Q3 2020 E. W. Scripps Co Earnings Call

November 6, 2020

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Scripps third quarter earnings call. At this time all participants are in a listen only mode. And later you will have an opportunity to ask questions. If you wish to ask a question.

On todays call you May press, one and then zero once again, if youd like to ask a question on today's call. You May press, one and then zero. If you should require assistance during the call you May Press Star and then zero as a reminder, this conference is being recorded.

I would now like to turn the conference over to our host head of Investor Relations Carolyn Micheli. Please go ahead.

Thank you Marilyn good morning, everyone and thank you for joining us for a discussion of the E.W. Scripps Company's financial result, you can visit script dot com for more information and a link to the replay of the call.

A reminder, that our conference call and webcast include forward looking statements and actual results may differ factors that may cause them to differ are outlined in our S. D filing the COVID-19 pandemic enhances the uncertainty of forward looking statements, we make about our operations and financial condition, we do not intend to update any forward looking statements we make today.

Well here this morning from Scripps President and CEO, Adam Symson CFO, Lisa can you then and local media President Brian Lawlor also on the call our National Media Executive Vice President, Laura Tomlin, and controller and Treasurer, Doug Lyons here.

Here is Adam.

Good morning, everybody and thanks for joining us today scripts is delivering a third quarter financial performance that would have been nearly inconceivable six months ago, Although our nation continues to battle significant business and economic disruption, we saw political AD revenue blow past our high expectations.

Retransmission revenue growth nearly of nearly 40%.

Core advertising rebound and national media revenue grew by double digits across.

Across our revenue lines.

We did not just need but in most cases, well exceeded expectations for third quarter setting this up to end the year with record post spin off company revenue and.

And of course, all of this revenue growth translates to a much higher profit and free cash flow generation.

In fact, the dramatic turnaround in our results puts us on track to deliver 2020 free cash flow well beyond even our pre pandemic expectations.

It was more than a year ago after announcing a series of acquisitions to double the size of our local media portfolio that we said, we expected full year free cash flow in 2020 of between 225 and $250 million.

We expected that mark to be a significant waypoint in the path, we are traveling to make scripts, a more productive and more efficient company.

We rescinded that guidance last spring in the shadow of the pandemic.

So I'm very pleased to share that right now we expect to end the year, having generated more than $280 million in free cash flow.

That generates an impressive $3.42 a free cash flow per share.

Again quite an accomplishment in this economic climate.

While some of this performance is due to rebounds in the advertising marketplace. A lot of this growth is due to scripts his foresight and planning over the past few years to become stronger and more durable.

We have executed a strategy to improve the operating performance of our local media portfolio through to work streams.

First by acquiring high quality stations with significant intention to improve and expand our footprint. We set out to methodically acquired television stations in markets that helped us grow our political advertising revenue and capture our full retransmission revenue potential.

We acquired 27 stations in 2019 and have realized their value in both political advertising and our retrans rate negotiations this year.

And that second work stream powering this forward our focus on execution execution execution Super serving both our audiences and our advertisers.

That's why we have met or exceeded expectations prior to the pandemic and why we believe we're better positioned after it.

Our national media strategy to acquire and grow businesses at scale is clearly bearing fruit as well.

Today in spite of the economic recession, our National Media Division is back to expanding its margins and in fact, we'll hit a nearly 20% margin in fourth quarter approaching its margin target even faster than we had told you it would.

Against the headwinds of the pandemic economy, our performance in 2000, Twentys validates these investment strategies.

To quantify that I can tell you that our 280 million or so in expected free cash flow for this year, we will allow us to bring about 15% of every net revenue dollar to the free cash flow bottom line.

On an as reported basis that compares to 9% in 2018, a comparable political year and before we acquired the Cordillera and Tribune Nexstar divestiture stations.

Our acquisition of Ion media is another step in our systematic plan to improve the financial portfolio of the company and increase free cash flow.

Acquiring ion creates a highly accretive transaction that also will boost scripts as revenue to more than $2.5 billion annually and more than double company EBITDA in our first full year of ownership.

As we have said, we expect to realize over $500 million and synergies mainly contractual in the next six years.

And I can now confirm that we expect free cash flow per share accretion of about 60% on a two year blended pro forma basis as.

As you can see this deal has incredible industrial logic.

Our performance is not by chance, but by design the execution of our plan comes thanks to the hard work and dedication of scripts and journalists sales teams and all of our employees, who through very difficult circumstances support our mission across the country.

To all of these employees I want to say thank you.

To sum it up record high margin political dollars grew.

Great Retrans growth and a solid core performance.

Outstanding National media revenue growth and margin expansion.

An acquisition that will give us free cash flow per share accretion of about 60%.

And cash flow that provides a clear path to paying down debt.

All in all a very good way to move into 2021.

When we said that our company would look to emerge from the chaos of 2020, a stronger business we mentor.

Now here's Lisa to give more details on our results.

Thank you Adam and good morning, everyone, let's start by discussing third quarter local media performance all comparison at the Division financial results on an adjusted combined April.

As of May 1st we have owned the quarterly our stations for a full year.

And as of September 19th we have owned the former Nexstar trivial station for a year. So the third quarter is our last quarter of adjusted combined treatment with them yes.

You can find our as reported results in today's press release.

Third quarter political advertising revenue of $96.4 million came in higher than expected, helping us to reach a record $265 million in full year 2020 political ad revenue.

It's an impressive 35% over our last record year 2018.

34 days of the fourth quarter election season brought in about $137 million or a bit more than half of that total as early voting took hold this year, we saw growth in third quarter political AD dollars, but certainly not at the expense of fourth quarter.

Brian will give more color in a moment on our political advertising performance.

Local media core advertising revenue was down 18% driven by the pandemic related advertising slowdown that number is 15% as we had indicated excluding the result of W.P.I., EPS, which lost Yankee unmet baseball in the quarter.

We have continued to see significant sequential improvement in core advertising and we have moved throughout the year and while we expect the fourth quarter to be down 15% from for fourth quarter 2019, we expect it to be up 10% from the third quarter of this year.

Our growth in retransmission revenue came after the resolution of our six week Blackout. With addition network in the third quarter. We were not paid for this stub during that time, but we did recognize a one time catch up payment from them for the five months during which we were receiving the old contractual rate because of that onetime Q3.

Payment you will see our Retrans revenue decline just a bit in Q4, we expect to end the year at $581 million of Retrans revenue.

And our latest reporting period Q2, we saw no real change in the rate of subscriber churn from the prior quarter.

Local media expenses decreased by 1% over the year ago quarter, when you exclude the fixed programming expenses.

The division hadn't heard various cost savings initiatives that included merit pay increases reductions in capital expenditures travel and marketing local media segment profit was $145 million, which is the strongest third quarter profit number ever for the division.

Now lets discuss national media results since.

Since stature with reported as discontinued operation. The Division results no longer include Fischer for any period. The stature sale closed on October 16th.

National Media Division revenue came back exceedingly well in the third quarter at $89 million up 14% year over year.

All three national businesses, Cape Newsy, and Triton contributed to this growth.

Capex, we felt strong spending indirect response and in the scatter market. The grit network in court TV were big contributors to the 8% revenue growth that we thought Kate.

Newsy revenue grew 30% driven by ongoing strong demand for AD inventory on connected TV and LTT and Dizzy took in $1.9 million the political in the third quarter and more than $4 million through election day as political campaigns have fallen consumers to streaming platform.

Triton revenue grew 14% in the quarter the growth was due to the growing digital audio audiences, which are reflecting the same trends, we see in television viewing as well as the shift toward automated ad buying and the digital audio marketplace.

We had expected modest national media revenue growth in the third quarter and the division exceeded our expectations looking to the fourth quarter, we expect low double digit revenue growth on higher comp for Q4 of 2019 Nash.

National Media expenses came in at $77 million up about 13% from a year ago and National Media segment profit was $12 million at the segment return to margin expansion mode.

Looking ahead, we expect to see that margin expand access.

Expansion to continue and to end the fourth quarter approaching 20% margins, we've been telling you for a while that we expect national media margin to reach 20% and we are very pleased to have made so much progress during an economic recession.

<unk> performance as an affirmation that our national media strategy is creating value and the execution and the national media marketplace recovery also bodes well for our plans as we integrate ion median next year.

Our shared services and corporate expenses were $12 million in the third quarter. We we do expect that to be closer to $16 million in Q4, that's due to the need to reflect higher blood bonus accruals as a result of free cash flow coming in at more than $280 million.

