Q3 2020 Tegna Inc Earnings Call

Good day and welcome to the TEGNA third quarter 2020 earnings call.

This call is being recorded our speakers for today will be Dave Lougee, President and Chief Executive Officer, and Victoria, Harker, Chief Financial Officer.

Hi, I would like to turn the call over to Doug Koman.

Of Investor Relations. Please go ahead.

Thank you and good morning, and welcome to our third quarter 2020 earnings call and webcast today, our president and CEO, Dave Lougee, and our CFO, Victoria Harker will review TEGNA its financial performance and results.

After that well open up the call for questions hopefully you've had an opportunity to review. This mornings press release, if you have not seen a copy of the release its available at TEGNA Dot com before we get started I'd like to remind you that this conference call and webcast includes forward looking statements and our actual results may differ factors that make.

Cause them to differ are outlined outlined in our FCC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release with that let me hand, the call over to Dave.

Thank you Doug and good morning, everyone I, it's hard to believe it's only been six months since we updated you on our Q1 performance. The first quarter that we're faced with any challenges from cold to 19.

Since then several significant events have taken place in our country continued developments and a global pandemic racial injustice and demonstrations related to severe weather wildfires hurricanes in many of our markets and of course, most recently last week's election TEGNA journalist had been there every step of the way and the Mark.

Which we serve across this country. This.

This includes being actively focused on building trust and combating this information during the voting process one of our greatest responsibilities as being a watchdog for our citizens and we do that and did that by educating voters through our coverage and by holding elected officials and candidates accountable. So voters are armed with the truth before they head to the polls and last week.

Among a sea of misinformation informing them about the truth regarding vote counting rules and procedures state by state.

News consumers crave transparent trustworthy content and want help deciphering, what's real and what is false and their social media age. So this year. Our journalists took part in specialized training to detect disinformation campaigns to help our audience detects and debunked misinformation surrounding the elections, we treated voters.

Yes teams in all our markets to provide information on where and how to vote.

And we also expanded our verify initiative by hiring additional regional fact, checkers well syndicate topics in need of fact checking topics submitted by our viewers and users.

They're affects verified content on our station sites averaged 2.5 million monthly visitors and 830000 monthly video plays in the quarter up significantly compared to a year ago, specifically, 234% for the monthly visitors and up 701 person, but the monthly video place and this audience is Nashville, where the price.

So I'm like 58% of our verify visitors coming to get our fact checking content from outsider markets and now through snapshot, we're reaching a whole new general generation with verified in just three months, we're up to 141000 verify subscriber some snap chat was 6.3.

Million unique viewers already.

We're also expanding our reach on over the top streaming services like Roku, and Amazon fire, TV, which come from which comprise 70% of the U.S. market. Currently we have just just completed an update of all of our station apps on Roku and we'll watch apps on Amazon fire TV by the end of the year and our true crime network. App is also now available on <unk>.

After an initial launch on Amazon fire and other platforms in August.

Sure. There are two updates from this quarter that we are proud of are those sort of expense expanded our commitment to diversity and inclusion which have always been core detection as values.

The first is the creation of a chief diversity officer role, which has been filled by Grady trip, where he reports directly to me and it's working with organizationally years across TEGNA to execute our diversity strategy.

His leadership, we've already held more than 25 employee town halls established local diversity councils and mobilized an employee led working group to help provide feedback and input to management on key diversity inclusion initiatives. Our immediate goals are clear addressed diversity in our recruitment and career development efforts.

Conduct inclusive contents and anti buys training and further develop our d. and I policies and practices across the company.

The second update is our signing of the CEO action for diversity and inclusion pledge and joining them more than 1400, Ceos and business leaders, who have committed to addressing this pressing societal issue.

We're proud of the inclusive culture that has been a part of taking this DNA for years, but no. There is more work, we can should and will do to fight systemic racism.

Through these two recent actions we have increased their accountability to support these efforts and we look forward to updating you on progress in this area going forward.

Turning now to our business and financial results as we noted in our press release last month, our record third quarter results are a reflection of the continued execution against our five pillar strategy and our expansive portfolio of big four affiliates through our focused M&A strategy. We have added stations in attractive markets that further strengthened our portfolio in scale and scope.

