Q1 2021 Tegna Inc Earnings Call
Good day and welcome to the first quarter 2021 they had no earnings conference 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.
At this time I would like to turn the call over to dark cocoa Madden head of Investor Relations. Please go ahead.
Thank you Ed Good morning, and welcome to all and welcome to our first quarter 2021 earnings call and webcast today, our president and CEO, Dave Lougee, and our CFO, Victoria Harker will review <unk> financial performance and results. After that we will open the call for questions hopefully you've had an op.
Opportunity to review this morning's press release, if you have not yet seen a copy of the release, it's available Ed Tech net 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 may cause them to differ are outlined in our SEC fine.
This presentation also includes certain non-GAAP financial measures and we've provided reconciliations of those measures to the most directly comparable GAAP measures in the press release with that let me turn the call over to Dave.
Thank you, Doug and good morning, everyone.
As Doug mentioned during todays call, Victoria, and I will provide an overview of our performance in the first quarter, which was the strongest first quarter since becoming a pure play broadcasting company.
Record total revenues record advertising and marketing services revenues record subscription revenue record net income and record adjusted EBITDA, all while making progress on our debt pay down and growing our free cash flows.
And we expect continued growth as we look forward to the second quarter and remainder of the year.
As you saw in our release today advertising and marketing services were up nine 4% year over year growth was driven across markets from both traditional and traditional digital advertising, including our innovative offerings such as premium.
As well as continued expansion with more advertisers.
Victoria will provide more color on performance of individual advertising categories during the quarter shortly.
Premiums are first to market over the top advertising platform has continued to evolve and expand to best serve the needs of regional and local advertisers with further acceleration of growth. This year. We're now updating our projection for the full year with our new expectation that Ping, an will close out 2021 with revenue of 45% to 50% higher.
In 2020, our partnership with Great is also helping to drive premium that's already exceptional growth by expanding our local footprint and leveraging Gray's sales footprint.
Turning now to subscription revenues, which had been supported by.
By the improvement of sub trends to levels, we have not seen.
Since 2019 it.
It is down in the quarter less than 5% and closer to 4% in the most recent months.
Subscription revenue is where first quarter record up 16% year over year and are on track to grow mid to high teens percent this year.
The combination of contractual rate increases and our multiyear retrans agreements strong renewals step ups and improving subscriber trends has support this continued growth.
In 2020, we repriced approximately 35 per cent of our subs and will reprice and additional 30% towards the end of this year supporting our expectation for net subscription profits to grow in the mid to high Twenty's per cent. This year 2021.
As a reminder, we reached a comprehensive multi year affiliation agreement with NBC earlier this year for our 20, <unk> NBC markets nationwide, including 10 of the top 25 NBC markets. We now have clear visibility into future expenses through multiyear network affiliation agreements, which covered 94% of our big four subscribers.
Through the end of 2022 and beyond.
Turning to strategic and content updates from the quarter Kirkman is positioned to continue to leverage streaming growth in two distinct ways first through premium as I noted on the AD side and second by expanding our news and information entertainment content through screening platforms.
Last week, we participated our first ever Iab news fronts to showcase our digital marketing solutions, including premium to a large audience of advertisers and agencies more than a thousand people and engage with our newest friends session, including people watching lie to the eye based stream I E Bay stream and those who have strained at on demand and we will continue to.
But she can be reached seen on tech net dot com forward slash new fronts.
During our presentation, we announced new attribution capabilities for automotive and tourism clients to help them understand consumer behavior throughout the buying cycle.
For those unfamiliar with Teck and attribution it connects television and streaming viewing habits with outcome metrics such as website visits but also brick and mortar store visits now for example car dealers advertising through tagged and pay me on we'll be able to see how their media dollars are bringing foot traffic to their dealership and driving new car sales.
The second way, we're leveraging streaming growth is through distributing our content across OTT platforms.
In the quarter weighing to new distribution deal with Amazon for all our stations to provide on demand news on Amazon's news App on fire TV.
