders, who have been supported us during this challenging time.
Many of you had been with us for years and some since before the last financial crisis today as always we appreciate your understanding of scripts is near and long term growth strategies and the value. This company has created over the decades and we'll continue to create in the years to calm.
Here's movie said discussed our financial picture and then I'll be back to cover a few more topics in detail Lisa.
Good morning, everyone. The first quarter got off to a strong start across the company and local media. We were on track to significantly exceed first quarter budget until mid March when the cobot 19 outbreak began to impact the economy, we reap the benefits of our acquisition of 27 television stations last year.
And although core advertising ended the quarter down on a same station basis. It started the year with the same momentum we saw in Q4.
We received significant early political advertising spending, finishing the quarter at $19 million and we captured retransmission revenue upside as we completed negotiations for about 20% of our subscriber helpful. With another 20% left to negotiate this year.
Retrans revenue was up 21% in Q1 on an adjusted combined basis.
The National Media Division thought even more positive Q1 dynamic by far our largest national businesses. The case networks, which managed to deliver it's best to revenue growth since we acquired at 31%.
No. They also finished up around 30% a testament to its ongoing appeal with young audiences and driven by programmatic AD growth on its over the top platform.
Overall, the National Division met and beat our first quarter guidance with $108 million in revenue and more than double its Q1 2019 segment profit at nearly $12 million.
Turning to expenses local media is Q1 expenses came in well below our guidance up low teens add up 8% on an adjusted combined basis.
National Media as expenses came in at $96 million versus guidance up about $100 million.
Shared services and corporate expenses were nearly $19 million than the first quarter that is consistent with what we guided and much higher than what we'll see the rest of the year because it included annual compensation and benefit payments.
I'll talk more about our ongoing expense control in a moment.
The company's Q1 net loss was 15 cents per share, but that lots is only 10 cents per share. If you factor out the first quarter acquisition and integration costs of $3.7 million net of taxes.
So again, a very solid first quarter.
Now I'd like to spend a few minutes on our current financial picture.
Although we are temporarily suspending guidance, we do feel obligated to our shareholders to make a good faith attempt to provide insights that reflect the current state of affairs and our outlook.
It was issues include where we stand today operationally and financially how we're responding to the cobot night 19 by protecting the well being up our workforce and how our operations and financial condition may change as global effort to fight Cobot 19 progress.
In addition to our comments today, you will find its closures and risk factors related to the outbreak in our 10-Q of course, we can't know the full impact at the Cobot 19 crisis at this time.
Turning to the local media division, let's start by discussing the progression of core advertising revenue over the last two months.
So speaking sequentially from March to April of this year, we saw a 40% decline in core as our markets felt the impact of state governments stay at home and business or shutdown order.
Right now our AD pacing indicate core advertising improving from April to May and from May to June let me be clear we are discussing month to month performance in 2020, not our year over year performance. Many factors will come into play into our cute I find.
Q2 results, including the pace of businesses reopening and consumer spending rebounding across our markets.
In comparison to core advertising political AD spending remains healthy Michael Bloomberg presidential Ryan provided helpful dollars at levels, we don't normally receive so early in the presidential campaign.
And now that Joe Biden is the presumptive Democratic nominee, we expect a full force the Democratic fund raising effort to fall behind him setting up for Robeco political.
Spending Keith Senate and governors races are also falling in line for US all in all we expect a strong political spending year and our outlook for political advertising in 2020 has not changed.
Our retransmission revenue outlook has actually improved from the started the year in January we began our new Comcast contract and in March we completed negotiations for about half of the 42% if the briber households that are up for renewal this year.
We are pleased with the outcome of those negotiations and believe our expanded station footprint helped to realize greater value.
We have now begun negotiations on the rest of those households, another 20%.
Regarding subscriber count we saw no substantial change from the third quarter to the fourth quarter of 2019, the most recent data available.
Our national media businesses also felt the effects of the soft advertising environment in April.
Month of April was down 19% from the previous month March.
And March was the best month of the first quarter. However, we now see stabilization in the national businesses for the remainder of the quarter.
Like local media. These businesses are managing the AD market challenges by employing stringent expense control. In addition, we believe the national businesses are well equipped to withstand these challenging time.
At Kate the pillars of the network businesses are very durable they bank on growth in over the air to TV viewing they benefit from stronger national advertising and they each reach nearly all U.S. helpful. These fundamentals will help Kate rebound as the economy improves.
At New Jersey, the stability of programmatic AD revenue on its over the top platform has allowed it to manage through this unusual time.
While newsy has seen cancellations and softness in the second quarter. It's AD rates are holding steady along with viewership gains.