Average significant shareholder value the strength of our portfolio has never been more parents was a record third quarter political revenue of $116 million and total company revenue was 738 million up 34% from 2019, and even when you exclude political advertising for the equation.

Our total revenues still increased 14% on a year over year basis.

As we previewed previewed last quarter. This strategically construction portfolio allowed us to capitalize on political spending in key battleground states, leading up to last week's presidential and Senate elections, and how selections, including but not limited to the very high spending states of Pennsylvania.

Arizona, Florida, Georgia, North and South Carolina, Minnesota, Michigan, Maine, and Colorado.

And as you may have heard we're not done.

We now have not one but two U.S. Senate runoff scheduled for early January in Georgia, where we have two stations in Atlanta, and our strong CBS affiliate in making Macon and the spending has already begun.

I'm sure you know these run offs will dictate which party controls the Senate, So fund raising and spending will be significant to say the least.

Through last Tuesday, trying election, we had booked $395 million year to date, almost 70% above our prior record in 2018 and well above our most recently updated guidance of $370 million.

Turning to our subscription business. It continues to produce a growing at high margin recurring revenue stream for the third quarter subscription revenue of $317 million was 32% increase year over year, which reflects the repricing at 50% of subscribers that took place in the fourth quarter of last year.

As a reminder, we have significant upside for continued growth into next year with approximately 35% of subscribers that will be repriced by the end of this year and another 30% toward the end of next year, our rate increases are significant and a far offset some declines for the last several years and our large portfolio concentrated on big four.

Network affiliates positions us very well on retrans going forward relative to our peers.

For the full year, we now expect subscription revenue to increase high 20% year over year and significantly we have seen sequential improvement in subscriber trends for three months in a row.

As a reminder, in the fourth quarter will begin cycling against our 2019 acquisitions and the initial repricing of that 50% of our subscribers I referenced earlier.

And back to political advertising. These high margin revenues have proven to be immune from the secular and economic headwinds and ecosystem and our margins on political are even higher than before now that we've taken our political sales efforts in house saving us $18 million this year and counting.

And given our acquisitions over the last few years, we have greater differentiation in our portfolio than in the past, making us well positioned for strong and durable political growth in upcoming even years.

Our subscription and political revenues will will comprise as we've said before more than 50% of total 2000, 1920 revenues and we expect to see an increasing percentage thereafter turning.

Turning now to non political advertising.

Earlier this year, we noted obvious uncertainty about the length of the recovery period for our advertising business due to the significant impact of Cobot, 19, which was which was obviously help.

Felt very much in April starting in April our advertising and marketing services revenues have rebounded at an impressive pace, including sequentially every month since April.

In the quarter, we continued to gain share and generated almost 300 million of advertising marketing services revenue, which was up slightly year over year, a much stronger position prediction than performance in many market participants predicted just partially driven by the sales front transformation that we implemented over the last few years, including bringing our national sales.

In house and the strategic benefits of this newly integrated one team TEGNA sales team.

Our AD revenues also benefited from the return of life, but sports this fall, especially the NFL and college football.

In addition, premium I wrote Ctr platform had very strong double digit growth in the quarter benefiting from increased viewing on streaming services and continues to weigh out before and more traditional advertising services, we continue to be thrilled with premiums performance and trajectory.

Turning now to capital allocation.

During the third quarter, we continue to prudently manage our expenses an extension of our ongoing cost containment efforts that were in place well before the pandemic, we reduced our total expenses for the quarter by $28 million from the original plan.

And due to a decline in spending of many non essential costs come.

Combined with our strong revenues and benefits of our recent acquisitions. This helped to drive 65% year over year increase in the third quarter adjusted EBITDA.

Year to date through the third quarter, our expenses are now down $79 million from our original plan.

In September we completed our third recent debt financing, which expense, which extended our maturities clearing our maturity profile through 2024 together. These refinancings have also lowered our overall cost of borrowing. We've also made progress on our priority of accelerating our debt paydown in the first nine months of this year we were.

<unk> net debt by approximately $400 million, while still continuing to reverse and return value to our shareholders through our regular quarterly dividend all of which Victoria will cover in more detail in a moment.