We are also on track with the previously announced $75 million and expense control and cash management measures about $54 million of the savings have been realized year to date and the other $21 million will come by year end.

We made about $4 million in dividend payments in the third quarter.

The company's Q3 income from continuing operations was 76 cents per share pretax cost for the quarter included $11 million of acquisition and related integration cost that decreased income by 10 cents per share.

Our current forecast for full year 2020 cash interest is about $82 million, a little better than we thought on our August call, mostly because of the decline in line or.

Our full year capital expenditures are estimated to come in at $32 million.

On September Thirtyth, our total debt was $1.9 billion in cash totaled $129 million, we now have about $200 million available on our revolving credit facility.

Our net leverage at the end of the third quarter was five dot three times per the calculation in our credit agreement that's down from five to eight times at the end of second quarter. We expect to end this year at port that two times the lower leverage reflects proceeds from the sales picture and political advertising revenue.

For the full year, we expect our company free cash flow to exceed $280 million. We are very pleased to be delivering well above the range. We set back in 2019 of $225 million to $250 million.

Finally, we are well underway in the process of acquiring island, we have made our FCC filing and have already received Hart Scott Rodino clearance. We also have begun communication with IR leadership and employees and they are enthusiastic about joining the company with such a well respected media brand.

We still expect the transaction to close in the first quarter of next year.

A significantly higher free cash flow, we will generate when combined with an eye on will allow us to move swiftly toward paying down debt.

As we have told you our top capital allocation priority is to work toward having a flexible balance sheet and now here's Brian.

Thanks, Lisa good morning, everybody.

This week, we completed an unprecedented presidential election season.

At the beginning of this year, we told you we expected our political AD revenue to come in at less than $200 million.

Today, we are over delivering on that by about $65 million. This.

This year, the competitiveness of our races aligned well for the Scripps footprint and our political sales and traffic operations teams maximize the opportunity for an incredible political advertising year.

Through a few of the things that went our way in the election landscape.

Number one Joe Biden secured the Democratic nomination in May the two presidential candidates were decided a full two months earlier than 2016 kicking off the general election spending that much sooner bye.

Guidance candidacy also broaden the swing state Matt.

Number two the pandemic significantly reduced the ground gave for candidates, forcing them to spend more on television to reach local voters.

Number three Scripps footprint for Senate races became even more competitive than we read originally anticipated.

In states, like Arizona, Colorado, Michigan, Kansas, Iowa, and especially Montana, where one of the Sun the candidates Didnt even come into the race until April.

And number four the nation saw unparalleled unparalleled political action committee spending which at Scripps accounted for a full half of our political dollars.

In addition to these external factors scripts was well positioned to capture more than its fair share of dollars over a decade ago, we broke from the industry and created our own political sales office, which remains a unique competitive advantage. We have built a reputation as experts on placing political ad buys.

Also on our station acquisition strategy that.

That included finding markets with strong political opportunity nowhere is that better demonstrated than a Montana, where our highly ranked stations captured the vast majority of the many dollars spent on competitive Senate and governor races. There.

The amount of political advertising revenue a station group received is all about how it station footprint aligns with the most contested races that year.

This year, we had many hotly contested races on our political sales strategy has helped us make the most of them.

At the same time, the pull of political dollars nationwide is growing tremendously and local broadcast is taking an even larger share.

In 2016, Threebillion political dollars was raised and spent in 2018. It was $5 billion. This year it was more than $8 billion.

In 2016 estimates, where the local broadcast television took 45% of that total.

This year it looks like we took more than 50% of the larger spend cats.

That's completely to the contrary of the peninsula views that 2016 had reshaped political spending away from local broadcast.

And we have some good news for you Scripps is well positioned to have another fantastic footprint and political for the 2022 election cycle.

Turning to core advertising revenue, we were pleased to fully meet our third quarter expectations. We did see significant displacement in some markets, but very little when others big.

Because the pandemic economy had driven down advertising, we had more inventory.

And the new inventory on our over the top programs also helped us mitigate displacement.

Two significant contract contributors to meeting our expectations on core where our ongoing efforts to developing new businesses as television advertisers and demand for our over the top products and we're seeing strong growth with our odisi products as local advertisers look for ways to reach streaming audiences in their market.

Yes.

I'd like to end by acknowledging the work of our local journalists their work makes our strong sales performance possible.

During the third quarter Scripps stations received the number of prestigious Journalism Awards Capex VR ABC station in Phoenix was once again the winner of a National Emmy Award for its outstanding investigative work.

Can actually also was one of six stations in scripts to earn a national Edward R. Murrow Award.

Kmgh or ABC station in Denver, one overall excellence in the large market category and W. TV arm Richmond, one that same award in the small market category and for other stations were recognized for specific projects.

These awards are a testament to scripts commitment to journalism minutes communities and so the quality of our people.

It has been a contentious and sometimes scary year for reporters and photographers in the field.

They have recovered social justice protests civil unrest and election events, which anger occasionally turned toward them.

Our news teams have worked hard to provide objective reports and help voters stay informed.

Expanded news programming dedicated chose to political coverage and fact check political ads despite.

Despite the challenges we remain focused on forming our audiences.

And now operator, we are ready for questions.

Thank you, ladies and gentlemen, if you wish to ask a question on today's call you May press, one and then zero on your phone. If you are using a speakerphone. Please pick up the handset before pressing the numbers.

Once again, if you do have a question on today's call you May press, one and then through at this time.

Our first question comes from Kyle Evans.

From Steven.

His line is open. Please go ahead.

Hi.

Thanks.

Spectacular.

What kind of visibility do you have into islands third quarter results and their fourth quarter outlook.

Okay.

Hey, Kyle it's Lisa.

We have a little bit of visibility and we're seeing the same trends that we're seeing in the national and International Division.

Division in terms of you know strong demand in third and fourth quarter.

By a strong.

And I take your can I take the Capex number and use that as a proxy for.

Yeah.

I didn't necessarily say that.

[laughter]. So [laughter] yeah, exactly we did as I said, you know strong D.R. and you know, it's the national marketing places.

Robustness and durability is definitely flowing through that line.

Great.

And maybe some.

Inter quarter granularity on.

Across the core what you saw in October and November spacing.

Yeah, Hey, Kyle.

Obviously massive displacement in October.

You know 100 and.

$37 million and you know five weeks is a heck of a lot of money. So you know kind of throw October out the window. We had some markets were displaced up as high as 50%.

So you know peeling that back you start looking at November I can tell you autos, having its best month since February sorry.

Service, which is our number.

Number one category represents more than 30% of our total is up mid single digits in November.

Prior to versus prior year home improvement a little bit smaller, but another growing category is also up mid single. So I think the categories that we can control, especially with our new business are strong.

I think you know as we see it it's still early there is a lot of points to be written and fourth quarter bar, our expectation as the core will and Q4 down probably somewhere in the mid teens.

Could you bracket novembers that is that a little too great.

Yes, I think its spray for only but three days from the election.

Election, we displaced a lot you know over the last five weeks in order to maximize that so we're working hard to get you know.

Business back as I, you know foreshadowed there we've got a couple of categories that are really strong obviously november's rolling up to a better number than we've seen in.

The last couple of months.

Yes, I'll, just I'll take that into.

Q3 core like others have reported we saw improvement through the quarter you know from the beginning of the quarter to the D. and we saw that.

July start about down 19 September finished minus 14, but when you consider that we did $52 million on political in September for it to have actually continued that growth.

I think it really speaks to the health that we're seeing in core as we continue.

Continuing to build from April.

April.

Well I have you we tick through the Retrans.

Renewal cycles for subs and networks and then maybe some high level commentary on.

And your outlook for returns.

Yeah, Let me, let me take the networks, it's a little more complicated with the Retrans subs because were waiting to see if picks closes and so I, probably rather wait until February because with that intertwined it gets a little bit messy.

Relative to our networks, we have to ABC stations small ones Tallahassee and.

Left the EPS up at the end of this year, but beyond that.

Our mbcs are up at the end of 21, and then our CBS.

Fox and NBC are all up in the middle or the end of 22.

Hey, Kyle it's Adam I can give you just maybe a little bit of commentary on your question around net Retrans growth look we this year, we completed 42% of our pay TV households that that's after Comcast renewed on December 30, Onest and that is driving us to more than 30% gross.

Retrans revenue growth over 2019 on a same station basis. So of course that growth is certainly driving a net retrans margin expansion.

