Q2 2020 E. W. Scripps Co Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the scripts second quarter 2020 earnings Conference call at this point all the participant lines Arnaud listen only mode.
However, it will be an opportunity for your questions you meet queue up for a question at any time simply by pressing one than zero as a reminder, today's call is being recorded.
During the call now ornaments, Carolyn Micheli Senior Vice President Corporate Communications and Investor Relations. Please go ahead.
Thanks, John Good morning, everyone and thanks for joining us for a discussion of the E.W. Scripps Companys financial results you can visit scripts dot com for more information and a link 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 FCC filing.
The cobot 19 pandemic enhances the uncertainty of forward looking statements, we make about our operations and financial condition.
Because of this rapidly changing economic climate, we're not issuing third quarter 2020 guidance, we do not intend to update any forward looking statements we make today.
Well here this morning from script, President and CEO, Adam Symson CFO at least the knutson local media President, Brian Lawlor and National Media Executive Vice President Lora Tomlin.
Also on the call its controller and treasurer deadline.
Here's Adam.
Good morning, everybody and thanks for joining us over the last three years scripts has articulated a strategy for transformation to create a more durable higher performing company by improving our short term financial performance, while continuing to build value over a longer term for our shareholders.
Over those years, we've executed quite a few important initiatives in pursuit of this strategy, including initiating an enterprise wide restructuring and cost cutting exiting radio buying the four kids networks and later launching core TV.
Acquiring the digital audio infrastructure and measurement leader Triton and of course last year acquiring 27 high quality local television stations to more than doubled the size of our local media portfolio.
All the while our focus has been on improving the operating performance of our local television business, we met or exceeded guidance for 10 straight quarters before that pandemic hit this spring.
Today as the fourth largest local broadcast or our station group is more effective more efficient and operating with greater strength than it was a year ago.
During last quarters earnings call in the midst of the most excited and profound business disruption. This country has ever seen we told you that our company would seek opportunity in the chaos to continue our transformation into a stronger company on behalf of our employees and shareholders.
And that's exactly what we've been doing.
Most recently, we announced the sale of our podcast leader Stitcher to capture a return of more than double our total investment.
The sale of Stitcher is an affirmation of our national media strategy, and a testament to our ability to create and unlock value through several different paths.
In contrast to our pure play local broadcast peers scripts has taken a dual pronged approach.
We believe in the continued strength in durability of local television simultaneously, we're developing growth businesses that look out over the horizon to the future of the media landscape, where we know will recognize high rates of return on our investment.
Just as what just as we've done in podcasting.
This strategy has also positioned us well to navigate the economic crisis.
We came into Twentytwenty with greater TV station durability, alongside diversified revenue streams coming from our national businesses.
Our second quarter results through the depth of the business disruption illustrate the point.
We held our own with pure performance on local media core and successfully renewed 30% of our pay TV households at rates that we consider an affirmation of our investment thesis.
And we turned in national media results that well outpaced the overall advertising marketplace.
I'd like to highlight case in particular for a standout performance during this challenging time.
In fact, Kate's has outperformed our expectations and certainly those of many investors since we bought it nearly three years ago.
At that time, we saw that consumers were quickly moving to be in content focused and platform neutral in their TV viewing.
They were pulling together their own custom programming bundles combined in cable over the air and over the top to create a full viewing experience.
Since then over the year viewing has continued to grow side by side with over the top end subscription video on demand as consumers recognize the value of free high quality linear network television.
In a study last year Nielsen projected that 21 million U.S. TV households would come to rely on over the year within the next two years.
We continue to believe in the future value creation opportunity over the year viewing and cases financial growth supports the confidence.
Remember their revenue was up more than 30% in last Q4 Q1 before cobot 19.
Even during the pandemic Kate's has continued to outperform the broader advertising marketplace.
Despite the tremendous headwinds associated with Cobot 19, Kate's finished the quarter flat.
That strength is driven largely by its balance of general market and direct response advertising.
Many people wrongly dismissed the are as low rate low quality out.
But the category has grown and changed tremendously in recent years.
Direct response is a flexible efficient and measurable way for advertisers to reach their customers.
And in case, you haven't been watching it now goes well beyond the one 800 and dot com calls to action.
Big name advertisers, including Procter and Gamble, Johnson, and Johnson Pizza Hut and state farm now put aside a good portion of their AD dollars for D.R. and one industry report estimated VR spending at $12 billion to $18 billion last year.
Capex has been a pioneer and crafting content that complement brands direct response strategies through audience targeting.
So the three levers to cases growth have been high quality programming over the year audience growth and resilience in the national advertising marketplace.
At scripts were fond of saying that two things can be true at the same time.
We're big believers in the opportunities ahead in local broadcast television.