Deters business also faced challenges from the unfolding economic crisis, and advertiser uncertainty about usage as stay at home orders reduce commute times, but listening has bounced back in recent weeks to near normal levels with the news Spike midday.
And the did your team has been actively managing its piano with two goals in mind to preserve and strengthen the long term value at the business and to mitigate risk through prudent expense management.
Did you are continues to receive pitches from big celebrities and maintains key partnerships with others and is well positioned to emerge as an even stronger brand.
Now I'd like to discuss the proactive expense control measures we've executed across the company since mid March to help us manage the AD revenue declines.
Our initiatives have included a reduction in capital expenditures, a hiring freeze a freeze on the merit pay raises we were scheduled to implement on April 1st.
The rolling back of executive pay increases that were made earlier in the year. Then later pay cuts for executives and reductions in our board of directors fees and general expense reductions in items like travel entertainment and marketing.
We expect these initiatives to provide cash savings of more than $85 million for the year.
And now a few.
Key liquidity items to update you on our current forecasts for full year cash interest is $90 million versus our previous forecast of $100 million.
The savings reflects the significant decline decline in LIBOR over the last few months.
Our capital expenditures currently are estimated to come in between 25 and $30 million versus our previous estimate a $50 million.
And our cash taxes are currently estimated to be zero for the year in fact, rather than paying taxes were receiving a 14 million dollar tax refund as a part of the cares Act I'll talk more about cares in a moment.
Many of you are with us as we weathered the great recession of 2009 that was a difficult time for this company and we were forced to impose furloughs pay cuts and suspension of many employee benefit.
We hope those measures won't be necessary in this case.
Our expense reductions are certainly helping.
Another significant difference from that period comes from the benefits of the federal stimulus package to our company's liquidity.
The stimulus provisions that benefits scripts include the deferral of social security taxes and pension contributions the tax relief on the use of net operating losses and interest expense limitations.
These measures either bring in cash this year or help us to push out cash payments to 2021 and beyond the total impact to script is about $60 million. We appreciate the federal efforts to help businesses maintain continuity during this difficult period.
We expect to be cash flow positive for the year and based on our current outlook.
We expect our cash flow from operations to be efficient.
To meet our operating needs over the next 12 months.
We have of course stress test our forecast with a number of downside scenarios and even in our most severe downside model, our 2020 cash flow significantly exceed 2019 cash flow.
And while we do not anticipate liquidity constraints, we do have other potential cost control levers as well as the ability to slow our working capital spend and generate cash in the event of a prolonged economic weakness.
Right now, we do not need to take these steps.
I'd like to conclude with the cash with cash and capital allocation.
Our cash balance at March 30, Onest was $180 million and net debt was $1.94 billion. Our net leverage at the end of first quarter was five dot four times.
Just a reminder, that our term loans and unsecured notes have no maintenance covenants.
We have no maturities until Q4 of 2024.
Our revolving credit agreement has a maintenance covenant only when when drawn its maximum leverage is 4.5 times on first lien debt on an adjusted pro forma two year blended EBITDA at the by defined by our current credit agreement at March 31st we were at 2.9 times on this threshold.
Finally, our team has been focused on navigating the economic fallout from the pandemic with a sense of urgency our number one priority right now is managing our cash and liquidity through the duration of the downturn.
However, we haven't lost sight of the fact that outside of this crisis. Our overarching priority is to pay down debt. This is why weve temporarily suspended share buybacks last quarter.
Nevertheless, we thought it was important to maintain our $4 million a quarter dividend and now here's Adam.
Thank you Lisa.
I shared with you at the outset about Paul how the plan we have been working over the last two years that script, which was designed to make us a stronger and more durable company and why that work has better positioned us to navigate this moment.
Then after sharing the results of our strong start to the year, Lisa detailed our plan to whether the current storm.
Now I'd like to discuss how we believe the work we're doing today will better position our company for the Don ahead, when we know the Sun will inevitably rise again on commerce fees.
As the Corona virus came crisis came upon us this spring.
We identified three key priorities to guide our actual.
Number one to protect the health and wellbeing of our 6000 employees number two to energetically serve our audiences and communities with the objective news and information they need to stay safe and the entertainment they seek to lift there spirits and number three to maintain business continuity and strong financial stewards.
Of the company.
These three priorities have guided our decisions thus far and they are the reason we believe we will be better positioned after the crisis.
All started with planning because several weeks ahead of the Pandemics rise to the top of the American consciousness, we were already putting the pieces in place to safeguard our employees execute the mission and maintain business continuity.
We let our industry in transitioning many of our employees to working from home across both our television station footprint and our national businesses I'm proud of the creativity and ingenuity demonstrated across our teams to overcome any challenge and I want to thank our employees for their dedication to their audiences.
True commitment to our mission and their loyalty the scripts.