As we look forward to the end of this year and I know many people are looking forward to the end of this year, we hope to see a continuing improvement both the broader macroeconomic backdrop and hopefully a strong national plan that gets cobot under control I'm sure you all saw the promising news just this morning about a possible vaccine from Pfizer, that's well under production that's waiting FDA approval.

Our strategic positioning prior to the impact of the pandemic and the thoughtful decisions, we have made to adapt and fraud.

Thrive have resulted in the strong performance we shared with you today. This year has been clear proof of the durability of our business model and how it will continue to drive shareholder value and service to any similar challenges we may face in the future now I will turn the call over to Vic.

Thanks, Dave Good morning, everyone and thank you for joining us as Dave discussed we had a record breaking third quarter on many fronts due to the strength of our business model and the strategic decisions we have made.

Not just in these recent challenging month, but really since becoming a pure play broadcast company in 2017.

Our diligent M&A strategy has resulted in a very strong portfolio of stations.

Yes, well to capitalize on future growth.

And the same thoughtful approach to capital allocation decisions has also served to strengthen our balance sheet for growing shareholder value through out.

Now turning to the third quarter consolidated financial results.

As a reminder, my comments today are primarily focused on taking this performance on a consolidated non-GAAP basis to provide you with visibility into the financial drivers of our business trends as well as our operational results.

As a reminder, you'll find all our reported data and prior period Comparatives in our press release.

As you saw in our third quarter earnings pre release, a few weeks ago. We've also updated expectations for a few of our key metrics for the balance of this year to help me. It was forecasting I'll expand on our outlook in more detail later in my remarks.

Well the third quarter total company revenue was up 34% year over here. This is driven by record 2020 political advertising revenue continued strength in subscription revenue and continued significant sequential improvement in advertising and marketing services revenue.

As a reminder, this quarter our comps benefited from the acquisitions that closed on different dates during the third quarter last year.

Excluding the impact of political advertising total revenue was up 14% year over here.

In terms of the subcategories of revenue the breakdown was as follows.

Subscription revenue increased 32% year over year, reflecting growth from both our business base business has sufficient revenue synergies achieved through our recent acquisitions.

As a reminder, we had step ups in retransmission rates for approximately 50% of subscribers, which reprice in the fourth quarter of 2019.

Echoing what Dave said previously subscribers have also been trending better than expected three straight months of sequential subscriber trend improvement.

Note that for the fourth quarter of this year, our net retrans growth will be lower sequentially as we have lapped or 2019 acquisitions.

However, we do expect to see positive net retrans growth next year and going forward.

This continued growth in our high margin subscription revenues combined with our expansive political footprint provides us a strong annuity like EBITDA and free cash flow production.

You saw evidenced by our financial results. This year. This has resulted in a more resilient portfolio than we've ever had before.

Further indication of the ongoing successful execution of tightness strategic plan.

[noise] in spite of the impact of COVID-19 advertising marketing services revenue finished the quarter slightly up compared to last year.

This is primarily due to TEGNA stations, great performance and growing market share recovery, a nonpolitical advertising in many categories and the return of live sporting events.

We also had the partial benefit of acquisitions that closed on different dates starting a third last years third quarter.

I'd also note that our advertising marketing services revenues have shown sequential positive improvement since the onset of the pandemic in April.

To provide some further color on specific advertising category trends as.

As you'd expect on improvement services banking and financing medical and fast food for all up above last year.

Out of automotive and retail are improving and they while they were still down relative to last year. It was sequentially better than last quarter.

Not surprisingly the categories that continue to struggle this quarter were entertainment travel and tourism.

Turning now to expenses for the third quarter, our non-GAAP operating expenses for the third quarter were 21% higher on a year over year basis, driven by the impact of acquisition that closed on different states last year during the same quarter as well as programming fees, which include a reverse compensation associated with higher subscription revenues.

Excluding acquisitions and programming expenses non-GAAP operating expenses were flat driven by increases in premium cost to sales tied to revenue.

By reductions in operating expenses.

As we discussed last quarter at the onset of COVID-19, we acted quickly to implement cost containment measures building on efficiency already in place prior to the pandemic.

Reducing all non essential costs, such as reduced see any and holding off on hiring of all non essential positions.