And the success that case for example, underscores scripts his view of the way we will also create value in the evolving TV landscape as we capitalize on consumers changing media habits and take advantage of diversified revenue streams.
Today, I believe our national media strategy is not fully appreciated by investors.
As we come through the business disruptions and economic fallout from the pandemic. However, I believe it will become even more clear that scripts has positioned itself well to succeed and to thrive across all of our businesses.
Now here's Lisa.
Good morning, everyone. The second quarter unfolded generally as we expected in our local media division and even better than we expected in our national media businesses.
Our last earnings call in early May we've also announced the sale of our podcasts industry leader Stitcher and the option exercise on WP <unk> in New York. In addition, we're currently in a retrans blackout with satellite television provider dish I will discuss each of these events in my remarks. This morning.
Let's start with our second quarter local media result.
All comparisons of the Division financial results are on an adjusted combined basis, continuing our treatment of the former Nexstar Tribune and quarter lira stations as though we own then in the fall period a year ago.
You can find our as reported results in today's press release.
Local media core advertising revenue was down 39% driven by the pandemic related advertising slowdown that number it's 37%. If you exclude the impact of W.P.I. Act and the lack of Yankees and net baseball on that station.
Had we had expected we see improvement from April may and from May to June.
We continue to see core AD revenue improved month to month through the third quarter and right now we expect core advertising to end this quarter down mid teen on a year over year basis, when you factor out the impact of tech.
Political advertising revenue of $13 million came in higher than expected and the second quarter that what's driven by strong spending in the presidential race and other key contact because of the robust pacings and the number of competitive races. We now expect to bring in north of $200 million in political AD revenue this year.
Brian will give more color in a moment on our political advertising outlook.
Our retransmission revenue was below expectations due to the unwillingness of dish to agree to fair and reasonable contract terms, but still up 27% from a year ago. Our dish contract expired on February 29, and we continue to provide service at our old rates under the extension until we.
Went dark on July 25th.
We expect to receive the new dish rate retroactively for the extension period, we did sign a new retrans agreements with a slightly larger distributor that took effect July 1st and now have completed more than 30% of the 40% we.
We are renewing this year.
This accounts for the final 10%.
Local media expenses decreased 3% and they came in 10% below second quarter of 2019, when you exclude programming expense.
The division did add imposed various cost savings initiatives that included merit pay freezes reductions and capital expenditure and travel and marketing.
Segment profit was $32.3 million.
Now, let's discuss National Media Division results.
This picture is reported as discontinued operations. The division results no longer includes picture for any period.
National Media Division revenue held up well against the pandemic headwinds in the second quarter, our national businesses, particularly benefited from direct response, and OTI advertising, which recovered quickly after an initial decline in the early days of the pandemic.
The division delivered total revenue of $81 million essentially flat from the second quarter of 2019.
Looking ahead, we expect modest growth and National Media Division revenue from the third and fourth quarters.
National Media expenses came in at $70 million about flat with last year and National Media segment profit was $10.3 million compared to $12 million in the 2019 quarter.
Our shared services and corporate expenses were $13 million in the second quarter down about 15% from our pre cobot expectation, we expect that line to remain consistent for the third quarter.
In May we told you we plan to make about $85 million and proactive expense control and cash management measures. This year with the sale of Stitcher, We now expect those reductions to total about $75 million this year.
About $35 million of savings has been realized year to date and another $40 million welcome by year end.
This company wide savings includes lower capital expenditures are hiring freeze a freeze on merit pay increases reductions and executive pay and general expense cuts, including travel and marketing.
We made about $4 million and dividend payments in the second quarter.
Companies to Q loss from continuing operations was 22 cents per share.
Now I'd like to briefly discuss the stitcher and WP Acs sales, which were announced on July 13th.
You can find more detailed on those transactions in the press releases and Investor call transcript from that day.
After a strategic review that began last year script entered into an agreement with Sirius XM to salad podcast industry leader Stitcher for $325 million that price includes $60 million an earn out over two years.
Our full sale price represents a multiple of four and a half time deters 2019 revenue.
Our deal represents the largest transaction and podcast industries history, and a return of more than double scripts investments since it entered podcasting five years ago.
Dentures annual losses were in the high teens millions of dollars. So you should see improvement in both National Media Division segment profit and company EBITDA for the previous adjusted reporting periods and going forward.
We are filing for hot Hart, Scott Rodino clearance this week and expect dentures sale to close in the third quarter.
Nexstar media group and form scripts in mid July that it'd transferred at option to purchase WP IOC, The New York City CW affiliate to mission broadcasting.
At the same time, we were told that mission with the exercising the option to purchase the station.
Our pre agreed price is $75 million plus about $5 million interest.