Without missing a beat anchors meteorologist and our field reporters transition to covering our communities with minimal risk exposure. Many lives from sets in their homes.
Cash are being produced recorded and edited remotely software engineering and development continues without interruption and video conferencing has helped shore up our sales efforts across the company.
Capex for instance, the upfront season has already started with about 100 pitches being made over video calls with the same polished as an in person pitch.
Across our company our sales teams are staying in close contact with clients agencies and brands as we navigate this together.
While coded 19 is a global pandemic it is inherently a local experience and therefore, a local news story.
We believe we have moved into a new era for the journalism industry, one in which news, especially local news is again a must have for most Americans.
This era begins at a time when local broadcast news rooms are uniquely positioned to cover our communities and meet audience demand.
Ratings in audience impression that our local stations have been on up on average between 10 and 50%.
And that seem data shows that scripts brands are taking a greater share of the increased attention.
Our coverage focuses on the facts, we are delivering information with authenticity with humility over authority and with a willingness to recognize that we don't always have the answers.
This is because of our newsrooms dedication to a differentiated content strategy.
That calls on us to deliver the stories and information our audiences need with context and objectivity.
At Newsy, the spike in demand from our audience has been justice profound.
Spread out across the nation Newsys journalist continue to report about the pandemic along with all of the other news that keeps the world spending.
Newsys audience has been up 40% on cable and more than 65% on OTSG record setting viewing numbers and the significant opportunity that is introduced newsy to a bigger and broader audience seeking out our commitment to nonpartisan objective journalism.
The five keeps networks are seeing boost in viewership from the increase in people watching television. This is especially true for mistry laugh and grid. The three networks that specialize in escapism.
And not surprisingly daytime is the new prime time as people turn on their Tvs, while spending more time at home.
Total viewership on these networks during the day is up between 20 and 40% over the same period last year.
At Stitcher more than 300 agency and brand professionals joined our power of podcast Webinars in early April to learn how even in this environment podcast will connect their messages with their target consumers.
Some advertisers have increased spending with us and new advertisers continued to enter the podcast marketplace.
The residents of podcasting during this chaotic time illustrates how deeply ingrained it is in our lives today.
All of this elevated consumer demand for our news and Entertainment makes me optimistic about what lies ahead.
Branding and marketing experts know that consumers habits shift after life changing events.
I believe we are collectively all experiencing a moment like this now.
People are recognizing that social media posts and Internet Influencers may not be reliable sources of legitimate information to keep them safe.
Our trustworthy and enduring brands will be here for them during and well beyond this crisis.
I believe all of this outstanding audience growth will financially benefit our company even in the near term as we head toward what we expect to be a very robust political revenue cycle.
At moments like this the scripts commitment to mission and service extend beyond how we inform our audiences it reaches to the role we play within our local communities for good and how we support the economy with the power of our media.
Our efforts on this front include launching read news and advertising campaign to support citizens and businesses across our footprint.
We are open takeout Tuesday, and the rebound.
These initiatives and campaigns connect us closely to our audiences and advertisers and reinforce the central role our media brands play in our communities.
And they are integral to our mission.
As the fourth largest independent television broadcast or one of the largest podcasting companies and the largest and most powerful portfolio over the year multi cast networks scripts is contributing to moving America forward.
This is what we do because it's what's right, but we also believe doing this work gives us an advantage that will payoff for our business and for our shareholders down the road.
As our company mission States, we do well by doing good.
Today advertising may be down, but audiences are way up.
I'm confident that as stay at home orders are lifted we'll see the start of a recovery auto dealers will need to sell their cars air conditioning systems will once again need to be replaced and eventually travel and leisure spending will resume.
As businesses return, we will be there to help them reach their customers and I expect our actions today will benefit us tomorrow.
Ahead of this pandemic scripts had repositioned itself to thrive by prudently deploying capital to grow our scale and the economic opportunity with a commitment to delivering strong financial results.
Along with the rest of the global economy, we are certainly being significantly impacted by the disruption to business.
But we're also using this time to become a stronger and more powerful company.
Scripts in its 142 Yester year history has survived wars depressions and even other Pandemics. Our company is strong our media is enduring and our people are resilient.
While it's inevitable that some comedies have to hunker down and play defense through this period, we will be on often.
Because we know that how we ask now during this crisis will have everything to do with how we succeed as we emerged from it.
And now operator, we're ready for questions.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press one and then the ROE on your telephone keypad.
Hey, withdraw your question at any time by repeating the one zero command.
If you are using speakerphone, please pick up the handset before pressing the numbers.
Once again, if you have a question you May press, one and then zero at this time.
Let me just one moment for our first question.
And well what are the line of John Janedis with Wolfe Research. Please go ahead.