This is in addition to completing the rollout of fire TV apps for all of our stations during the quarter.
We also began expanding locked arms daily sports podcast OTT platforms, which is one of the opportunities. We saw as part of that acquisition. Specifically, we've launched video simulcast of sum of Lockdowns podcasts that are now available on our local stations OTT apps. We've also announced that we will launch a standalone OTT app for locked out later this year.
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Paul Studios podcast content has also expanded through our Amazon partnership with the entire volt catalog now available on Amazon music music.
And last week, we debuted our national verify brand building on a substantial growth of verified content on our station properties over the past few years.
Therefore, <unk> is dedicated to helping our public distinguish between true and false information by fact checking claims through research incredible sources without many talented journalists consumers can now text verified to submit any store a question they wanted verified.
Turning now to capital allocation, we have continued to deliver on the actions. We said we would take.
Last year, we communicated that one of our top capital priorities was to pay down debt. Following our temporarily increase leverage to finance our 2019 acquisitions. We've made considerable progress here ending the quarter at a net leverage ratio almost a full turn lower than we were this time last year and as we said before we expect to end the year at low three times.
Well below our 2020 year end level of 395 times.
We've also communicated that we will evaluate the most appropriate use of capital given the current market environment with an eye toward creating and returning value to shareholders again, we have delivered on this with our recently announced at <unk> 36 per cent increase to our quarterly dividend, which begins this july which closely followed our board's authorization.
Of a three year $300 million share repurchase program, which provides us the option to buy back shares will be determined it's most appropriate.
<unk> has strong business performance supports our growing cash flows which provides us the ability to return value to our shareholders through these capital allocation actions.
This flywheel is expected to continue as reflected in our second quarter and recently updated full year guidance, including our expectations for free cash free cash flow as a percentage of 2000 2000, I'm sorry, 2000, 22021 revenues on a two year basis to reach 21 to 22 per cent.
On the expense management slot side, we have remained diligent in cost containment efforts since the beginning of the COVID-19, expanding on the efficiencies, we'd established well before the pandemic.
We're still on track to drive out $50 million of recurring annualized savings. This year and will continue to generate increased savings through careful execution of cost and efficiency initiatives, Victoria will discuss our expense management initiatives in more detail shortly.
Our fourth quarter earnings call earlier. This year I provided you also with an update on some of the key actions that our board and management have taken to further installed diversity equity and inclusion in our culture here at Tetra day, Eni remains a top priority for our leadership team and we've continued to take steps to ensure that our broader workforce both reflect.
The communities, we serve and received the support they need to grow their career with Technip.
Well that folks focus in mind last year, we developed a first of its kind inclusive journalism program in partnership with diverse leaders at Turner and at the point or Institute, a leading nonprofit journalism organization. This program specifically geared to address unconscious bias in news reporting sources and content development.
Through training and third party audits.
All newsroom staff inclusive of news digital and marketing employees are currently taking part in this program and training throughout the year in 2021, and many have already habit and by the end of the year, everyone will and notably last Thursday in recognition of our actions and commitment to coverage and storytelling around racing and our quality.
Turning to receive six regional Edward R. Murrow Awards for an inaugural award this year excellence and diversity equity.
And inclusion.
We also took action at the beginning of this year to hold us accountable for making forward progress on inclusive inclusivity across stagnant as a reminder.
We have established specific measurable five year goal is to increase black indigenous and people of color representation and content teams news leadership and overall company management.
You can find additional information on these goals as well as our broader DNI efforts and accountability and our social responsibility highlights from website.
Before I turn the call over to Victoria to cover our financial results in more detail.
I think take a moment to thank all of our colleagues and journalists for continuing to deliver important impactful news day viewers are local markets across the country as local markets. We play a critical role in convening in facilitating important discussions around race inequality, and systemic and justice and our communities.
Techno journalists across the nation are helping us deliver on this role every day and making communities more tolerant of each other and making them more informed in every way and we thank them again for their dedication I'll now turn the call over to Victoria.
Thanks, Dave Good morning, everyone and thank you for joining us.