Pending regulatory approval W.P.I. ex deal is expected to close by year end.
Taking into consideration the gain on each of these sales are cash tax bill for 2020 is expected to be about $24 million that majority of which we expect to pay in the fourth quarter.
The balance would be do in Q1 of 21, depending on when to pick sale closes.
Separately, we mentioned in May that we expected to receive a 14 million dollar cash refund in the third quarter.
That is the result of carry back claims available with the cares Act.
So we expect to see a net cash outflow of about $10 million. This year, assuming all taxes on the gains are paid this year.
And now a few liquidity items to update you on our current forecast for full year cash interest is about $85 million. The savings reflect reflects the decline in LIBOR and our plan to pay off our revolver.
Our full year capital expenditures are estimated to come in at about $30 million.
On June Thirtyth, our net debt with $1.9 billion and cash totaled $99 million, our net leverage at the end of the second quarter with five that a time for the calculation in our credit agreement.
Finally, we were free cash flow positive in the second quarter and expect to be free cash flow positive for every quarter of 2020 and now here's Brian.
Thank you Lisa good morning, everybody.
Well as expected the cobot 19 pandemic took a toll on local media core advertising in the second quarter.
Well, we're happy to report results in line with our peers down about 37% year over year, that's without the impact of WP Iocs and despite the loss of the MBS finals on our many NBC stations.
Our largest categories improved month to month in the second quarter, our largest categories service since was flat in June as was home improvement and we continue to see further recovery in July.
We expect improvement in the auto category throughout the rest of the year as manufacturing plants reopened and new car inventory it picks up.
Dealers already are seeing strong demand and high performance on used cars as people are starting to migrate away from public transportation and ride sharing for health reasons.
One important way, we have calmed added the slowdown in local advertising has been an aggressive approach to new business development across all of our stations in mid March we initiated a new business sales contest to keep our account executives engaged in focused during the pandemic.
Our sellers made thousands of new calls and closed deals with hundreds of new businesses, resulting in $15 million and new business running in the second quarter.
More than 30 million booked for the full year.
In some ways the pandemic brought out the best in our account executives and sales leadership.
It is new to TV advertisers are an important component as we continue to grow our local advertising business.
Political advertising revenue also was a positive story in the second quarter exceeding our expectations.
And based on strong fund raising figures and limited ability to hold in person events. We continue to have a very positive outlook for TV spending this year.
In fact, our July political revenue has already top our whole second quarter.
There are some color on the different elections in the scripts footprint.
And the presidential race, we're seeing both Trump and Biden campaigns amping up their fund raising to levels well beyond those of 2016.
Both candidates or advertising in key states today, and Trump has already laid in significant pre buys for the fall.
Right now they see most focused on our markets in Arizona, Florida, Michigan, Nevada, Ohio, and Wisconsin.
In the U.S. Senate script stations are well positioned and six hotly contested races, Arizona, Colorado, Iowa, Kansas, Michigan and Montana.
In Montana. The Senate race has its term limited governor Steve Bullock running against Junior Senator Steve gains in what will be one of the closest Senate races in the country.
In addition, the battle for the Sunit majority has sparked unprecedented fund raising and spending so early.
And a political cycle.
And with President Trump's coattails getting shorter.
Combination can Kentucky, Texas in Iowa are now considered a bit more at risk.
In the US house races, Prebook buys from both parties show that packs and campaigns as funding just as we expected.
We think our list of 35 competitive seats and Scripps markets should remain stable.
We also have an open toss up Governor's race in Montana, where we have the top rank station in each of Montana's five largest markets, resulting in scripts, capturing a large amount of the political dollars being spent in that state.
Finally, we expect a high percentage of our political advertising revenue to come from issue spending where fund raising continues to exceed the experts forecast all in all a very good presidential election year is unfolding.
Turning to our retransmission revenue line as Lisa mentioned, we were still booking our old rates with dish in the second quarter and.
And we went dark will addition, the third quarter beginning July 25, after five months of negotiating on extensions.
We were very disappointed to have experienced our first blackout when the paytv provider.
As you know dishes a veteran of many.
Blackout battles scripts prides itself on getting deals done and in fact already has completed several successful negotiations, including two large providers this year.
Because of those other deals however, we're confident in our new market value and the appropriate industry contract terms and we just can't agree to non standard proposals that would disadvantage us.
Scripts Retrans household subscriber base decline to 2.5% and the most recent reporting period ending March 30 Onest.
It's a stepped down from the reporting period, which ended December 30, Onest when they were about flat over the prior quarter.
I'd like to conclude by building on Adam's comments about the ongoing strength at the five teach networks as this business reports to me.
They have delivered an impressive 14% revenue growth year to date.