And I would I guess I would I would sort of point out that the successful renewal of these contracts and that revenue growth and margin expansion is really affirmation or validation of our acquisition thesis last year. When we picked up 27 television stations to expand our footprint, making us a stronger company and I expect we'll be able to share more on on.

Timing of things next year.

I hate to belabor the point, but there's there's one of your peers mentioned kind of down net retrans next year and it.

Because a lot of investor concern can you can you can.

Can you say, whether or not you think net retrans will grow and 21.

I think.

I think as a result of the as a result of some timing things, we'd we'd rather actually hold off until we are able to share with you some of the timing related as Brian risk responded on on picks.

And then we'll be able to share some of that information, okay, I, although although I will tell you given the given the.

Given the.

Timing of our network contracts I don't know that whatever they shared is a.

Industry wide phenomenon.

Fair enough Ive got questions from more but I'll get back in queue.

Brian if everybody else is like me and you started to mention political 22, I Cringed I'm not ready for.

[laughter] I'm ready to talk about any political right now.

I'm ready for golf I know you [laughter] we've.

We've got a great footprint. So I am excited to go do you do congrats thanks for taking my questions.

Our next question comes from Michael Kupinski from Nuvo capital markets. Your line is open. Please go ahead.

Thank you and congratulations on your quarter.

I just have a couple of quick questions. Brian I don't know that you in your commentary could you talk a little bit about December and what the core it looks like given the fact that we don't have a the noise of the political in the in that month I was wondering if you could just give us some thoughts about how how that's shaping up.

Hey, Mike did you ask about December.

December yes, yeah.

You heard my comments about November it's just really early on December typically from this point through the end of the month.

We will add a lot of dollars on a lot of points outlook decembers pacing much better than third quarter right now, it's a little bit behind November, but that's not atypical I think especially into share people are booking week to week and month to month. So I'm expecting that you know the sequential growth that we've been talking about all year continues for the quarter.

Okay, but.

Quite frankly at this point, it's still early there's a lot of business to right.

Okay, and then how much was the one type dish payment in the quarter.

And is that in the Retrans number.

Yes, so Mike it's Lisa I'm worried about we really can't.

Say what that one has limited.

You know obviously huh.

Related to rate that we hope will have to remain silent on it.

Okay, but that but but that's reflected in the third quarter Retrans number right.

Correct.

Okay, and then just looking at Newsy I mean, obviously you know it's great that that they had political it was that the first time that that newsy really started to see political revenue in.

I I I was surprised to see how strong that was.

Hey, Mike, It's Laura and you know, we really kind of gone away, our EPS expectations on political revenue as it relates to me. This year, we saw very little previously I think Lisa mentioned.

Our year to date about 4 million, but if you think about where consumers are spending their time and growth then I connected TV viewing has just been exploding and we've been there for a long time and I think what happened. This year is political campaigns really saw the opportunity to get their messaging in front end for some of these targeted.

Targeted voters and we're targeting capability I think thats going to bring more and more dollars into that space and you know were positioned well, especially as we move forward.

Great and are you looking at expanding more distribution for newsy at this point was that looking like.

Hi distribution, both on cable and NTT Lee we continue to expand on over the top where sort of near at 40 million pay TV subscribers. That's been stable this year and so I think as we move forward. You know, we'll continue to kind of look at expanding and adding market places, where we're seeing a lot of growth.

And right now that's MTT.

And in terms of our political you Didnt really see anything and then your other national businesses right. I mean, I don't think in terms of cash very very.

Very minimal it the case that one's really political revenue for the division at came mostly from.

From an easy.

Okay, Great all right. That's all I have thank you.

Our next question comes from the line of John Janedis from Wolfe Research. Your line is open. Please go ahead.

Thanks, Good morning, I had one for Adam one for Brian Adam can you talk a little more about national media, where its cage in its growth cycle, you're run rating about 250 million in revenue and I was wondering if.

That's still a multiyear opportunity given how much has grown since the acquisition and I guess, that's the same about newsy and then Brian the market share gain commentary was helpful. Given the narrative in the market. So can you give some more detail on where you are taking share from thanks.

Good morning, John Yeah, I mean, I absolutely think.

It's still early days and the growth cycle at the National networks Capex and then when we combine it with an eye on certainly on a lot of that has to do with marketplace growth and sales execution. When we when we acquired the Capex networks I think nobody sort of understood that these networks were poised to begin to take real ratings.

Points out of the audience Mark you know out of the audience marketplace and share and then of course following that real share out of the national advertising marketplace and that's exactly what we're seeing now is especially as consumers spend more of their time in EPS vide environments.

Brand managers marketers plan or is recognize that for them with their brands to reach large mass audiences. They will need to actually reach them through linear broadcast over the air television.

And this company will be poised to own you know seven networks at the end of a at the end of that that the acquisition with respect to the audience shares. So we're very bullish on the opportunity.

And John I'll take your second when I was talking about.

Local broadcast capturing share I was referring to the political sorry.

So I assume that's where your question is that and I think you know there were a couple of things. This year I think the fact that there was a limited ground game for the candidates meant that they are used more money on advertising than they would have maybe on signs I mean, you know campaign.

Campaign.

Headquarters in cities and things like that but then I think you know from radio and Billboard also I think the pandemic has had an effect on People's lifestyles people you know the two biggest day parts and radio or morning drive an afternoon drive yet there is a whole lot of people who are working from home and are missed by that opportunity same thing for Billboard them, So less people out commuting.

On highways and so I think dollars that.

Would have been allocated there you know we're able to come to local the other thing is I think its just important in my comments that it started earlier for us and so we were able to mold move dollars earlier in the cycle.

And so you know typically that last five or six weeks. There's only so much you can take but the earlier you can bring dollars, that's where we have more inventory and more opportunity and I think with the early voting this year and the fact that we knew who some of the candidates were earlier allowed us to pull dollars forward in the cycle.

Thanks, maybe one last related question you spoke to pack being about half of the total money what would that have been in 16 or 18, just as a reminder.

Oh, probably around the same share about you know 45% to 50% the numbers just obviously on a smaller base.

Got it right great. Thank you.

Our next question comes from the line of Craig Huber from Huber Research Partners. Your line is open. Please go ahead.

Great. Thank you just some housekeeping questions here was the Retrans subs brought in a pro forma basis down say, 5% or so year over year.

Craig the rate of our Q2 jobs and again, that's you know our catch up was basically unchanged from Q1, so in about the mid 2% and really right on track with our seasonal estimates for Q2.

I thought three.

Three months ago in your Guys' conference call you were talking about.

Down about 6% year over year, netting okay. Yeah that would have been done I just shared with you kind of a quarter a view Craig on a year over year basis, I think were in line with our peers little bit less than 7% over the 12 month rolling.

A little bit better than seven you said, Oh, yes, less than 7%, okay. So six or seven okay. Okay appreciate that Brian.

Brian Your TV stations on a pro forma basis. The AD revenue should I assume that the local piece of AD revenue pro forma was.

Materially worse, the national how would you sort of bracket that.

In the quarter, we just finished.

No I don't think you should.

Make.

Make that assumption actually local performed slightly better than national on a pro forma basis.

Okay. Okay, that's good to hear.

And then and again I think you know we've spoken on prior conference calls, but you know our commitment to new business I made it I talked about this in the prepared remarks to our commitment to new business and I think were really a leader in the OTSG space right now is bringing new dollars and creating new revenue streams in local space and I think that's one of the reason.

That's why our local performance is outpacing our national performance.

And then on the National media side, the 20% more permanent goal should I assume that you're thinking like that's like three years out for all your thinking.

Hey, Craig, which we think will approach 20% for this year. So I think you're not we're not thinking three years out and I think its it if things go well for the quarter as they've been going on I think you could see it approaching 20% by year end.

Fourth quarter, Yeah, you buy this year for the margin you're talking but just some color.

Yes margin.

And then as.

As you think out beyond that obviously I assume you think this meaningful margin upside beyond that put aside the oil.

Acquisition stuff, which is a three legacy properties. They have in the right now do you think will be driving margins longer term.

Yeah, I mean, I think all are contributing certainly tightening has high it's high margin. When we bought Triton we were attracted to their high high margin Capex and continued margin expansion, especially as core TV just launched last year. It seems like forever ago, but it was really just last year and so we're continuing to.

I see and Weve got some really great high profile on court cases coming up and then finally you saw the impressive growth that movie had in the third quarter, 30% growth in the year of the pandemic and a global global pandemic in a recession. So I think it on you know you're going to continue to see us hitting on all cylinders that certainly.