Note that these measures were in addition to the continued streamlining of our business processes and company wide efficiency efforts such as our one team TECNIS sales force transformation.

Further centralization of master controls and implementation of our financial ERP platform, all of which have been underway for quite some time.

As a result of all of these drivers reported adjusted EBITDA for the quarter was $259 million producing a healthy 35% margin this quarter up 65% year over year.

High margin political advertising revenue growth and net subscription profits and ongoing cost savings efforts all contributed to these strong results for the quarter.

I'd like now to touch on balance sheet and liquidity as we previously mentioned we have taken a series of proactive steps to strengthen our already resilient balance sheet, both before the current market volatility and over the past several months.

On September 10th we successfully completed a $550 million or refinancing.

Your notes due March 2026 [noise] there.

Proceeds were used in October to repay the entire 315 million or 2021 notes as.

As well as 188 million of our of the 325 million 2024 notes, leaving just $137 million due in 2024.

The unused borrowing capacity under our revolver stood at 950 million on October 31st.

At the end of the quarter. We also had $165 million at total cash on the balance sheet, which is now being used to reduce debt.

This resulted in total debt of $3.94 billion for the quarter, producing net leverage of 4.5 times or 4.38 times as defined by our <unk> revolver financial Covenant.

As a reminder, our revolver has our only financial covenant, which caps leverage at 5.5 times based on a trailing eight quarter EBITDA calculation that also creates cash on hand, and other noncash based items like stock based compensation.

[noise] as you've seen we've continued to generate strong free cash flow a testament to the strength of our financial model, which focuses on carefully managing our balance sheet.

Investing in strong EBITDA and cash flow producing opportunities [noise].

In the third quarter, we generated $153 million or free cash flow fully 21% of total revenue.

Despite high margin political revenue, which is paid up front.

Third quarter free cash flow as a percentage of revenue was lower due to under due to deferred tax payments from the second quarter due to cares act as well as significant cash interest payments.

Now to provide a few closing thoughts on capital allocation before I turn to our full year outlook.

As you've seen in recent months and throughout our history technologies continued to carefully manage our capital and liquidity provide shareholder value.

Prior to prioritize investments and subsequently restarted accelerated debt reduction, while continuing to deliver a regular quarterly dividend to shareholders.

We've also remain diligent in evaluating series for reduced or delayed spending where needed and where needed and fruits.

As I mentioned before many of our operational efficiency efforts are under way well before the onset of the pandemic for me now to be an increasingly important part of our ongoing strategy.

We shared with you last quarter that we will continue to monitor economic conditions carefully evaluate whether to reinstate our forward looking guidance.

With rent recent increases in Kobe 19 cases, the full impact of the pandemic still remains uncertain.

We're all well aware.

However, there are fewer areas I'd like to provide more color on regarding our outlook for the rest of this year and reaffirm what we've already announced in our press release on October 15th.

First as Dave shared earlier, we now expect subscription revenue growth of high Twentys for the full year, an improvement from our prior outlook of mid twenties.

Second we exceeded our prior political guidance of at least $370 million for election day with $395 million already on the books last week.

With runoff races, we will finish higher yet.

These strong results were supported by the expanded competitive footprint in presidential U.S. Senate and U.S. House races.

Third we continue to protect full year total capital expenditures of $45 million to $50 million for the full year, including approximately $20 million of nonrecurring spend.

And approximately $17 million reduction from our prior guidance of $60 million to $66 million.

[noise] fourth we're increasing our free cash flow as a percentage of combined 2019, 2020 revenue to be 20% to 21% an improvement over the high end of our pre Kobe 2020 guidance of 19% to 20%.

In terms of net leverage ratio, we now expect to be 4.2 times or less by year end, which is well below our financial covenant leverage cap and as a reminder, we have only debt that is unsecured.

Yeah, we have reaffirmed and expect full year interest expense to be in the range of 210 $215 million.

Finally, we project our effective tax rate will remain in the range of 23.5% to 24.5%.

Hopefully that additional color old proprietary or context for your modeling and forecasting.

And with that I will now turn to Q and I take your questions.

[noise] if he would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again.

Star one to ask a question well pause for just a moment to allow everyone an opportunity to signal for questions.