Next growth has been driven by strong general market and direct response advertising rates and both the grid network and core TV, So, especially strong revenue growth in Q2, driven primarily by IDR.
We also continue to see strength in audience viewing networks.
Viewer ship at both balanced and grit was up 8% over the same time last year due to strong programming new made new movie debuts and ongoing pandemic related increases in TV viewing.
At quarter TV, we continue to grow that audience as well costs across the country have begun to reopen and just this week. The network is carrying the high profile Doomsday trial preliminary hearings in Idaho.
In early May core TV carried the historic first live oral arguments from the U.S. Supreme Court.
And this approach has continued and the social unrest was heighten the team saw an opportunity to create an original special black and blue examining the justice systems relationship with the Black community.
The special assignment crashed across all of Vacates networks on June 22nd and viewed by nearly 2 billion people.
Distribution continue to expand in Q2 with core TV now live on you tube TV and it's got his own channel on Sirius XM.
Cats over the air coverage has also grown with bounce mystery grit and laugh, each reaching 90, 496% of the U.S.
Core TV now reaching 91%.
Keith continues to benefit from the growing scale of over the year viewing as more and more consumers discover the large amount of free quality programming available there.
Now here's Laura.
Thanks, Brian Good morning, everyone.
We were very pleased by the resilience indicates an easy businesses as a pandemic took its toll on the U.S. economy during the second quarter.
Ending the quarter with our divisions revenue nearly flat to the year ago quarter seems remarkable given the headwinds.
And we will continue to build back in the second half of this year.
Overall, the national advertising marketplace has fared better than other AD market. Since early March Big brand is quickly recast our messages to create relevant urgency and currency, we saw consumer products companies and other businesses shift brand messaging to consumers during stay at home waters.
That later in the quarter on social Justice messaging around the unrest.
Hi, or viewership across defined case networks and easy helped us to capitalize on this spending.
At Newsy, we saw record dealing levels as Americans thought information on the Corona virus and social unrest across the country.
Over the top dealership driven by new these younger demographic with 60% higher during the prior year quarter and streaming dealer stayed with newsy as their new stores.
Newsy has also launched its first week night newscasts exclusively on LGT, the new shell and is designed to give a straight forward look at the days biggest headlines in a conversational style that is related well to digitally savvy audience.
Also newsy and the scripts, Washington Bureau received more noteworthy national recognition for their joint documentary a broken trust.
The RFK journalism Grand Prize and the top prize for domestic television was awarded to the project.
Hi, examine how centuries in equities and legal loopholes have left native American lemon vulnerable to abuse.
Our SAP, our SAP digital audio business Triton also delivered a good revenue performance in Q2.
China actually had 11% year over year growth, if you factor out the impact of our sale the noncore piece of its business in Q2 of 2019.
Triton's Global sales pipeline began to pick up as we ended Q2 and the company recently announced a series of new deals with International company.
And the second quarter try and expanded its podcast rancor to the U.S.
This new measurement product. The podcast report provides both publishers and advertisers with trustworthy third party data, allowing them to make informed decisions around advertising with NPR NBC news and many big terrestrial radio company.
A more robust measurement system is much needed as that industry grows in regions scale.
And speaking of scaling podcasting one other reasons, we are selling stage or is there very positive outlook for podcasting and the larger digital audio space.
We were early to podcasting and watching a new large company entrance helped us see the opportunity to best capitalize on that investment.
As Adam how sad, we're constantly evaluating various path, we can take for our businesses value creation.
Regardless of the path as we wireless picture you can count on us to be disciplined investors and these businesses focused on fostering growth to achieve the greatest ROI.
And now operator, we're ready for questions.
Certainly.
And as a reminder, ladies and gentlemen, if you wish to ask your question. Please press one than zero on your telephone Keypad. You me withdraw your question at any time by repeating the ones Harold commands. Once again, if you have a question. Please press one then zero.
And first of all line about Kyle Evans with Stephens. Please go ahead.
Hi, Thanks, Thanks for taking my questions, Brian would you mind.
I caught the 2.5% decline on sub count in Twoq.
What's your outlook for the rest of the year than I have some follow up questions.
Hey, carloads Brian.
As we look out now we typically see seasonality.
Associated with Subcount set of improved in the fourth quarter seems like on football starts slow as people are.
Sling narrowing the PD is.
Like you Weve seen just this week, including this morning, some of the NBP. These reporting positive up some accounts that would indicate that maybe the next quarter and again they work a quarter ahead of us.
May be more positive than what we saw so the 2.5% was kind of in line with how we model and we have.
We do look for a little bit of improvement as we move to the back half.
Great.
Thats Cordillera stations in Montana.