Hi, good morning, Thanks for all the color happier process.
Adam a couple of questions first as markets reopened what are you hearing from your sales team.
Quickly our advertisers for parents will move given perhaps on local businesses and when you look at your top categories like services and auto you think they lead or lag coming out and then just on on Kate.
You talked a bit but is the advertising mix there with more de are just making it simpler more resilient.
I'm just curious in terms of what the mix is there and if thats whats helping thanks.
Good morning, John and it's great to hear you on these calls again I mean as Brian to cover those two.
Hi, Good morning, John It's Brian.
How fast are opening honestly, it's just early I mean, we're just in the last week, Kentucky, Texas started opening up.
Montana.
Which had very few cases.
And started opening up a bit now we're beginning to see some of the other states.
Starting to take from incremental steps I think we'll know better in the next couple of weeks I mean, this past week was.
Very reassuring.
So quite a bit of business that had been canceled.
Four or five weeks ago reinstate their buys.
But I think it's really going to be on a market by market basis and.
There's some categories. The medical category is one of the first.
To start to Britain money back into the ecosystem as non elective surgeries and so forth or one of the first things that are opening backup. So I think thats a category that we're starting to see services actually has held up okay. I mean, everything's down but has held up okay sorry.
So I think with a lot of people hold that was a good time to start to get some soft fix so.
I think in the next couple of weeks, we'll know more but I expect it to be a.
Kind of a market by market.
Situation.
Relative to case would your question John about the first quarter performance or just how they are holding up now.
Well I am now I mean, there's been talk in the market around direct response being just a much better category broadly and I'm I'm curious, what thats going to benefit case going forward as opposed to looking backwards.
Yeah, I think so I mean.
D.R. was not immune to the challenges that.
General market had.
There was some de our that pulled back, but there's enough and that ecosystem to backfill cpms are down a little bit and so we do have.
Switch of.
Of advertisers, but even than the last two weeks and talking to folks vacates, they've actually raised their estimates and there are only thanking where Q2 would be because the cpms were actually starting to grow off of where they had said in at the end of March So I do think Q2.
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DDR will fare okay.
Yes, probably not back to Q1 levels, but we are seeing momentum in crop CPM Sir.
Thanks, John.
Thank you and next we'll go to the line of Kyle Evans with Stephens. Please go ahead.
Hi, Thanks.
Lisa or Brian I know you have 20% of Retrans subs renewing in the balance of the or can you talk about how those phase across the quarters that I've got some follow ups as well.
Hey, Kyle we're in the middle and negotiating those now I think.
That money will phase in over Q2, Q3 and Q4.
Fairly evenly.
Little bit heavier for the back half the some of that money will come up and into Q2.
Not those negation negotiations are complex, but they are going well.
Even in this period, we continue to have ongoing conversations with them week to week in advancing the negotiation. So I would expect sooner than later, we will be in a position to announce successful completion loans Gill.
Great.
Q 20 political ads.
Makes sense.
How did you have on how those comp on a same store basis to the 16 and 18 cycles.
Hey College, Brian again, we did 18.7 million in Q1 of 20, we did 3.4 million.
Of political in Q1 of the 18 and I don't have the.
Number 416 and front on the but we can work on getting that for you, but obviously it was good the on Bloomberg was about a little over 40% of our spending but beyond that we had I don't know 15 states that had primaries.
Finally saw crowd out of the fact that affected our core.
The back half of March, Michigan, Montana, Missouri, Arizona, Florida, Ohio, All had.
Primary is where we have multiple stations and so we definitely saw an impact on our core their butts.
It was a good first quarter and beyond just Bloomberg Sanders by more than book to Judge Kubicek, everyone was active in most primaries that moved us through the quarter.
I'm staring at a very expensive Bloomberg terminal so you're welcome for the for that.
We are appreciative.
The sub counts Threeq to Fourq, you not not been materially.
Urging.
If anything could you give us on your view for 2020 given.
30 million of unemployed and.
The lack of alternatives for people when they're locked in their houses.
Yes look I think you're asking a good question.
We get our quarterly numbers and Reorders and.
Down less than 1% down less than half a percent over the last three months, what we have reported so that was quite frankly, one of the best.
Results, we've had in several quarters.
It'll be a while before we know.
The impact of this period.
Certainly heard both arguments that.
People need local TV, and maybe TV more than ever and so those subscriptions really valuable I also understand the pressure on people who are having our time paying their bills and is that dispensable expense. So I don't really know how thats going to play out I think we'll be watching just like you will be watching to see but.
So we look at the momentum we had coming into this quarter. It was actually very positive.
Great one last one.
Could you please tick down kind of what the pacings are for the national business segments. Thank you.