Well take our first question from Dan Kurnos with the benchmark company.

Thanks, Good morning, and nice to see kind of the positive continuation of results here.

That's two kind of higher level question, Steve it's sort of the.

Most of mine here first just on the M&A environment I'm, just kinda loved to see how you're thinking about that going into 21 post election, you think things start.

What do you think the impact actual you know you see a Supreme Court win would mean whenever that gets heard sometime next summer.

And then you know you've had a very long string now positive connected TV.

Announcements here, you've got premium doing, particularly well still and I think the narrative is starting to shift to around how broadcasters can start to improve yields.

Especially as they shift to connected TV I, just love to hear some more color on some specifics there you know maybe any granularity on percentage of revenue.

Our within the next year or two that you think homes from connected TV, how you're starting to see yields improved the growth rates. There just any more strategy or color you can give around that would be helpful. Too. Thank you.

Alright, Thanks, Dan locally take those in reverse order just so I make sure I can cover them. All look we're still not in the position to giving numbers on premium per se. I think will you know you know we'll exit the year at a double digit margin. It doesn't mean for full year was saying, we'll exit the year at that obviously.

The second quarter impacted that business like it did all advertising business, but it's got a very very nice growth rate, but we've got we've also got other you know you know lines in the pond official launch of the pod relative to OTI connected TV revenues right like I made announcements I made about putting our O.G.T. apps.

Out there on Roku Amazon fire.

More positive news on a coalition of news cast that's an app that's already on on an on road too and we will continue I would call. It a long tail of OTI T. video applications in strategies that will continue to start to be added to be growth in the aggregate, but obviously, we do benefit.

Immensely from being.

Almost a first to market player on the advertising side to take advantage of it. So you know what the yield on that per Se is is you know or you know not simple and really to quantify at this point, but just to say it will be improving obviously on on our own OTN T. apps.

Well the numbers will be small initially the margins are much higher on those things that we own outright as it relates to M&A and the FCC look that's as it relates to the M&A. Just you know the story is really the same as what we said last time right as Victoria talked about capital allocation. We are you know we have the the you know the firepower.

And the kind of balance sheet to be opportunistic if the right opportunity comes along but are you know at the moment our priority continues to be a debt payback as we had promised before but obviously, we're you know we're in any and every conversation that's out there that the Supreme Court, it's actually a very promising ruling for TEGNA specifically.

And again just to remind everybody on the call what that issue is about it's not about.

The ownership cap, it's about the end market consolidation issue work, where the current commission had put new rules in place that would allow you didn't market consolidation of too big for us on a case by case basis and enact that held up by the Philadelphia Court, we actually did not think the Supreme Court would necessarily take the case.

They take so few cases, but they did obviously and we expect a ruling actually I think hopefully by June or July and you know where that goes the other big you know if if they rule in our favor and frankly I think we're inclined to think they it is not a case, where they're looking at differences between two lower courts opinions. They do I think that.

It is they took this case because they disagree with the opinion of the one court that's ruled on it but you know if you do one option would be they throw it back to the Philadelphia Court and that would delay things, perhaps another eight months to a year or are they directly just throw it out completely and send it back to the FCC and say what the rule in place so timing of it Dan is really unknown.

All other than the fact, we believe you don't overtime the industrial logic of this.

Allowing broadcasters consolidation makes sense and given our portfolio, which is almost comprised of not having to big fours in a market almost you know other than than just a small handful of that I think we stand since just about based on our size of our portfolio.

As potentially the largest beneficiary of that regulatory change if it comes to pass so we're very enthused about the developments on that so far.

Got it Super helpful. Thanks, Dave appreciate it.

Stan.

We'll take our next question from Kyle Evans with Stephens.

I think I'm going to follow up a little bit on the Supreme Court.

In in market opportunity.

You size that up it was many years ago, but I think you size it up at north of $100 million in incremental EBITDA jurisdiction footprint was much much smaller at the time safe to assume that without asking you to update that number specifically.

That number is higher today, if you get something from a springboard.

Yeah, Karl I I don't want to I don't want to size, it or or say that because the other thing that to put all the puts and takes the one thing that went backwards from when they made that announcement back then was the D.O.J. went backwards on their definition of what was acceptable.