Dave discussed this past quarter was our best first quarter since becoming a pure play broadcast company in 2017.
Our record performance not only reflects the strength of taking this business model, but our focus on execution on all five pillars of our strategic plan.
As you've seen our disciplined M&A strategy has resulted in a strong portfolio of stations delivering on current synergies, while positioning us well to capitalize on future growth.
The same thoughtful approach to other aspects of our capital allocation ranging from our recently announced dividend increase as well as ongoing organic investment has also served to strengthen our balance sheet, while growing shareholder value.
Now turning to the first quarter consolidated financial results.
As a reminder, my comments today are primarily focused on <unk> 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.
You'll find all of our reported data and our prior period comparative in our press release.
As you saw in this morning's release, we provided guidance on key second quarter financial metrics, while reaffirming our full year 2021 guidance.
In addition.
We've shared our expectation for premium revenue to be up on a full year basis between 40, and 45% and 50% over 'twenty 'twenty.
We've also added more detail on the operational drivers of our projections I'll touch on our outlook on all of these categories later in my remarks.
But the first quarter total company revenue was up 6% year over year, driven by record first quarter advertising and marketing services as well as subscription revenues, despite being up against record first quarter political revenue revenue last year of $47 million.
Total revenues were up 41% compared to the first quarter of 2019 also driven by the impact of our acquisitions.
In terms of revenue stream growth here are some additional details on drivers.
As Dave referenced in his remarks subscriber trends have continued to improve with the rate of year over year decline in February the most recent month of reporting the best it's been since 2019.
Down mid 4% below last year.
Subscription revenue increased 16% year over year this quarter, reflecting strong make for retransmission rates for approximately 35 per cent of subscribers, which repriced in the first fourth quarter of 2020.
As a result of these rate as well as subscriber trend performance. We continue to forecast positive net subscription profit growth in the mid to high Twenty's in 'twenty, 'twenty, one and growth well beyond that too.
This growth in our high margin subscription revenues combined with our expansive political footprint provides us with a strong annuity like EBITDA and free cash flows as well as a clear view of the strength of forecasted trends well into the future.
Yeah.
Now turning to advertising and marketing services revenues, which produced a record first quarter.
As you know our Ams revenue served as a key growth driver to support our second quarter and full year 2021 guidance.
And that's finished first quarter up nine 4% compared to the first quarter of last year.
And notably.
Ams was also above the first quarter of 2019 pro forma.
First quarter Ams year over year growth was driven by both traditional as well as digital advertising revenues, including premium.
We continue to see recovery in non political advertising in many categories with strong audience metrics in both traditional and digital platforms.
To provide some further color on specific advertising categories performance in the first quarter. Most categories were up over last year, including auto services Health care home improvement Entertainment gambling insurance banking and finance packaged goods and education.
Automotive our largest AD category improved significantly up low double digits relative to last year.
Not surprisingly advertising categories, which continue to struggle, where retail restaurants travel and tourism given the ongoing impacts of COVID-19.
That said with vaccination levels, increasing across the country. We look forward to these categories continuing to prove improve over the balance of the year.
In addition to these positive first quarter trends advertising improvement is continuing a pace in the second quarter as well with Ams pacing significantly positive to last year with all categories up year over year.
In the second quarter of 2020 advertising was particularly challenged given the pandemic and business is being shut down across the country.
That said, we expect second quarter Ams to be up low single digits relative to second quarter 2019 pro forma.
Turning now to expenses for the first quarter.
Non-GAAP operating expenses were $528 million up 5% compared to the first quarter last year, driven by higher programming fees, including reverse compensation associated with higher subscription revenues in the quarter.
Operating expenses less programming costs were up less than 1% year over year. Despite continued investments in growth areas such as Premia.
Operating expenses less programming and premium went down fully 3% year over year as we continue to drive further operating efficiencies across the company.
Now to provide more color on the specific cost management initiatives, which Dave touched on earlier.