Hey, Kyle it's Laura.
We know how you doing at we've come off of.
Excellent quarter, we delivered a higher profit you know as those guys mentioned earlier for that division, yet and a real healthy growth rate of 23% even without the impact is covered 19, you know hitting us at the end of March we do see stabilization as the quarter is progressing.
And we continue to believe and the underlying growth rate.
Too early to tell sort of how the growth rates will shake out for the remainder of the year.
Okay. Thank you.
Thank you and exportable items, Dan Kurnos split the benchmark company. Please go ahead.
Thanks, Good morning.
Just first on Retrans.
We actually came in a little bit higher in Q1, so it just no adding or Brian you've been pretty proud of the ability with the scale you've gotten to get rate and we see it in pretty good numbers just want to make sure there's not any.
Ups in there that we're missing.
And then.
Brian This sort of on core in general you guys, obviously have a pretty good footprint relative to less restricted.
Shelter in place type markets as well as pretty good APC exposure. So you think that's giving you an advantage you think your pacing ahead of kind of where.
The broader industry is facing from corporate aspect that.
Hey, Dan Nice to talk to I'll take the first question no no unusual true ups.
Those numbers I think it's an app what youre seeing is an affirmation of the strategy we've been working adding.
Through M&A to our portfolio last year ago physician position US best for this year, we've been for a long time talking about how important 2020 was because of the Comcast step ups and also because of the opportunity to renegotiate 40% of our subs that is underway and we're very pleased with the results.
Ryan.
Yes, Hey, Dan.
I'm not sure that.
As we look across we feel like we had less markets affected by the sheltered home every one of our markets had a shelter at home in order to some degree.
As a result of that every one of our markets had some business cancellations as a result of the environment I don't think that there was any state that just.
Was open for business exclusively so I can't speak to the other groups, but we definitely felt like we were impacted across our entire portfolio.
As it relates to APC.
We've been really pleased with the health of the APC brand Good morning America World News.
Has seen significant growth.
Over the last couple of years and I think in this time has done a nice job and then a very credible brand and so our I think our association with that has been good.
They do have a couple of primetime shows like American idol that they've been able to continue to stay on with live performances I think thats helped us.
But I think time will tell whether the heavy APC will be an advantage over the others through this.
And maybe just one more either for I guess, Adam or Lora, just on maybe high level thoughts around.
Kind of the mix shift towards towards streaming and out of home rella as it relates to newsy and Stitcher and just you know is there any way that you guys can sort of try to handicap. What you think the stickiness is in terms of the.
Uplift in usage inactive accounts and relative to kind of what you think that how that impacts sort of the way you either view, let's say state your valuation Adams and Thats been a conversation piece or newsy is kind of growth trajectory over the next call. It 12 24 month.
Yeah, I mean look I think we're experiencing certainly increased attention at newsy as a result of two things first more people are spending more time looking for.
The brand of news and information that we provide.
Right now and they're doing it on new platforms like OTG. We've also seen audience growth on the cable side.
With Newsy and I think that will definitely benefit us over the long term.
It's been good to see that programmatic AD rates have hung in there through this and Thats benefited newsy for sure obviously there is still.
At this moment more supply than there is demand, but the rates or are hanging in there on on the programmatic side and so I expect that the work we're doing through this period at Newsy as we continued to maintain our commitment.
To the kind of reporting we do through this crisis will endure to this company's benefit to newsys benefit over the long haul as People's preferences are set.
On the podcasting side I think as Laura mentioned in the in the prepared remarks, there was a little hit two podcast listening overall as an ecosystem as the morning commute disappeared. It certainly wasn't as profound as I think what you're seeing from radio groups with respect to terrestrial radio.
Thats bounce back to basically normal levels as people have begun listening to podcasting now on their daily walks as they're walking around the neighborhood and I expect as people returns of commuting I expect those people who have for the first time been introduced to all the different opportunities that podcast provides from a programming perspective, we'll.
We'll continue to to help them. So when we look at what this what this crisis has done.
I'm I'm I'm, let me be clear there are no silver linings with respect to the crisis that this world is going through right now, but I do think when I when I look at our company relative to other industries. We are serving an audience that is hungry for the product we produce yeah.
Yes, we are temporarily being negatively impacted by business disruption, but I expect once business gets back to normal we will be in a better position to capitalize on the strength of this company than we might have even been before and I'm, absolutely looking forward to that moment.
Got it thanks for all the color guys appreciate it.
Thank you and next we'll go to the line of Davis Hebert with Wells Fargo. Please go ahead.
Good morning, everyone. Thanks for taking questions well.
Just one question.
So give us last quarters.
On a basis.
To leverage thank you.
Yes.
David.
Right.