Okay.

Those are the main drivers of margin expansion.

And then my final question on the financial side of things, what sort of long term net debt to EBITDA.

Target ratio you guys.

Looking to get down to.

Well, Craig and yeah long trip and it would be in the mid threes and I think we have on lead has been consistent.

Anything that you know we're committed to having a strong flexible balance sheet and we would be somewhere in the mid threes.

As a good place to be.

Great. Thank you.

And ladies and gentlemen, if you wish to ask a question on today's call you May press, one and then zero at this time.

Again to ask a question on the call you May press, one and then zero.

At this time, we have no further questions in queue.

So my apologies, we do have the line of Dan on currency from benchmark come Funny. Your line is open. Please go ahead.

Thanks, Good morning, Hi, Dan, Yes, it's okay, and we were I think I was Kronos and we still have janedis today as well so [laughter]. We're on a roll so far we know yet [laughter] I don't know if that's a good or a bad thing. So so just one quick question going back either Brian or Adam.

And just on the Retrans, just I I know highlights a bunch of questions around this I just want to get a sense in just terms of sub expectations on a go forward we've heard some more positive commentary I.

I think just around the potential for maybe charter to post another quarter of positive subs in Q4. So just any any view you have on that and then Adam I want to ask you maybe Laura at pretty high level connected TV question that I think is important.

Yeah, I mean on the sub counts I would just look to what the NVS and the operators are reporting now remember that we report.

A month in or a quarter in arrears and so you know we've been pretty pleased with their the stability that there that they're showing I mean, I think it's I think it's a it's certainly an expression of stability in the in the sub marketplace. It appears like its returning to about what it was pre pandemic, which I think is good to see.

Okay. That's helpful and then it really good color on on margin guidance, obviously way ahead of expectations on national.

As much as I'd love to talk about the fact that you know kind of the legacy core broadcast business is just continued to file the gloom and Doom expectation. There is an inordinate amount of focus on connected TV and I think you guys are uniquely positioned to kind of answer. This question I think Laura started to touch on this a little bit and we have been having some congress.

Patients around this the converts the concept of more targeted marketing the ability to effectively do dynamic AD insertion a split you know within a deadly DNA kind of the ads and that's obviously a lot easier to do on connected TV, so with that backdrop to the extent that.

You can share you know how much of the business now is from connected TV, how much of it that growing and how much are you guys seeing a in terms of at least sort of an economic and delta between maybe a legacy southern and what we would consider a connected TV. So we're that's who you too.

Are any of the other methods I think would be really helpful to outline the growth trajectory going forward.

Hey, Dan I'll take the first part and then I'll turn it to add on that you know when you think about just the growth in connected TV dealers across all of our platforms that includes local you know connected TV is about scale and we are well positioned to grow our.

Scale across the enterprise really all as need be at significant growth and rate growth is coming from that they.

We're seeing more of that in local and I think as we move forward from an enterprise perspective.

And we'll be able to capitalize on the fact that we've been in these marketplaces for a while we understand that we understand them. We know how the technology works and I expect that you know, we'll see a lot of upside moving forward that Adam do you want to talk a little bit about sort of legacy fabs and and.

Connected to it he said.

Yeah, I mean, I guess I would I would also just add there is incredible opportunity with connected TV as we move forward frankly, even in the linear space, whether you think about the transition the industry and our company is making with Ats Eathree Dido and the move.

Towards the earliest stages of advanced advertising, which is the dynamic AD insertion that you referenced we're very bullish on the opportunity ahead, it's still early but work we're doing with things like project or are beginning to validate the thesis that there will be a time when we will be able to use the AD tech stack that we.

Developed to improve yield both in our local and national media portfolios through both connected TV and OTI tea as well as through HCFC Threed out, though enabled linear television now that's a little farther off but I think that's where the business is going in the future and I.

I think it will pretend to a significant economic opportunity.

To to maintain and improve yields and yield and cpms a little bit further down the road does that make sense.

Yeah, I mean, that's that's kind of what I'm getting at I don't know I don't want to belabor. The point here on something that I know is are still relatively small but it's.

Everyone is making the assumption and I was referring to linear as well that we're moving towards kind of a streaming ecosystem right and everybody starts moving towards the MDP ease over the next 10 years. We all know HFC is still a ways out but you know you guys given your portfolio in the tech stack I think have an interesting opportunity.

Whether it's partnerships with who live in Q2 and working through trade desk or other third party I know you've got your own tech stack, but you know to kind of migrate or carve out inventory on connected to already improve yield and sort of positioning ourselves well for kind of the future growth, but I don't think people are.

Baking into their numbers I was just curious of how you're thinking about that understanding that its really early days.

Yeah, I mean, that's exactly how we're thinking about it actually well, while we focus a lot on Doozies journalism mission. It should be said that newsy is regarded in the otcs space as a leader in the dynamic AD insertion and technology that that's that's really what I think help you know.

Bring about.

The political revenue that you saw a it's about the ability to target down to demographics psychographics and certainly geography, as we always said that all politics and political AD spending is local and so how do you how do you develop $4 million $5 million of political in one quarter for a national brand.

Yeah, you do so through dynamic AD insertion and we expect that we'll be able to take the the the technology that we've developed and that has proven to power newsy is tremendous growth in the O.T. space and bring it to linear television for sure I mean, that's the way the business is going I think that will differentiate us. So when you sort of think about.

Some of the opportunity with Scripps around both local and national a little further out we expect you know our national television networks business to be able to yield benefits as a result of laying this technology on AD sales and we certainly expect it to come to the local side our logo.

Media Division hasn't made a huge deal out of OTV publicly, but we have really advance the ball on generating new audiences and new impressions monetizing those impressions in the local media space and when Brian talks about OTI t., providing opportunity both for our advertisers during political to.

To go to and for our political dollars that's exactly what he's talking about every single one of our brands has strong audiences in the Otcs space right. Now we also have a multitude of advertising solutions that we bring to the marketplace. Newsy is an example of that you know every one of our local local sales people.

The ability to sell not only the local inventory, but also newsy inventory along with partner inventory to create what we what we believed to be a significant opportunity at the end of the day, our advertisers know television is television and what they want is to make sure. Their ads are reaching the right audiences and we're now able to deliver.

Those ads to the right audiences through over the year linear television through our partnerships with virtual MVP. These and some dynamic AD insertion, we do there through connected television and through our own OTI EPS and that's the direction. This business is moving in.

Okay. That's super helpful item I think it just really helps frame up maybe as much better core store in people are thinking on a go forward I appreciate all the color there.

Hello, Good morning.

Our next question comes from the line of Steven Cahall from Wells Fargo. Your line is open. Please go ahead.

Thanks, Adam and lease I was hoping I could pin you down a little bit on the pro forma free cash flow accretion of 60%. So you're doing around 280. This year I think a lot of as to how you're doing around 100 for next year. So call. It a 140 blend is that a good basis for us to use to think about that 60% accretion which would get to maybe.

Mike 225 million on a pro forma basis, and that's a that's a pretty attractive free cash flow yield.

Hey, Steven Thanks for the question, yes, so <unk> the 280 this year obviously.

I think I did you say up to somewhere near a 100 next year did I hear you have kind of where consensus is yeah around 100.

Yeah, I would say that in the ballpark.

Okay, Yeah, Great and then I was also wondering if we could just get an update on how keeps an eye on viewership is performing lately you know I think there's a lot of focus on the AD revenue, but most of US think that you know revenue maybe isn't the best judge of viewership and that is that the market is going to recover here. So as we think about just the viewership trends on those two networks.

And the ability to put those two networks together from an AD sales perspective, how should we think about the combined viewership trends there. Thanks.

Hey, Stephen It's Brian I can you know just speak to other kids networks, a little bit you're obviously court. He had some challenges in the third quarter and that there were no life trials, but we did develop a new live primetime show each night and that viewership was up 120% year to year. So.

We saw you know now that its further deployed we saw a lot of engagement there just bounces up 5% and households, compared to Q3 of 19.

We had a bunch of original programming John Lewis Special the documentary with Michael Jackson that was multiple parts. Some original movies. There group was up 6% in primetime 5% in households over prior year, a big shift and laugh when we launched how I met your mother, which premiered labor day weekend big audience growth there.

But we saw the median age dropped six years to 49 years old So you're seeing continued growth on each of our our networks and Adam maybe I'll turn it over to you were for a comment on long Island.

You are on mute.