And like a really good acquisition congrats on that any any thank you other key ratios that you would point that.
Swing that annual number that you guys are.
According to the street.
You know I really don't think Thats, one race I mean, as you can see where.
Yes, very heavy and six competitive Senate races, you talked about Montana, montanans, just going to be huge all of the cards.
Calling in place between the gubernatorial incentive range there.
That will be one of our business, but I think as you look at Michigan will be very strong between the presidential strong Senate race there.
Couple of house races there.
We expect Arizona again presidential Mic Sally Senate race, there is very competitive.
The competitive.
Gardener Senate race in Colorado as well so I don't think it's one race and I think we have enough that if one were to drop out in the last couple of weeks a few extra as have kind of moved our way through remember on the last call. We were talking that and the Senate. We were highly contested in five of the races now thats moved to six.
So and then you know you see things like Mcconnell in Kentucky, which were getting in both Lexington in Cincinnati that will become more aggressive.
So actually I don't think Theres, one particular raise that puts us at risk.
I think we have a lot of coverage across the entire country.
Sticking with political.
Okay and understanding that 2016 was an anomaly.
Roughly speaking what do you think presidential will account for as a percent of that total.
You know, it's usually about.
20% and.
Residential year in Q2, it was just over 10%, which was more than six 2016 and more than 2012. So we're off to a good start there, but I think when it's all studies on when you consider the Pac money in all that's going to implement said Oh, probably the 20, maybe a little bit north of 20 per.
End of our total political spend.
Great and then.
I was under the impression that blackouts, we're we're kind of a no no right now for the FCC.
Did I Miss something there.
With regard to your dish dispute.
Yes, I think in the.
The heat of the pandemic.
[music].
The FCC had asked all parties to try and.
You know avoid blackouts.
Again, we're five months beyond the deal we've done extension after extension and.
[music].
We just couldn't make a lot of progress and so it seemed like the right thing for our business to do was to step back and.
Trying to approach at a different way.
Hey, Kyle it.
Adam I would also just remind.
The call that we were able to get done cooperatively to deals this year already including an additional one during the depth of the pandemic in which we felt very very good about the rates that we achieved so I think this is a unique circumstance and unfortunately its just.
Sort of probably par for the course with dish given their history.
Yep clear pattern.
One last one for Laura maybe just an update on newsy, where which channels you are getting your best consumer engagement and then.
Related to that kind of what you saw on the CPM Rina pricing.
Rate there as we Troughed in April and kind of how its power back thanks, yeah, yet so.
Really most of our dealing in revenue continued the continued to be driven by LTT now as reading an article I think yesterday in CTV viewing during that pandemic has been up like 80%. So we then just rolling of yours tremendously on LTT demand has been picking back up month over month and key.
Q.
It's been strong and didn't take and get in April that leads continue to see edinburg improved.
Sequentially.
Each month, so we're pretty optimistic about the growth levels that we hope to see in Q3 in Q4.
Would you mind diving down into.
And talking about maybe engagement channels within Okay, Oh sure thing so a lot of our viewing today.
We were present on almost every LGT platform out there a significant portion of our viewers today come to us from Rocchio.
Obviously, Amazon is making a big entrants as well so we're growing there we have a lot of viewers on Pluto TV as well. So I think the majority of those years come from railcars, but we've done a great job, making sure that were distributed on every CTV platform out there.
Great. Thank you appreciate it.
Our next questions from the line of Michael Kupinski within Global capital markets. Please go ahead.
Thank you. Thanks for taking the questions I was wondering if you can give us.
The sequential I guess declines in core advertising by Mark for the quarter and what you saw in July possible.
Hey, Mike It's Brian in April we were down 48%.
They were down 43 in June we were down 27.
And for July when you back out the baseball from picks again mentioned Yankees. So it's a big revenue line, we were down 15%.
Gotcha, and then regarding score.
In the past I guess for broadcasters that with dark on.
MPPD, they usually have leveraged with them with up coming sports events that would tend to bring them back to the negotiation table and first of all the.
Secondly, do you think that with the relatively weak sports schedule that maybe these negotiations are dragged out for a while I mean.
I guess.
Asking a whole hate to see what your thoughts are in terms of a resolution and how quickly you might be able to.
Kind of get this result.
Yes.
Certainly hope that the its doesnt drag out long and we are.
Continuing to actively exchange.
Change.
I will discuss from with them.
Yes look sports is on that right I mean this weekend, we got the PJ Championship you got the NHL playoffs, you've got the end the playoffs.
That's all happening right now and so I think sports is.
An important part of the lives of our viewers and we hope this will continue to understand that.
And by the way the news is pretty darn important right now with everything going on and so we don't love. The fact that we're not there for our viewers.