Current leverage as of March 30, Onest was 5.4 times on at the end at the end of that.
The last.
12 quarters, when we look back on an EBITDA basis. It was 363.
On the lagging.
Yes.
Actions like you ask one follow up you gave some color on April May June being sequential.
The color on year over year expense, how that would look I know, it's difficult with M&A, but maybe on a pro forma basis.
Hey, Dave Us it's Brian.
I think thats the key thing Lesa mentioned in her prepared remarks was that we are seeing sequential growth. She talked about the fact that March which was our strongest strongest month of first quarter. We saw a decline of about 40% into April.
But from that maze bookings were better than April June bookings are better than may.
Compared to last year.
Each one is going to be down each quarter category is going to be down there's still a lot of moving parts.
And the stakes are changing their rules everyday so it's very difficult at this point to give you any sort of solid Q2 guidance and Thats why we focus more on sequential growth.
Thank you.
Thank you and next we'll go to the line of Michael Kupinski with normal capital markets. Please go ahead.
Thank you, Brian just a follow up on that what is the normal.
Sequential month to month.
Formats for the.
Let's say the broadcast group.
From March to April I.
Yes personality right.
There is typically April would be flat or even down a little bit from March may bounces off to be one of our best month through the year, one of our talked to our strongest months here and then June would typically.
Dropped back from that so the fact that it's not unusual see may grow over April but it would be unusual and we do expect June now to grow over may.
Gotcha and then.
In terms of just looking at the retrench, just going back to that for a second.
Just trying to get a sense because I understand that you had some new renegotiations that kind of kicked in in March you already had to step up.
Getting January onest from the Comcast subs Kinks, kinda give us a sense of the progression in retrans month to month.
Please.
Mike It's Brian we're looking in here each others, who is going to take this.
Relative to month to month, you know you saw a step up in Q2 as a result of the deal that we got done that we've now announced was done early in the quarter.
You will see another big step up.
As we complete Q2 and that will carry through Q3 in Q4, and then we have another deal up at the end than the first half of year that will benefit third and fourth quarter.
I understand the them.
Turning to the first quarter in terms of the Retrans came a little bit better than.
Many of US we're looking for was just wondering that I know that you had a renegotiation that kind of kicked in in March I believe and I was just wondering to kind of give us just some thoughts in terms of the trend line for retrans in that quarter.
I.
Mike It's Adam I would say, we did benefit in March from the completion.
[music].
Have a retrans agreements.
Okay, and I and just just going back going back to my comments before.
I guess I would say.
[music].
Again, it's an affirmation of the plan, we've been working to negotiate those those agreements with a larger portfolio.
And in terms of that agreement is or any additional color that you could say in terms of the variance that would have accounted for that agreement in the quarter I mean kind of give us a sense of given the trend.
I mean, not I mean, not really I mean, the reason we have been reticent to guide.
Two retrans is because we're in the midst of these negotiations and we expect that it's our responsibility on behalf of the company and our shareholders in order to.
To to monetize the distribution of our signal to the best of our ability. So when we outperformed your expectations I guess I'd say, that's an affirmation of the job we're doing.
Fair enough fair enough.
Wondering if you're.
Good morning Pack you guys. Thank you I was wondering Brian if you could go back to.
Your comments about the how the performance were among.
Disparities about TV stations, but I was wondering if there were regional disparities in terms of performance in your television segment small markets versus larger markets are are they pretty much down the similar across the board.
Yes, there was some regionality too Mike really depending on what was happening in the state I mean, obviously.
Think of how markets like New York were in New York City in Buffalo, where.
We're especially hard hit.
In.
The Midwest, Michigan.
Ohio.
Wisconsin, they're very aggressive and many of their.
Stay at home borders too and so.
Those have been restrictive there were other states general, Texas fared a little better we're in.
Corpus of Waco, Montana fared a little better also once you get a smaller market you have a little less national advertising and so end markets like those where there were less stay at home and local is what drives. This nation, we were able to hang onto more the business. So it really depends on sort of market market size.
State to state versus just.
A general.
Regional comment.
So it's nice to have a diverse portfolio last question.
The company historically, its managed with much more modest debt levels and the initial thought was that the company would increase leverage with a very visible way to lower it and certainly you're going to get that cash influx from Comcast of the political to pare down debt now that prospect doesn't look as.
As a promising given lease you're going to get that but given the other portions of the business.
With that prospect in doubt in terms of the debt leverage pare down can you talk about the product prospect of more aggressively lowering debt would you consider monitoring monetizing assets are their non strategic assets markets that could help reinforce your balance sheet any thoughts on that.
Hey, Mike its out I mean, right now obviously, we're very focused on navigating through the crisis looking at.
The cash that we're generating.