You would think we would know by now we should we expect I on the audience to really perform in the same way we've seen in the national marketplace.

Yeah on continues to be a leader as we have said before it's the fifth ranked television network.

By audience I think that's surprised a lot of people and it delivers you know with the with incredible consistency a ratings that that come from its programming strategy and the really popular.

Crime and injustice genre.

I you know on a on a go forward basis I would tell you with respect to the comments about you know how these things will will perform coming together you know weve described $500 million in synergies those synergies are contractual synergies, mostly in the expense side, having to do with distribution I do believe there will be up.

Side, when we bring these businesses together and begin to bundle AD sales. So the the case networks have long moved into the national advertising market as a bundled approach, but one of the things that I on hasn't been able to do because it's essentially a single network has been able to take advantage of you know participation in bundling you can see.

What happens in the cable and the National broadcast network marketplace. When they go to the marketplace with solutions that allow them to take greater share.

All in all and I expect that to be able to benefit from that the other thing I would say is we've placed a huge emphasis advocates networks on managing yield and pricing relative to both our use of direct response and the careful use of both the upfront and the scatter markets in order to me.

Maximize.

Advertising Guild, and maximize Cpms and so when we think about bringing some of that to eye on you know that that's an incredible business thats done very very well, but we expect there is still opportunity and growth ahead. When we bring these businesses together in the national advertising marketplace for sure.

Hey, Stephen since you asked about audience I just wanted to mention that.

Something pretty material yesterday for core TV. The the judge in May George Floyd, a case of Minneapolis wrote the order, allowing cameras in the court room for that trial, so that'll be a big events, obviously for quarter to date.

Great. Thank you for that update.

And at this time there are no further questions in queue.

Thank you Carol and thanks to everyone for joining us today have a good day.

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Once again, if youd like to ask a question on today's call you May press, one and done zero. If you should require assistance during the call you May Press Star then zero.

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I would now like to turn the conference over to your host head of Investor Relations Carolyn Micheli. Please go ahead.

Thank you Carolyn good morning, everyone and thank you for joining us for a discussion of the E.W. Scripps Company's financial results you can visit <unk> dot com for more information and a link to the replay of the call.

A reminder, that our conference call and webcast include forward looking statements actual results may differ factors that may cause them to differ are outlined in our EPS do you see filing the COVID-19 pandemic enhances the uncertainty of forward looking statements, we make about our operations and financial condition.

Do not intend to update any forward looking statements we make today.

Well here this morning from Scripps President and CEO, Adam Sun CFO, Lisa can you then and local media President Brian Lawlor also on the call our National Media Executive Vice President, Laura Tomlin, and controller and Treasurer, Doug Lyons.

Good morning, everybody and thanks for joining us today scripts is delivering a third quarter financial performance that would have been nearly inconceivable six months ago.

Although our nation continues to battle significant business and economic disruption, we saw political AD revenue blow past our high expectations.

Retransmission revenue growth nearly of nearly 40%.

Core advertising rebound and national media revenue grow by double digits.

Across all revenue lines.

We did not just need but in most cases, well exceeded expectations for third quarter setting this up to end the year with record post spin off company revenue and.

And of course, all of this revenue growth translates to much higher profit and free cash flow generation.

In fact, the dramatic turnaround in our results puts us on track to deliver 2020 free cash flow well be on even our pre pandemic expectations.

We expected that mark to be a significant waypoint in that path, we're traveling to make scripts, a more productive and more efficient company.

We responded that guidance last spring in the shadow of the pandemic.

So I'm very pleased to share that right now we expect to end the year, having generated more than $280 million in free cash flow.

That generates an impressive $3.42 a free cash flow per share.

Again quite an accomplishment in this economic climate.

We have executed a strategy to improve the operating performance of our local media portfolio through to work streams.

We acquired 27 stations in 2019 and have realized their value in both political advertising and our retrans rate negotiations this year.

And that second work stream powering this forward our focus on execution execution execution Super serving both our audiences and our advertisers.

That's why we have met or exceeded expectations prior to the pandemic and why we believe we're better positioned to after it.

Our national media strategy to acquire and grow businesses at scale is clearly bearing fruit as well.

Against the headwinds of the pandemic economy, our performance in 2020 validates these investment strategies.

To quantify that I can tell you that our 280 million or so in expected free cash flow for this year will allow us to bring about 15% of every net revenue dollar into free cash flow bottom line.

On an as reported basis that compares to 9% in 2018, a comparable political year and before we acquired the Cordillera and Tribune Nexstar divestiture stations.

Our acquisition of eye on media is another step in our systematic plan to improve the financial portfolio of the company and increase free cash flow.

Acquiring I on creates a highly accretive transaction that also will boost scripts is revenue to more than $2.5 billion annually and more than double company EBITDA in our first full year of ownership.

As we have said, we expect to realize over $500 million and synergies mainly contractual in the next six years.

And I can now confirm that we expect free cash flow per share accretion of about 60% on a two year blended pro forma basis.

As you can see this deal has incredible industrial logic.

So all of these employees I want to say thank you.

To sum it up record high margin political dollars.

Great Retrans growth and a solid core performance.

Outstanding National media revenue growth and margin expansion.

An acquisition that will give us free cash flow per share accretion of about 60%.

And cash flow that provides a clear path to paying down debt.

All in all a very good way to move into 2021.

When we said that our company would look to emerge from the chaos of 2020, a stronger business we meant it.

Now here's Lisa to give more details on our results.

Thank you Adam and good morning, everyone, let's start by discussing third quarter local media performance. All comparison other division financial results on an adjusted combined April.

As of May 1st we have owned the Cordillera stations for a full year.

And as of September 19th we have on the former Nexstar to reveal station for a year. So the third quarter is our last quarter of adjusted combined treatment with them yes.

You can find our as reported results in today's press release.

Third quarter political advertising revenue of $96.4 million came in higher than expected, helping us to reach a record $265 million in full year 2020 political ad revenue.

That's an impressive 35% over our last record year 28 pool.

34 days of the fourth quarter election season brought in about a $137 million or a bit more than half of that total as early voting took hold this year, we saw growth in third quarter political AD dollars, but certainly not at the expense of fourth quarter.

Ryan will give more color in a moment on our political advertising performance.

Local media core advertising revenue was down 18% driven by the pandemic related advertising slowdown that number it's 15% as we had indicated excluding the result of W.P.I.S., which luck Yankee unmet baseball in the quarter.

We have continued to see significant sequential improvement in core advertising and we have moved throughout the year and while we expect the fourth quarter to be down 15% from for fourth quarter. A 29 tool we expect it to be up 10% from the third quarter of this year.

Our growth in retransmission revenue came after the resolution of our six week blackout. With addition that work in the third quarter, we were not paid for dish sub during that time, but we did recognize a one time catch up payment from them for the five months during which we were receiving the old contractual rate because of that one time.

Q3 payment, you'll see our Retrans revenue decline just a bit in Q4, we expect to end the year at $581 million of Retrans revenue.

And our latest reporting period Q2, we saw no real change in the rate of subscriber churn from the prior quarter.

Local media expenses decreased by 1% over the year ago quarter, when you exclude the fixed programming expenses.

The division had imposed various cost savings initiatives that included merit pay freezes reductions in capital expenditures travel and marketing local media segment profit was $145 million, which is the strongest third quarter profit number ever for the division.

Now lets discuss national media with all.

Stature with reported as discontinued operation The Division results no longer include Fischer for any period. The Skechers sale closed on October 16th.

National Media Division revenue came back exceedingly well in the third quarter at $89 million up 14% year over year.

All three national business, It Kate Newsy and Triton contributed to this growth.

Capex, we felt strong spending in direct response and in the scatter market. The grid network in court T.V. were big contributors to the 8% revenue growth that we thought Kate.

Newsy revenue grew 30% driven by ongoing strong demand for AD inventory on connected TV and OTI tea and did they took in $1.9 million the political in the third quarter and more than $4 million through election day at political campaign have followed consumers to streamone platform.

Triton revenue grew 14% in the quarter the growth was due to the growing digital audio audiences, which are reflecting the same trends, we see in television viewing as well as a shift toward automated ad buying and the digital audio market place.

We had expected modest national media revenue growth in the third quarter and the division exceeded our expectation looking to the fourth quarter, we expect low double digit revenue growth on higher comp for Q4 of 2019 Nash.

National Media expenses came in at $77 million up about 13% from a year ago and National Media segment profit was $12 million at the segment return to margin expansion mode.

Looking ahead, we expect to see that margin expand.