We're expecting college football and an NFL to start and a month and or little bit over a month and we're certainly hopeful that by the time that happens we're back serving all of our audiences.
Yeah, I know that there were a lot of skeptics with the Kate's acquisition and obviously this has proven to be a good acquisition for you as well.
In terms of that performance in Q2.
You indicated that toward TV and of course court TV was I believe launched in the third quarter last year. If you can add to that launched in may.
Yes, okay.
Gotcha, Okay and so.
You were kind of expect that would be pretty strong.
How did the other networks on a relative basis, where they pretty much lumped together in terms of their performance or outside of the growth that you said that you had with great core TV I was just kind of curious in terms of the how the other networks perform some of your more mature networks versus some of your Yoga Awards.
Yes, as I said on the call grit.
Had a.
Terrific quarter.
Laugh.
Performed very well balance also was off just about 10%.
And then Mr. me, a little bit over that but.
For the quarter for.
For the kids networks to be about flat with where they were a year ago, considering that pandemic. We thought was an outstanding performance on their part.
Gotcha, well congratulations on that.
Okay. Thank you.
Our next questions from the line of Dan Kurnos.
Foreign company. Please go ahead.
Thanks, Good morning, just a housekeeping on on dish, yes, Brian or at least.
So you ran a your QQ is at prior rate when you get the deal done you will get what a true ups for the prior four months I guess the EUR five months that you are on extension when when that you'll get some.
That's correct and so we won't get paid for the days that were dark, but we will get a true up to whatever our final deal is.
For the four months that way or on extension.
Got it and I know, we've talked about this AD nauseum assist strains there.
Did the deal with with Gray, there's still an extension with her stare dark on Cox it seems kind of.
No no rhyme or reason, there, especially ahead of political season, but it could I guess, we'll see how that kind of resolves itself and kind of just you brought it up Brian a second ago. Just in terms of expectation is around college and NFL. I think you might have mentioned last call, but just remind us kind of what the impact is to read.
The new.
For first sports and also if theres any.
Meaningful back to school impact or not.
Yeah Im just looking at this Dan yesterday football is somewhere in the range of about 5% of our AD revenue.
So.
There was a little bit of risk but.
It's not overly significant in terms of back to school every state is open and you though.
Most states have kids going back to school and when capacity or another so we have not seen any impact yet on the back to school business.
Got it that's helpful and then just.
Obviously July pacings are not guidance, but just curious if you could give us color on categories, how they're performing and then.
Kind of your sort of expectations of balance given what you're seeing on political with where pacings are and how crowd out might play a factor in the upcoming quarter.
I think you know I mentioned that July.
<unk> was down 15% significantly better than the 27% decline in June. So every month continues to get.
Sequentially better we do believe based on everything we're seeing now that August will be better than July and September will be better than August in terms of year to year improvement and.
And just pure dollar growth in terms of categories for July.
Basically every category improved off of June, which improved off of man, which improved off of April and so no talked about services being flat.
In July in in June and we saw that continue.
Into July improvement in services and about every other categories saw some degree of improvement most are still down.
Year to year, but they continue to get closer to flat to up.
Got it Super helpful and if I could just.
Sneak one one more and just around.
Kind of that Theres been an issue in the marketplace around messaging.
And I don't know, Brian maybe I'm, reaching here, but it feels like I'd also really even lower I just was sort of tastes and newsy you guys can kind of even with the with NDR you can kind of shape almost targeted marketing slashed messaging in a way that maybe others are facing challenges with around content. So I don't know if the you're actually.
Seeing some influx into some of those channels or not could be a bit of a stretch, but just figured I'd ask.
Yeah, actually hey, Dan It's Adam I think the very nature for example of our networks business gives us access to different.
Demographic niches and I think that gives brands and agencies and opportunity to inherently shape their messages differently.
Obviously.
We've got a.
Different demographics with laugh and with balance certainly with our focus on younger audiences at newsy, and even grit and I think that does benefit us with the R&D, our placements as well as even the way general market.
Agencies and brands place their business.
Got it that's that's really helpful. Sorry at least so what's the do you know what the W. picks a baseball NPAC isn't Q3.
Hey, Dan it's about 18 million.
Actually Laura alright, thank or at least so if that was Q2.
The 18 million was Q2 I don't have Q3.
Broken out we can get back to you on that yeah, sorry about that okay, well no worries, we'll have we'll take it offline, but that's that's helpful color anyway, all right. Thanks for all the responses guys appreciate it.
Our next questions from the line the Stephen can you help with Wells Fargo. Please go ahead.
No. Thanks.
Maybe first this morning could you talk about what that Retrans has been trending and maybe what kind of.
First compensation expense growth you expect from big four for for this year.
Hey, Steven its Lisa Hey.