Using that obviously for the long haul as we've said for now the less.
Several quarters, our focus will be paying down debt, reducing our company's leverage.
Think we've got to.
Sort of ticket quarter at a time Im gratified actually to see that we were able to flex our balance sheet last year in order to.
In order to double the scale of our our local media portfolio, because I actually think that it's really helped us to.
To be better positioned to withstand a crisis like this the cash flow generation of the company has significantly enhance.
Now as a result and that helps us.
Looking at our fixed costs I would say.
Moving through the crisis, we will continue to execute with that strategy in order to make sure that we we maintained a healthy balance sheet and continue to pay down debt.
Do you have any thoughts in terms of where the debt leverage might be by year end.
Hey, Mike its Lisa given the uncertainty of the impact of Cobot, where we're not guiding our forecasting two and year end leverage at the time.
Fair enough okay. Thank you.
Thanks, Mike.
Thank you in next door to liner Craig Huber with Huber Research partners. Please go ahead.
Thank you Hi, guys Hope you all safe.
Few questions I'll, just maybe just go one by one if I could Brian on the Retrans subs.
What was the year over year percent change was down like say about 4%.
Earlier this quarter there.
Over the last year.
Our subs have declined about 5%.
Okay.
TT right.
Correct.
And that's a 2019 just clarifying through through the end of 2019.
Yes.
So I like your latest quarter I guess.
During the fourth quarter down roughly 5% year over year.
No.
Im saying for the full year over 12 month period.
We have declined about 5% total subs.
Brian will have you here.
Your thoughts you're only on the NFL contract renewals outdoor just broadly that you can speak to here I mean do you think things are getting pushed out in terms of.
In the aggressiveness here together get contracts signed during the coming quarters. Given this this virus situation going on here will also be curious to hear what your thought is how you think the contract may get broken up.
The Sunday afternoon games, I think you'll see status quo over there.
Oral four players participate which really just thoughts on the contract. Thanks, Yeah, I don't have any insight as to where those negotiations are at other than I know they're going on.
And so I don't have any visibility as to if this current environment has slowed mills I'm guessing it didnt.
But.
Actively involved in those areas I've said in the past I I'm not sure that this next deal has to look like the last deal I think that there could be an opportunity for everybody to have a piece of the action.
I could see and again I don't have visibility into how these negotiations are going so as much as my own personal opinion, but I can see an environment where.
Every all four of the major networks have a piece of the NFL package Im not sure. The NFL package has to be as cleanly as.
Prior ones with one company getting the AMC and other one getting NFC summit again, someday I think that.
I think theres a lot of regional games that are of high interest and.
It would be great.
Markets could have the opportunity to see them. So I think of a market like Cincinnati, where I'm sitting and oftentimes, we'll get the Bengals game, which is great. But then you know we had within 100 miles of here you've got the Colts a little over that you've got the Browns.
Steelers some of the big interest here and so the idea of somebody being able to have a bangles, but also another station or to also at the same time being able to broadcast from other teams of regional interest I think.
I would be of high appeal, and so I think theres an opportunity for every one of the play.
No smarter people then they will figure out how that could all work but.
You know the fact that we have a books big footprint with all four networks I wouldn't be hopeful that everybody has a piece of the action.
Then back on the core advertising front on television.
Comments about.
Down 40% I think.
I guess like many question here is it was that a comment I guess sequentially. So it also assume basing first down 40% year over year for the month of April for core TV advertising is that fair statement, but without a rate of decline is getting better in may and June is that what you're trying to say.
Yes, so what I'm, saying is that.
April revenue was down core revenue was down 40% from March.
So we're looking at.
March was kind of our high water Mark in first quarter April dropped obviously come the third week of March.
Millions of dollars and cancellations, but now we see may do we have more money booked and a better percentage year to year.
In may than we had in April and we have more money booked in June and we had in may and an improved percentage never as well.
Within just to be clear a year over year base, you inferring not year over year. Let me just let me just Claire not more money both year over year more about money booked in the but at a greater percentage month over month.
Okay, that's likely to 40, but how about this april year over year pro forma set down roughly 40%.
Yes, we're not sharing that Britain Craig.
Okay.
Yes, I mean, Craig I really appreciate where you're trying to get out there's just so many moving parts right now we're just not.
Issuing any guidance right now.
Okay last if I appreciate that and then my last question I guess, Brian on the cost side within television can you give us any sense of the non programming costs. How much you think that might be down sequentially like compensation costs et cetera.
Just we have something go off of your to think about four models.
I think when you take out all of our programming costs.
Which would be all of our network.
Has paid to the networks are syndication to all of that programming stuff everything else is running flat to up low single digit so all of our employee costs.
Our.