Expansion to continue and to end the fourth quarter approaching 20% margin, we've been telling you for a while that we expect national media margin to reach 20% and we are very pleased to have made so much progress during an economic recession.

This performance is an affirmation that our national media strategy is creating value and the execution and the national media marketplace recovery also bode well for our plans as we integrate ion median next year.

We're also on track with the previously announced $75 million and expense control and cash management measures about $54 million that the savings have been realized year to date and the other $21 million will come by yearend.

We made about $4 million in dividend payment in the third quarter.

The company's Q3 income from continuing operations was 76 cents per share pretax cost for the quarter included $11 million of acquisition and related integration costs that decreased income by 10 cents per share.

Our current forecast for full year 2020 cash interest is about $82 million, a little better than we thought on our August call, mostly because of the decline in LIBOR.

Our full year capital expenditures are estimated to come in at $32 million.

On September Thirtyth, our total debt was $1.9 billion in cash totaled $129 million, we now have about $200 million available on our revolving credit facility.

Our net leverage at the end of the third quarter with five Dot three times per the calculation in our credit agreement that's down from five to eight times at the end of second quarter. We expect to end this year at port Dot to tie the lower leverage reflects proceeds from the sales pitch or and political advertising revenue.

For the full year, we expect our company free cash flow to exceed $280 million. We are very pleased to be delivering well above the range. We set back in 2019 of $225 million to $250 million.

Finally, we are well underway in the process of acquiring eye on we have made our FCC filing and have already received Hart Scott Rodino clearance. We also have begun communication with <unk> leadership and employees and they are enthusiastic about joining the company with such a well respected media brand.

We still expect the transaction to close in the first quarter of next year.

It's significantly higher free cash flow, we will generate when combined with an eye on will allow us to move swiftly toward paying down debt.

As we have told you our top capital allocation priority is to work toward having a flexible balance sheet and now here's Brian.

Thanks, Lisa good morning, everybody.

This week, we completed an unprecedented presidential election season.

At the beginning of this year, we told you we expected our political AD revenue to come in at less than $200 million.

Today, we are over delivering on that by about $65 million. This.

This year, the competitiveness of our races aligned well for the Scripps footprint and our political sales and traffic operations teams maximize the opportunity from an incredible political advertising year.

There were a few of the things that went our way in the election landscape.

Bidens, Kansas City also broaden the swing state in that.

Number two the pandemic significantly reduce the ground game for Kansas, forcing them to spend more on television to reach local voters.

Number three Scripps footprint for the Senate races became even more competitive than we read originally anticipated.

In states, like Arizona, Colorado, Michigan, Kansas, Iowa, and especially Montana, well one of the sounded candidates didnt even come into the race until April.

And number four the nation saw unparallel level unparalleled political action committee spending, which at Scripps accounted for a full half of our political dollars.

Also on our station acquisition strategy that.

That included finding markets with strong political opportunity nowhere is that better demonstrated than in Montana, where our highly ranked stations captured the vast majority of the many dollar spent on competitive Senate and governor races. There.

The amount of political advertising revenue a station group received is all about how its nation footprint aligns with the most contested races that year.

This year, we had many hotly contested races on our political sales strategy has helped us make the most of them.

At the same time, the pull of political dollars nationwide is growing tremendously and local broadcasters, taking an even larger share.

In 2016 3 billion a political dollars was raised and spent in 2018. It was 5 billion. This year it was more than $8 billion.

In 2016 estimates were that local broadcast television took 45% that total.

This year it looks like we took more than 50% of the larger spend that's.

That's completely to the contrary of the ponds interviews that 2016 had reshaped political spending away from local broadcast.

And we have some good news for you Scripps is well positioned to have another fantastic footprint and political for the 2022 election cycle.

Turning to core advertising revenue, we were pleased to fully meet our third quarter expectations. We did see significant displacement in some markets, but very low when others because.

Because the pandemic economy had driven down advertising, we had more inventory.

And the new inventory on our over the top programs also helped us mitigate displacement.

Two significant contract contributors to meeting our expectations encore, where our ongoing efforts to developing new businesses as television advertisers and demand for our over the top products and we're seeing strong growth with our odisi products as local advertisers look for ways to reach trending audiences in their market.

Yes.

I'd like to end by acknowledging the work of our local journalists their work makes our strong sales performance possible.

During the third quarter Scripps stations received the number of prestigious Journalism Awards can XV RBC station in Phoenix was once again the winner of a National Emmy Award for its outstanding investigative work.

Capex. We also was one of six stations in scripts to earn a national Edward R. Murrow Award.

Kmgh or ABC station in Denver, one overall excellence in the large market category and Wtvr enrichment, one that same award in the small market category and for other stations were recognized for specific projects.

These are awards are a testament to scripts commitment to journalism minutes communities and so the quality of our people.

And it's been a contentious and sometimes scary year for reporters and photographers in the field.

They have covered social justice protests civil unrest and election events, which anger occasionally turned toward them.

Our news teams have worked hard to provide objective reports and help voters stay informed.

We have expanded news programming dedicated chose to political coverage and fact check political ads just.

Despite the challenges we remain focused on forming our audiences.

And now operator, we are ready for questions.

Thank you, ladies and gentlemen, if you wish to ask a question on today's call you May press, one and then zero on your phone.

We are using a speakerphone, please pick up the handset before pressing the numbers.

Once again, if you do have a question on today's call you May press, one and then zero at this time.

Our first question comes from Kyle Evans from Stephens.

Your line is open. Please go ahead.

Hi.

Right.

Spectacular.

What kind of visibility do you have into third.

Our results in the quarter.

Today.

Hey, Kyle it's Lisa.

And we have a little bit of visibility and we're seeing the same trends that we're seeing in the national and our National Division.

Division in terms of you know strong demand in third and fourth quarter.

Strong.

Can I take your can I take the capex number and use that as a proxy for <unk>.

Yes.

I didn't necessarily say that.

[laughter] sales.

[laughter] yeah exactly.

We did as I said, you know strong D.R. and you know it's a national market take place is a robustness and durability is definitely flowing through that line.

Great.

And maybe some.

Intra.

Yeah.

Across the core what you saw in October and November spacing.

Yeah, Hey, Kyle I'm, obviously massive displacement in October.

A handwritten $37 million and you know five weeks is a heck of a lot of money. So you know kind of throw October out the window, we had some markets where displacement was as high as 50%.

So you know peeling that back you start looking at November I can tell you autos, having its best month since February.

Service, which is our number.

Number one category represents more than 30% of our total is up mid single digits in November.

I think you know as we see it it's still early there's a lot of points to be written and fourth quarter bar, our expectation as the core will end Q4 down probably somewhere in the mid teens.

Could you bracket novembers that does that.

Right.

Yeah, I think its brave wrongly, but three days from the election, we displaced a lot you know over the last five weeks in order to maximize that so.

We're working hard to get you know.

Business back as I foreshadowed there we've got a couple of categories that are really strong obviously november's rolling up to a better number than we've seen in.

The last couple of months, yes, I'll, just I'll take that into.

Q3 core like others have reported we saw improvement through the quarter from the beginning of the quarter to the D. and we saw that.

On July started about down 19 September finished minus 14, but when you consider that we did $52 million on political in September for it to have actually continue that growth.

I think it really speaks to the health that we're seeing in core as we continue.

Continued build from eight.

April.

Well I have.

We checked through the Retrans.

Renewal cycles for subs and networks and then maybe some high level commentary.

Commentary on.

Outlook for net Retrains growth.

Yeah, Let me, let me take the networks, it's a little more complicated with the Retrans subs because were waiting to see picks closes and so I, probably rather wait until February because with that intertwined it gets a little bit messy.

Relative to our networks, we have to maybe see station small ones Tallahassee and.

Left.

Lafayette, that's up at the end of this year, but beyond that.

Our mbcs are up at the end the 21 and then our CBS.

Fox and NBC are all up in the middle or the end of 22.

Hey, Kyle it's Adam I can give you just maybe a little bit of commentary on your question around net retrans growth. We this year, we completed 42% of our pay TV households that that's after Comcast renewed on December 31st and that is driving us to more than 30% gross.

Retrans revenue growth over 2019 on a same station basis. So of course that growth is certainly driving a net retrans margin expansion.

Timing of things next year.

I hate to belabor the point, but there's there's.

Peers mentioned kind of down net retrans next year at it.

As a lot of investor concern.

Can you can.

Can you say, whether or not you think net retrans.

21.