In the midst of on.
The dish blackout, so really until we resolve that or not really commenting on our giving guidance on net retrans.
Okay. Maybe then leaves another one I think the cash balance drop sequentially by about 100 million, but it also looks like the debt was maybe down by a similar amount. So just wondering if if I had that right that you took some debt out and but could you quantify the.
Investiture cash that you'll realize net of tax from the two divestitures.
So yes, so you're correct in terms of and the pay down at the revolver. So you saw that.
In terms of that net proceeds so.
On the to 65 cash proceeds that we expect to get from.
The state your sale, we have about 55 million.
On that that doesn't include whether or not we and.
Make the earn out and then on Pik as you know I mentioned 75 million plus about 5 million of interest, which will have about 4 million attack on that.
Great and then maybe just switching gears to.
National media, so it looks like that with the removal of stitcher. It might have pushed the margin out maybe a couple of percentage points like from Q1 to Q2, and so with that guidance for modest growth in the back half of the year should we expect margins to continue to expand at National media.
Yes.
Yeah, I was just going to say, we certainly expect.
Both on the revenue line and I would say from a margin perspective.
We'll continue to continue to see improvement there.
Over the back half of the you're probably looking more at.
Year to date.
Margin increase year over year.
And then frozen and then just.
Okay, Great and then just a just a last one on political.
So it seems like an upgraded that political guide I think you and your peers are all very bullish for great reason when do you feel like you'll have the visibility.
On that revenue to.
Really know that you're going to meet or exceed that guidance of it if it by August because of September sales or is it really kind of on November 10th.
Hey, Steven I got to tell you I mean, I feel really good about.
The guidance, we're putting out now we've got a lot of it already on the books Theres been a much higher percentage of Prebook dollars for the fall than we've ever seen in the past something.
Mentioned in my prepared remarks, President Trump already has laid and millions and millions of dollars or some press reports this week that bidens about to do the same we think thats coming and then in the next week potentially.
And many of our contested races in states, we're already seeing.
Pre booked dollars, we're well on our way to the number we've estimated so.
I think that something's gonna have to dramatically change for us to feel like that.
Guidance had put out we're not going to be able to achieve.
Okay, that's great color. Thank you.
[noise]. My next question from the line of John Janedis with Wolfe Research. Please go ahead.
Hi, good morning, Thank you.
I'll stick with the case theme there for a second and I wanted to ask as you look at the networks and their current format in form of the five is there more room to expand the portfolio and then maybe can you talk more broadly about at the our category.
I understand the dynamics, how do you think about.
The longer term growth in D.R. relative to the more traditional linear out business and then maybe quickly as a follow up on auto.
Is the read here that it stays negatives.
Or is there enough pent up demand, where it could actually tick up I think you mentioned the aftermarket is good but curious as to what you're seeing on the other side. Thanks.
Hey, John it's Adam.
I'll take the first questions on Cape and VR, and then I'll toss it to Brian on some commentary on auto.
Look we we always assess opportunities for us to expand the business I think we're very very happy with the performance of case right now and so there's nothing.
So.
Say that little bit further down the road as we see additional opportunity for distribution to expand open up that we couldn't look for additional options to open another beachhead in over the year Broadcasting I think that's always an opportunity.
With respect to de our you know de are used to be the lowest rate and frankly today, we see DVR and hybrid VR, which involves the use of ratings to help establish the currency as continuing to grow rate and during this down period.
We've actually seen VR in hybrid DDR rates that have in some cases displaced low general market advertising. So we really focus on maximizing yield the strength. We haven't DDR has helped the kids networks and newsy to maximize our overall yield we don't really care whether.
It's a D.R. spot or a general markets, but we want the highest rate possible for that spot and having that strength in DDR has given us that.
I think that nice cushion to create that ability to manage yield better I think than otherwise.
Brian you want to talk about auto.
Yes, let me just expand on that for one second if I can you know based on the increases and feeling that we're seeing as a result, a pandemic that general they do our clients are getting a really good response and when they get it really good response week to week, they're willing to book more inventory at higher unit rates.
And so as Adam said in many cases, we are seeing DDR rates that actually.
Rival or surpass general market rates and keep in mind that on a D.R. rate, we don't have to post to a Nielsen ratings and so there's actually a really rich business for us in direct response.
As a result of the success, we're having and the fact that we don't have the boat post.
Shifting over to just automotive.
I think automotive is going to continue to be challenged this year just because of.
The lack of and inventory I think demand is very high I think as vehicles finally get back out of the production facilities gets distributed through the country I think theres a.
Waiting list of people, who will be gobbling those up so I do think that there's going to be a lot of momentum and therefore, I think will be a lot of advertising as people are trying to the dealers are trying to let people know when inventories heading there.