As a result of their you know look they're very extensive review of what was the large failed transaction you all know about in our industry I'm optimistic actually that a new administration and a new head of the antitrust division that that can be relaxed as well, but we don't know that so that would you know so.

Yes on one hand, we've gotten larger so theoretically the size of the opportunity is but the D.O.J. is tighter restrictions could limit some of the market. So we don't know where those puts and takes in that out yet Kyle.

Victory could you give us same station revenue growth for subscription and am ethanol. So same station operating expense growth in Threeq.

Actually I've got that I read it's on my side of the table over here. So I think same store M.S.

You're asking for yes and.

In the quarter, Yeah, right just a it but.

So in a quarter, it's high single digits.

Advertising and marketing services.

Down.

Oh, yeah down Im sorry, I left that minus sign out [laughter] photo nicely, but a nice sequential improvement from where we've been.

Got it and then you mentioned it sounded like premium is going to end the year with double digit margins could you provide an update on the competitive landscape. There who are you competing most heavily with for inventory and selling against.

Yeah, just to be I want to be very specific again, just when we say we finished the year will be exiting the year with those margins that that would not that we'll finish the full year within the aggregate with a double digit margins well, there's a lot of players in the space right. There's oh teaching inventory. The publishers. There's you know there's there's programmatic services. The cable companies themselves are selling it says a lot.

Out of people selling you know inventory in the long form and the long form space up but the advantage. We have is when does that continue to harp on is that you know, we we source or inventory directly from the publishers. So they're not you know unlike exchanges, where the publishers aren't sure about this.

Safety of the environment that they're in and we're able to make sure. They get you know the the ads are what they want and what they want so but theres a lot, but there are certainly a lot of players but we.

We're we're we're not a you know straightforward programmatic exchange I like the old days of remnant than display if you will.

It's a higher end offering.

Got it one last one could you could you give us your long term thinking about growth of gross and net retrans. Thanks.

Yeah, I'll take that one where it's worth it looks very good and it looks very good cop one week and it's it's baked in we know we know what the variables are and so you know we know that.

You don't give an exact number but it's it's at its strong double digits in the double digits.

For both gross and net.

Hi, I'm talking about I get it.

So you get <unk> and gross Weve sort of talked about obviously you see that type of numbers, we have on that top end right. So obviously that the top line can with our subs that are up. It's a you know it's going to look very good but net net is going to be in double digit growth. Thank.

Thank you.

And we'll take our next question from Alexia Quadrani with JP Morgan.

Hi, Thank you I have two questions. The first one if you could just give us a little bit more color on your commentary on the AD market. It sounds like every month in the quarter you continue to see improved man I Wonder if that stayed consistent in October and then how much core demand do you think on the sidelines, yeah that may come in now post as much in the political it's behind us.

And then my second question is really just on any thoughts on the NFL. You know press reports that suggest ABTS is now in the running you know you obviously have maybe heat failures. So I'm curious how that might change your view our positioning on those affiliates and any color you can share on NFL.

Yeah. Thanks.

Thanks, Alexia, so I'll start with the AD market. So we're interested to see as well look I think because frankly, the uncertainty around the election, and and a little bit to covert that people had been pulled you know holding on and waiting to see I think actually you know just in the span of you know the last three days in a high relative.

Certainly on the outcome of the election, notwithstanding our point about the Senate, which is positive for us, but also this morning's news about and CBS 60 minutes story last night about a plan you know for a vaccine to be distributed it's already being produced right and being stored by the government on the assumption of a of an FDIC approval. So I think.

Those that's the kind of news that I think large ticket advertisers are looking for to to and so I wouldn't be surprised if we saw a nice some heavy ups here in December as a result of what's happening here just this week, but its still look it's been it's been pretty decent anyway, and I would really call out auto when retail I mean, obviously they.

We're hit hugely backend.

Back in the you know in the second quarter, but Dave you know improved monumentally you know just from the standpoint of you know I mean auto has improved you know.

You know pretty close to you know just a few points out the 50 points from the second quarter to the fourth quarter right and it's you know, it's not not not quite positive yet, but it is in tier two which is frankly, our largest category. We're not tier three is still not is still working to come back, but we're not as exposed.