I think.

I think as a result of a as a result of some timing things weve, we'd rather actually hold off until we are able to share with you some of the timing related as Brian risk.

Responded on on picks.

And then we'll be able to share some of that information, okay. I I, although although I will tell you given the given the.

Given the.

Timing of our network contracts I don't know that whatever they shared is a.

Industry wide phenomenon.

Fair enough Ive got questions from more but I'll get back in queue.

Yes.

You started to mention political 22, I Cringed I'm not ready for [laughter] I'm ready to talk about any political right now.

I'm ready for golf I know you [laughter], we've got a we've.

We've got a great footprint, so I'm excited they do.

Thanks for taking my questions.

Our next question comes from Michael Kupinski from Nuvo capital markets. Your line is open. Please go ahead.

Thank you and congratulations on your quarter.

I just have a couple of quick questions. Brian I don't know that you in your commentary could you talk a little bit about December and what the core looks like given the fact that we don't have a the noise of the political in the in that month I was wondering if you could just give us some thoughts about how how's that shaping up.

Hey, Mike did you ask about the summer.

December yes, yeah.

You heard my comments about November it's just really early on December typically from this point through the end of the month.

We will add a lot of dollars on a lot of points outlook decembers pacing much better than third quarter right now, it's a little bit behind November, but that's not atypical I think especially in this year people are booking week to week a month to month. So I'm expecting that you know the sequential growth that we've been talking about all year continues for the quarter.

Okay, but.

Quite frankly at this point, it's still early there's a lot of business to right.

Okay, and then how much was the one time cash payment in the quarter.

And is that in the Retrans number.

Yes, so Mike it's Lisa we're now we really can't.

Say, what that onetime payment is that.

And you know obviously right.

Related to rate. So we hope we'll have to remain silent on it.

Okay, but that but but thats reflected in the third quarter Retrans number right.

Correct.

Okay, and then what was it just looking at Newsy I mean, obviously you know it's great that that they had political it was that the first time that that newsy really started to see political revenue and.

I I was surprised to see how strong that was.

Hey, Mike It's Laura.

You know, we really kind of gone away, our EPS expectations on political revenue as it relates to New Jersey. This year, we saw very little previously I think Lisa mentioned.

Our year to date about 4 million, but if you think about where consumers are spending their time growth then I connected TV viewing has just been exploding and we've been there for a long time and I think what happened. This year is political campaigns really saw the opportunity to get their messaging and find out in front of some of these targeted.

Targeted voters in we're targeting capability I think that's going to bring more and more dollars into that space and you know were positioned well, especially as we move forward.

Great and are you looking at expanding more distribution for newsy at this point was that looking like.

Hi distribution, both on cable and MTT, we continue to expand on over the top where sort of near 40 million pay TV subscribers. That's been a stable this year and so I think as we move far where are you now we'll continue to look at expanding in the marketplaces, we're where we're seeing a lot of growth.

Right now that's MTT.

And in terms of our political you Didnt really see anything and then your other national businesses right I mean items in terms of cash very very.

Very minimal advocates networks really political revenue for the division at came mostly from.

From an easy.

Okay, Great all right. That's all I have thank you.

Our next question comes from the line of John Janedis from Wolfe Research. Your line is open. Please go ahead.

That's still a multiyear opportunity given how much it's grown since the acquisition and I guess, that's the same about Newsy and then Brian the market share again commentary was helpful. Given the narrative in the market. So can you give some more detail on where you are taking share from thanks.

Good morning, John Yeah, I mean, I absolutely think.

It's still early days and the growth cycle at the National networks or Capex and then when we combine it with ion certainly.

A lot of that has to do with marketplace growth and sales execution. When we when we acquired the Capex networks I think nobody sort of understood that these networks were poised to begin to take real ratings points out of the audience. Mark you know out of the audience marketplace and share and then of course following that we'll share out of the national.

Advertising marketplace and that's exactly what we're seeing now is especially as consumers spend more of their time in EPS vide environments.

Brand managers marketers plan or is recognize that for them with their brands to reach large mass audiences. They will need to actually reach them through linear broadcast over the air television.

And this company will be poised to own you know seven networks at the end of a at the end of that that the acquisition with respect to our audience shares. So we're very bullish on the opportunity.

And John I'll take your second when I was talking about.

Local broadcast capturing share I was referring to the political so.

Campaign.

Headquarters in cities and things like that but then I think you know from radio and Billboard also I think the pandemic has had an effect on People's lifestyles people you know the two biggest day parts and radio or morning drive an afternoon drive yet there's a whole lot of people who are working from home and are missed by that opportunity same thing for Billboard those less people out commuting.

On highways and so I think dollars that.

You know would have been a allocated there.

We're able to come to local the other thing is I think its just important in my comments that it started earlier for us and so we were able to mold move dollars earlier in the cycle.

Thanks, Brian maybe one last related question you spoke to pack being about half of the total money what would that have been in 16 or 18, just as a reminder.

Oh, probably around the same share about 45% to 50% of the numbers just obviously on a smaller base.

Got it right great. Thank you.

Our next question comes from the line of Craig Huber from Huber Research Partners. Your line is open. Please go ahead.

Great. Thank you just some housekeeping questions here was the Retrans subs brought in a pro forma basis down say, 5% or so year over year.

Craig the rate of our Q2's jobs and again, that's our catch up was basically unchanged from Q1, so in about the mid 2% and really right.

Right on track with our seasonal estimates for Q2.

I thought.

Three months ago in your Guys' conference call you were talking about.

Down about 6% year over year net okay. Yeah that would have been that can I just shared with you kind of a quarter a view Craig on a year over year basis, I think were in line with our peers little bit less than 7% over the 12 month rolling.

A little bit better than seven you said.

Yes, less than 7%, okay, so six or seven okay. Okay I appreciate that.

Brian Your TV stations on a pro forma basis. The AD revenue should I assume that the local piece of AD revenue pro forma was.

Materially worse, the national how would you sort of bracket that.

Or do we just finished.

No I don't think you should makes.

Make that assumption actually local performed slightly better than national on a pro forma basis.

Okay. Okay, that's good to hear.

And then and again I think you know we've spoken on prior conference calls, but you know our commitment to new business I made I talked about this in the prepared remarks to our commitment to new business and I think were really a leader in the OTSG space right now is bringing new dollars in creating new revenue streams in local space and I think that's one of the reason.

That's why our local performance is outpacing our national performance.

And then on the National media side, the 20% more friction goal should I assume that you're thinking like that's like three years out of four are you thinking.

Hey, Craig, which we think will approach 20% for this year. So I think you're not we're not thinking three years out I think its it if things go well for the quarter as they've been going I think you could see it approaching 20% by year end.

Fourth quarter by this year for the margin you're talking but just some color.

Yes margin.

And then as.

As you think out beyond that obviously I assume you think this meaningful margin upside beyond that put aside the oil.

Acquisition stuff, which is a three legacy properties. They have in their right. Now do you think will be driving margins longer term.

Yeah, I mean, I think all are contributing certainly tightening has hired high margin.

When we bought title we were attracted to their high high margin Capex and continued margin expansion, especially as core TV just launched last year. It seems like forever ago, but it was really just last year and so we're continuing to see and Weve got some really great high profile.

Court cases coming up and then finally, you saw the impressive growth that movie had in the third quarter, 30% growth in the year of the pandemic in a global global pandemic in a recession. So I think its you know you're going to continue to see us hitting on all cylinders that certainly.

You know that those are the main drivers of margin expansion.

And then my final question on the financial side of things, what sort of long term net debt to EBITDA.

Target ratio you guys.

Looking to get down to.

Well, Craig Yeah long term it would be in the mid threes and I think we have and we have been consistent leasing that you know we're committed to having a strong flexible balance sheet and we would see somewhere in the mid threes.

As a good place to be.

Great. Thank you.

And ladies and gentlemen, if you wish to ask a question on today's call you May press, one and then zero at this time.

Again to ask a question on the call you May press, one and then zero.

At this time, we have no further questions in queue.

Sorry, My apologies, we do have the line of Dan a currency from benchmark come any your line is open. Please go ahead.

Hi, Thanks, Good morning, Hi, Dan, Yes, it's okay, and we were I think I was Kronos and we still have janedis today as well so [laughter], we're on a roll so far.

We know yet yeah, I don't know if that's a good or a bad thing. So so just one quick question going back either Brian or Adam just on on the Retrans just I know highlights a bunch of questions around this I just want to get a sense in just terms of expectations on a go forward we've heard some more.