There are lots.
But I'm not sure if they can get enough inventory to push the category positive now we may see as we get to the ended the year those new brands coming out next year. The you know for Bronco and others and you may see some branding that begins to lay the foundation for next year expecting that next year will be very strong in a rebound here.
I'm just not sure if you know either of the two remaining quarters and especially with the displacement that we actually move to positive on auto.
Got it thanks, Brian maybe one quick on GR tends to backfill that are you seeing also a broadening and the number of those advertisers meaning are there more de our players today than say six to 12 months ago.
I don't know about six to 12 months ago, but I think you would be shocked to see what a broad advertiser base really represents the our Adam mentioned four or five big clients.
In his earlier comments, but it's a pretty long list.
And.
It has been far more stable.
During the pandemic, which speaks to its durability than we saw in the local markets.
Thank you very much.
Our next questions from Craig Huber with Huber Research partners. Please go ahead.
Thank you few questions if I could.
Brian You mentioned football his college and NFL teams, 5% of your AD revenue what is total sports is typical year.
Your AD revenue starts there please.
It's about 10% Craig.
What is news right now.
Well news typically is in the 40% to 45% range, but we actually have seen that move too close to 50% in the last couple of months part of that has to do with the lack of sports, but part of it has to do with the increased audience and therefore demand on.
On the news inventory.
And then you talked about strong ratings a few minutes ago, Brian can you just quantify the which overhead where you'd like to Im also curious once we get through this volumes, we are sort of thoughts or like how much of the extra audience.
Hopefully hold onto.
Yeah, I look we I think it's been a interesting four or five months now we saw the.
No the surge and co mid 19 viewing and that really drove audiences you know anywhere from 15, the 50% up.
We began to settle down a little bit and then you know we saw as a result to the protests and another increased.
Level of interest now with all of the political narrative that's happening there's a high level of interest there really is so much going on so we continue to see you know, especially in the early evening on late news a real spike in news viewership. The morning has been disrupted a little bit as the result of changing lifestyles with less people commuting to work.
The six to seven any has rebounded a little bit before 30 to 60 day continues to be down but also as a result of that people are staying up a little later, because they're not getting up as early and so we have seen a bump in the late news and so that has remained consistent double digit growth on a percentage basis across the country.
And.
No. It would appear much of the country is going to continue to operate with this kind of lifestyle through the rest of this year and so we're going to continue to take advantage of that.
And Brian.
Advertising comments, so what I wanted just want to expand a little bit further.
Some of the states the trend where the virus cases picked up significantly things have gotten tighter from government control standpoint. If you will have you seen any significant changes in the AD revenue trends are too hard to parse sort of parts of the slick states your mind.
The we really haven't seen much change I mean.
Clearly states, Florida, Texas, other places and continuing to see spikes.
Were not seeing a meaningful.
Change and those states versus many of the others business is open everywhere car dealers are open furniture stores are open.
Malls are open clearly how each of them operates with their social distancing precautions is different but.
Even in Florida, and Texas and other places, we're not seeing a material change.
For meaningfully decline meaningfully lower AD numbers that we're seeing in the states that are.
More open for business.
Brian wanted ask your cost question, if I could.
Other expenses category looks like it was down about 20% to 23% year over year in the quarter roughly $12 million what drove that please.
And on the credit analyst that I'm, not lower number yeah, yeah, we shut down everything we possibly could so.
Typically in there.
You have.
Our facilities towers repairs supplies, we have a lot less people in our buildings and so when preparing a lot running less things we have less of the need for supplies and then you think of travel and entertainment travels basically been halted across the division Entertainment and ceased the last couple of months.
We didnt freeze pay increases for all of our employees. This year, so that had an impact in our.
In our employee cost line, but I think.
Once the started we.
We made a commitment to our employees that.
We were going to stand by them and we have we're incredibly proud of that but.
We were also going to be fiscally responsible through this period and we locked down every expense, we possibly could.
Okay. Appreciate that when you strip Big picture question, if I could squeeze us and Brian We would talk about this in the past.
Over the air what percent of household viewership in your markets will be one just help with the entire US do you think that represents right now.
Somebody optimistic about as why mask.
Yeah, I mean, I, Greg it's Adam I can tell you that the latest Nielsen survey showed I, if I were to look at our markets.
Some of our markets can be as high as 28% considered over the year homes. It can be a the average right now I think in the latest survey from Nielsen was.
Around 16 or 17%.
For the nationwide.
That's great. Thank you very much guys.
Thanks, Greg Nelson, Yes, no further questions in queue I'll turn it back to the company for any closing comments. Thank you John Thanks for everyone to everyone for joining us today have a good day.
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