The local altered the auto dealers as well so auto has a has really come back very strong and we really like to see that trajectory that it has.

And then on the NFL.

Yes, I'm sorry, Yes, then the NFL stuff, we don't know where that we don't know where it will come out other than we're highly confident that the ER. The vast majority of the NFL will stay on broadcast and was some some package on cable, but obviously has a cable has lost distribution.

Right, there's less and less homes have cable that that's a problem for the NFL. So it actually puts that merely puts a give us broadcasting. So I think part of the a b C. Rumors and I know nothing I have no inside information or think about that as if it did it wouldn't comment on it but I mean, it would make sense that the conversation now is about putting games on a b C versus exclusively on.

Yes, Ben so I'm not surprised that they are in the bidding and you know, we'll see how it all comes out but.

You know I feel you know we do have quite a few NBC affiliates. So will you know we'll have a we'll have a lot of exposure the NFL no matter how it comes out we're highly confident.

Thank you so much.

Well take our next question from Stephen King Huh with Wells Fargo.

[laughter] then some maybe first I was wondering a year to date what percentage of your political revenue you took in was in Georgia, and you know with the senatorial run off there I know, it's really tough and this is pretty unprecedented but do you have any idea as to just how big that could be since you have a pretty big footprint in Georgia.

Uh huh.

Yes, I I don't have I don't have the breakdown of the Georgia Senate numbers in front of me I wish there were there were so many massive races in terms the amount of spending and they frankly I wouldn't say they were the amongst the biggest right North Carolina was enormous but they will be now right. I think actually you know I think in Georgia spending overall.

Steven that both parties I think didn't think it would be competitive couldn't in the n. be competitive on the presidential side and.

And I think and they knew one of those two races was going to be headed to a run off no matter, what the Kelly loeffler seat.

Don't have the produce seat was obviously close it not not meeting a run off but whatever the history that race was Steven it won't matter relative to now right. Because you did you know given that it's for control of the Senate Big and they're big media markets.

We're trying to size. It now we don't have frankly, a good answer other than we know it will be very very large.

For obvious reasons, that's fair yes.

Yep Yep, and then I think you have a major distributor that's repricing either late this year early next year I think that that contract is pretty below market rate I'm. Just wondering if that's in the recent upgrade you gave to retrans guidance for this year or is that more of something that impacts 2021 gross return.

Yeah.

Yeah I appreciate the question, it's all over its really all about 21, it will not if it's one even marginally affect our numbers this year.

Great and then last one for me is just on Peacock, you're a big operator of NBC. So I guess first I'm, just wondering what's happening with AD load on life events now like football games or the Olympics next summer you know do you get any share of that and when did your NBC affiliation agreement reset and I'm wondering how peacock is sort of a key.

Catalysts are.

In long term monetization or in that relationship. Thanks.

Yeah I appreciate the question so I wouldn't speak Stephen any conversations we're having with them. We're in Oh, you know negotiations now with NBC.

The agreements up at the very beginning of next year and so obviously, we are having conversations with Peacock as is the larger NBC affiliate Association, but I wouldn't be appropriate for me to comment on those and so I would just leave it at that.

Okay fair enough. Thank you.

Thank you.

Well take our next question from Doug Arthur with Huber Research partners.

Yeah. Thanks, two questions. Dave I know you you don't want to pinpoint a sub loss declines I think if I go back to the second quarter transcript you sort of.

Said, it was better than the industry and you.

You were taking a hit in Q.

Q2 from.

Coded.

You talked about three months it arose.

Criminal improvement I'm wondering if you can just.

You know frame that a little bit in terms of what kind of improvement you are seeing and how you see it going forward and then I've got a follow up.

Yeah, I'll give you a little color on that Doug. So it's it is you know obviously, we were concerned during cobot on what would happen to the pay TV ecosystem, but where where we ended up back in say April we're now a point better than that in terms of what the rate of decline is no one knows the rate of decline.

Is what has continued to decline right and Oh, you know, there's there's a theory out there that were starting to really buy into that as the denominator gets lower you are getting into a much more durable subscriber base many of them sports fans right that and because of all the sports that's on both broadcast that but cable as well obviously.