Yes legal fees earned repairs towers music license travel and entertainment.
For and I'm speaking to Q1, Q2, Q tool a totally different as we frozen. So many expenses of there's obviously a travel we've cut back on capital things like that but in Q1 all of those other categories nothing was up more than 2% and so everything was in that kind of flat to just maybe up a little bit range. So most of our costs.
Yes, our expense increases came in the programming line.
Can you help us quantify what do you think the second quarter, we'll do versus that up 1% to 3% number.
How much much better if you get a tool.
Well, we've made we're thinking Hey go ahead on Hey, Craig It's Adam I mean, we've obviously tighten the belt very very significantly I think very consistent with lease those comments and we can't give you much more beyond that.
Okay. Good thank you.
Thanks, Greg.
Thank you and exportable I know John core Roche with JK media. Please go ahead.
I may have missed this it.
What's the size of your revolver.
And the maximum pressures second quarter because of political won't be all that great and then the third quarter picks up in the fourth quarter to explode.
So.
You comfortable in your best case modeling that you won't have to tap.
The revolver isn't mix.
234 months.
Hey, John based on our current forecasts.
I had indicated we are cash from operations provide sufficient liquidity to sustain operations for the next 12 months and we would not expect to exceed our first lien secured leverage.
Covenant over the next 12 months so.
And that revolver size is 210 million.
None of its drawn.
Now we did we did draw the revolver really out of an abundance of caution as right, yes, absolutely yes.
I would oil.
No we did not dropped off.
Can you give me an idea would you do.
175, okay.
Okay.
I want to say that Brian I want to talk.
A concept out at you and get your reaction every.
Call with every broadcaster.
Politico estimate unchanged afterall people more people at home and will remain home and they won't be any you won't be much in the way of campaign rallies and so on make sense. They the campaigns will want us will want to spend more.
What I'm concerned about is the raising the money side.
Our wealthy donors in such a great mood. This year that they were willing to give huge amounts of money to the candidates I mean I can speak for myself I will I went into this year ready to donate act.
To a candidate.
I am still going to donate halfbacks.
You know I'm wondering just like everybody else.
So I am more worried about the raising the money side than the wanting to spend side, what do you think of that.
Well look Jonathan gets.
A legitimate question, that's probably a legitimate concern so to this point the fund raising levels have been significant.
And significantly higher than what we've seen in the past and so the campaigns at this point or well fund.
Expect they will continue to be well funded I think your comments about maybe people will not give.
The same amount that they were going to.
May be valid time will tell on that but I do think that there will be enough money in ecosystem that TV comes first and.
As a result of that I think that.
If there is less money it could impact.
Maybe some other mediums, but I think local TV is typically where.
They go first for spending and.
Look we look at our footprint.
Very strong in the presidential States are Senate were in six of the top 10 considered competitive races.
The house is going to be very competitive 53.
Races consider tossups are lean and were in almost half of them.
I think we're really well situated that even if there is a little less money in ecosystem. We believe local television is going to come first and we'll be fine okay.
Finally, I heard a room is that Brian Lawlor is privately working out with Joe borrow is that right.
I can't comment on that Okay, we'll have thats my agent [laughter]. Thanks for the help.
Thanks, Doug.
Thank you and next we'll go to the line of Jamie Zimmerman with Lightspeed partners. Please go ahead.
Hi, guys you guys have like in terms of employees per station, you've always had like a number that way exceeds everybody else's I just thought that this opportunity would allow you to sort of you know to get to take that number down and actually.
I'll, let go a bunch of employees, who perhaps were.
Redundant and not necessary and I'm curious.
Hi, staffing levels haven't come down during this crisis.
Hi, Jamie it's Adam Wow.
I guess I would tell you.
I don't see this in any way as an opportunity.
And right now we're very focused on the health and welfare of employees I don't necessarily think it's also an accurate statement that we have more.
Employees across our stations then.
Other groups. So at this moment, we don't feel a need to execute.
Furloughs pay cuts and layoffs.
Alright.
Thanks for the question, though.
Great that there any other questions in the Q.
We do have John Kornreich back in the queue from JK media. Thank you.
Retrans growth.
Pro forma turns out to be this year.
Asking what it will be is it safe to say the net retrans growth.
We'll be less.
Less than lender lessened.
Less than the gross retrans growth whatever that turns out to be.
Gross margin margin will be down a little bit.
We really haven't discussed any guidance on retrans for the year, Hey, John we haven't disclosed our net retrans profit and based on obviously the large amount of sets that are resetting in 2020.
We do expect nice growth this year, but we haven't said really because of those negotiations okay fair enough. Thank you Ken.
Thank you and I have no further questions in queue at this time.
Great. Thank you very much everyone for joining us today.
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