Positive commentary like.

I think just around the potential for maybe charter to post another quarter positive subs in Q4. So just any any view you have on that and then Adam I want to ask you maybe Laura at pretty high level connected TV question that I think is important.

Yeah, I mean on the sub counts I would just look to what the NVS and the operators are reporting now remember that we report.

A month and a <unk> or a quarter in arrears and so we've been pretty pleased with their the stability that there that they're showing I mean, I think it's I think it's a.

Certainly an expression of stability in the in the sub marketplace. It appears like its returning to about what it was pre pandemic, which I think is good to see.

Okay. That's helpful. And then really good color on on margin guidance, obviously way ahead of expectations on national as much as I'd love to talk about the fact that you know kind of the legacy core broadcast business is just continued to file the gloom and doom expectations. There is an inordinate.

I'm not a focus on connected TV and I think you guys are uniquely positioned to kind of answer. This question I think Laura started to touch on this a little bit and we've been having some conversations around this the converts the concept of more targeted marketing the ability to effectively do dynamic AD insertion a split you know within it.

<unk> DNA kind of the AD and that's obviously a lot easier to do on connected TV, so with that backdrop to the extent that.

You can share you know how much of the business now is from connected TV, how much of it is that growing and how much.

Are you guys see a in terms of at least sort of an economic and delta between maybe a legacy solvent and what we would consider a connected TV set with US who you to or any of the other methods I think would be really helpful to outline the growth trajectory going forward.

Hey, Dan I'll take.

The first part and then I'll turn to Adam, but you know when you think about just the growth in connected TV deal.

<unk> across all of our platforms that includes local you know connected TV is about scale and we are well positioned to grow our scale across the enterprise really all of New Jersey.

Significant growth and rate growth is coming from me.

We're seeing more of that in local on I think as we move forward from an enterprise perspective.

Well be able to capitalize on the fact that we've been in these marketplaces for a while we understand that we understand them. We know how the technology works and so I expect that we'll see a lot of upside moving forward, but Adam do you want to talk a little bit about legacy Samson and.

Connected TV subs.

Yeah, I mean, I guess I would I would also just add there is incredible opportunity with connected TV as we move forward frankly, even in the linear space whether.

Whether you think about the transition in the industry and our company is making with FC Threed auto and the move.

Developed to improve yields both in our local and national media portfolios through both connected TV and OTI tea as well as through HCFC Threed out, though enabled linear television now that's a little farther off but I think that's where the business is going in the future and I.

It will portend to a significant economic opportunity to to maintain and improve yields and yield and cpms a little bit further down the road does that makes sense yeah.

Yeah, I mean, that's that's kind of what I'm getting at and then I don't want to belabor. The point here on something that I know is still relatively small but.

Whether it's partnerships with who live in you tube and working through trade desk or other third party I know you've got your own tech stack, but you know the kind of migrate or carve out inventory on connected to already improved yield and sort of positioning ourselves well for future growth and I don't think people are.

Taking into their numbers I was just curious how you're thinking about that understanding that its really early days.

Yeah, I mean, that's exactly how we're thinking about it actually well, while we focus a lot on Newsys journalism mission. It should be said that newsy is regarded in the otcs space as a leader in dynamic AD insertion and technology that that's that's really what I think help you know.

Bring about.

Political revenue that you saw a it's about the ability to target down to demographics psychographics, and certainly geography, as we always said that all politics and political AD spending as local and so how do you how do you develop $4 million $5 million of political in one quarter for a national brand.

You do so through dynamic AD insertion and we expect that we'll be able to take the the technology that we've developed and that has proven to power newsy is tremendous growth in the O.T. space and bring it to linear television for sure I mean, that's the way the business is going I think that will differentiate us. So when you sort of think about.

I love the opportunity with Scripps around both local and national a little further out we expect you know our national television networks business to be able to yield benefits as a result of laying this technology on AD sales and we certainly expect it to come to the local side our local.

Media Division hasn't made a huge deal out of OTV publicly, but we have really advanced the ball on generating new audiences and new impressions monetizing those impressions in the local media space and when Brian talks about OTI t., providing opportunity both for our advertisers during political to.

To go to and for our political dollars that's exactly what he's talking about every single one of our brands has strong audiences in the Otcs space right. Now we also have a multitude of advertising solutions that we bring to the marketplace Newsy as an example of that you know every one of our local local salespeople has.

The ability to sell not only the local inventory, but also newsy inventory along with partner inventory to create what we what we believe to be a significant opportunity at the end of the day, our advertisers know television is television and what they want is to make sure. Their ads are reaching the right audiences and we're now able to deliver.

Those ad to the right audiences through over the year linear television through our partnerships with virtual NBP. These and some dynamic AD insertion, we do there through connected television and through our own OTI EPS and that's the direction. This business is moving in.

Okay. That's super helpful. Adam I think it just really helps frame up maybe as much better core store in people are thinking on a go forward I appreciate all the color there.

Hi, good morning.

Our next question comes from the line of Steven Cahall from Wells Fargo. Your line is open. Please go ahead.

Thanks, Adam and lease I was hoping I could pin you down a little bit on the pro forma free cash flow accretion of 60%. So you're doing around 280. This year I think a lot of us had you're doing around 100 for next year. So call. It a 140 blend is that a good basis for us to use to think about that 60% accretion which would get to.

Or maybe something like 225 million on a pro forma basis, and that's a that's a pretty attractive free cash flow yield.

Hey, Steven Thanks for the question, yes. So the 280 this year, obviously on I think did you say that somewhere near a 100 next year did I hear you had kind of where consensus.

Yeah around 100.

Yeah, I would say that I'm in the ballpark.

The ability to put those two networks together from an AD sales perspective, how.

How should we think about the combined viewership trends there. Thanks.

Hey, Stephen it's Brian I can just speak to other kids networks, a little bit obviously court. He had some challenges in the third quarter and that there were no live trials, but we did develop a new live primetime show each night and that viewership was up 120% year to year. So.

We saw as you know now that its further deployed we saw a lot of engagement there just bounces up 5% and households, compared to Q3 of 19.

Bunch of original programming John Lewis Special the documentary with Michael Jackson that was multiple parts. Some original movies. There group was up 6% in prime time, 5% and households over prior year, a big shift and laugh when we launched how I met your mother, which premiered labor day weekend big audience growth there, but.

We saw the median age dropped six years to 49 years old So you're seeing continued growth on each of our our networks and Adam maybe I'll turn it over to you were.

For a comment on long island.

You are on mute.

You would think we would know by now we should we expect I on the audience to really perform in the same way we've seen in the national marketplace.

Yeah on continues to be a leader as we have said before it's the fifth ranked television network by audience I think that's surprised a lot of people and it delivers you know with the with incredible consistency a ratings that that come from its programming strategy and the really popular.

Crime and injustice genre.

I I you know on a on a go forward basis I would tell you with respect to the comments about how these things will will perform coming together, we've described $500 million in synergies those synergies are contractual synergies, mostly in the expense side, having to do with distribution I do believe there will be a.

Upside when we bring these businesses together and begin to bundle AD sales. So the <unk>. The case networks have long moved into the national advertising market as a bundled approach, but one of the things that I on hasn't been able to do because it's essentially a single network has been able to take advantage of participation and bundling you can.

See what happens in the cable and the National broadcast network marketplace. When they go to the marketplace with solutions that allow them to take greater share or all in all and I expect that to be able to benefit from that the other thing I would say is we placed a huge emphasis advocates networks on managing yield.

And pricing relative to both our use of direct response and the careful use of both the upfront and the scatter markets in order to maximize.

Advertising Guild, and maximize Cpms and so when we think about bringing some of that to eye on.

That's an incredible business thats done very very well, but we expect there is still opportunity and growth ahead. When we bring these businesses together in the national advertising marketplace for sure.

Hey, Stephen since you asked about audience I just wanted to mention that.

Something pretty material yesterday for core TV the judge in May George Floyd.

Okay. So Minneapolis wrote the order, allowing cameras and the court room for that trial, so that'll be a big events, obviously for court to be.

Great. Thank you for that update.

And at this time there are no further questions in queue.

Thank you Carol and thanks to everyone for joining us today have a good day.

2676, 890 international part it just depends May dial four zero to 970 0847. Those numbers are again 186, 620 710 for one and four zero to 970.

0847 with access code 2676, 890 that does conclude our conference for today. Thank you for your participation and for using ATM T. conferencing services you may now disconnect.

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