Whether it's a you know regional sports networks or or or Ah, yes be out or whatever or Turner.

That the sports band is going to keep the pay TV package. It will obviously be on any pay TV package, which and that's we think we're seeing is that a you know again is that that virtual traditional mix is you know is part is it keep party equations because the virtual is continue to grow I think faster than people thought they would because they're showing really really.

Nice growth and so what were you know we're now we're now art or sub losses on a monthly basis year over year, Doug are now closer to five than they are to six.

Great. That's very helpful and then Victoria, all else being equal and assume that you know given the improvement in cash flow.

Obviously political coming in better than you expected at the beginning of year or if you do know strategic transactions through the end of 2021, what what do you think the debt load looks like at the end of 2021 I know you don't just just broadly.

Well, obviously below four times, how much lower than four times really won't be an element of whether we reinstate I back and at what capacity.

That remains one of the levers that we pull it depending on the stock price. So from a capital allocation standpoint, well be balancing that person is accelerated debt pay down versus any investment in the business, whether it be capex organically or in terms of tuck in acquisitions. So all of those still remain.

Elements that are open to us.

Okay, great. Thank you.

Well take our last question from Craig Huber with Huber Research partners.

Yes, hi, Thank you Dave do you think you can give us a little better sense of TV.

TV advertising Pcs or post the election heard some comments or we were going to be just quantified a little bit how to look at.

Actually there are looking pretty good crack the best of the best full year since the first quarter.

You know, let's say when you when you adjust takeout just take the weeks after election day, we're looking at sort of down mid single digits and improving right around you know call. It minus let's just roughly minus five and it's improving.

Okay didn't it did but are you thinking I. Appreciate that are you thinking that auto is still a drag or is that sort of get.

Get meaningfully better.

It is auto is down but not much worse than that so it's not relative to the number it's not much of a drag at all now.

Okay. My other question for you.

I have this but can you quantify for us the ratings trends at your news in aggregate across your portfolio maybe for.

The evening news late news and something like this morning, as well how's that sort of trending up year over year basis, How would you say that was versus what the trend was two years ago before this virus yeah.

Yeah, we continue to see TV TV viewing overall on our stations up over last year in local news continues to Overperform and frankly, especially with younger consumers. You know for example across our markets. You know persons 25 to 54, no not everybody 54 considers themselves young I would but it but at the lower end of that we've we've seen that.

Growth and we've been up in every month from March to September this year. The last numbers, we had in OE and evening news viewing over last year. So you know, while we're not we don't see the double digit increases that.

That we did back at the height of the pandemic, we still have we still have year over year, you know growth relative to especially on the share of the viewer ship that we have and frankly, we probably you know in the last month when numbers come out bled in loss you know to to cable news the height of the election and I think as that now has settled down.

I think we will actually even get some of that coming back to us.

Well Jimmy on the bottom line. The bottom line is you know that'll Nielsen put it out there you know news as the number one genre TV watched among those working from home.

And that in September like 35% of the week lead time spent on television was with was watching news. Now then that included cable, but local news is still the number one game in town.

So what about the morning news ratings and also late night is how are those trending for you.

Yeah, it's a little bit it's been interesting just on the household the last I saw Craig and the same sort of makes common sense because.

Because there's so many less commuters.

Due due to cope with that Theres really a temporary loss center early morning available audiences, but Conversely people are for a lot later, so available audiences at 11 o'clock or higher sort of which makes sense, but we you know we sort of expect that we'll kind of see saw back when when when when cobot normalizes.

Great. Thanks, Dave.

That concludes today's question and answer session. At this time I will turn the conference back to the speakers for any additional or closing remarks.

Thank you operator, and thanks, everyone for taking the time to join US today and in closing I just want to reiterate again, the resiliency of our business model that has allowed us to continue to perform earnings during even during these most uncertain market conditions and we're proud of the very important role that we have played for our audiences across the U.S. This year during these.

Our unique times, we look forward to continuing to providing value to our shareholders and all stakeholders in the months and years to come. Thank you for your time, if you have any additional questions. Please reach out to Doug Hoffman and 7038736764. Thank you everyone and have a great day.

This concludes today's call. Thank you for your participation you may now disconnect.

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