Our expense savings in 2020 of course included reducing all nonessential costs and discretionary capital expenditures during the early days of the pandemic in order to protect the long term health of our business.
However, it's important to highlight these measures were in addition to the ongoing streamlining of our processes and company wide cost reduction efforts, which we had begun well before that.
As discussed in our prior calls.
These have been underway for some time as part of our culture, a thoughtful cost management through operational leverage.
Examples of these efforts include it.
The successful integration of our one team Tech net sales organization, bringing national sales in house further upgrades and efficiencies to our centralized streaming center also known as Master control and a strategic decision to reallocate digital investment away from Commoditized products like paid media to focus on growth in video across the portfolio.
Including premium.
As a result of these efficiencies we've gained we've already achieved our 2021 $50 million annual run rate expense target several quarters earlier than we had planned.
These permanent expense reductions coupled with revenue growth investments will produce strong EBITDA margins and free cash flow conversion this year and for years to come.
As a result of all of these drivers we achieved a record first quarter adjusted EBITDA of $231 million, representing fully 32% margin this quarter and at 33% margin excluding premium.
As we previously discussed we are intentionally investing in premiums growth to take market share.
Adjusted EBITDA was up 9% year over year and up 51% compare to first quarter 2019.
Record first quarter, Ams and subscription revenues as well as these ongoing cost savings efforts all contributed to these strong results for the quarter.
I'd now like to touch on balance sheet and liquidity as we've previously mentioned, we've taken a series of proactive steps to further strengthen our balance sheet, even prior to the pandemic.
As you May recall in September 2020, we successfully completed a $550 million refinancing with an offering of senior notes due March 2026, opportunistically leveraging at historically low interest rate environment.
These proceeds were used in October 2020 to repay the remaining balance of the $350 million of 2021 notes.
As well as $188 million of our 2024 notes.
The unused borrowing capacity under our revolver stood at $1 $2 billion on March 31 of this year.
The only remaining maturities due over the next five years is the remaining $137 million of our 2024 notes callable at par in 2022.
Total debt at the end of the quarter stood at $3 5 billion, producing net leverage of 382 times or 377 times as defined by our revolver covenant.
As a reminder, this calculation excludes certain items such as stock based compensation.
The strong performance of our entire portfolio of stations supporting accelerated debt reduction during the first quarter 2021, allowing us to achieve our expected full year net leverage of three low three times by year end.
Obviously this leaves us ample leverage headroom under our only financial covenant related to the revolver, which caps leverage at five five times based on a trailing eight quarter EBITDA calculation.
Reflecting our strong financial results in 2020, including our reduced leverage S&P affirmed our double b minus credit rating in February while revising their outlook to positive given the strength of our balance sheet and operating trends.
Now turning to free cash flow, we've continued to generate strong free cash flow a testament to our financial model and our ability to carefully manage our balance sheet. We generated a record first quarter free cash flow of $159 million, 22% of total revenue driven by strong subscription and advertising revenues in the quarter.
Based on first quarter results, our second quarter outlook and improving trends. We recently increased our full year free cash flow percentage of two year revenue to be 'twenty to 'twenty, 'twenty, 1% to 22%, but a year 2020 2021.
As a reminder for your modeling based on our record 2020 results, we anticipate second quarter cash tax payments in the range of $120 million to $125 million in Q2.
Relating in parts of 2000, Twenty's historically high political revenues.
Just to provide a few closing thoughts on capital allocation before I turn to our second quarter and full year outlook.
As has been true throughout our history <unk> has remained prudent and disciplined in managing our capital and liquidity, particularly during this recent period of uncertainty.
We prioritize investments and continue to pay down debt, while continuing to deliver our regular quarterly dividend to shareholders.
Additionally, we recently renewed our share repurchase program, which includes an authorization of $300 million over the next three years.
Beyond that we recently announced a 36% increase in our dividend beginning in July.
As Dave mentioned, given our significant cash flow generation, we're carefully carefully analyzing our options for capital deployment, including returning additional capital to shareholders, while still continuing to pay down debt and evaluate any inorganic and organic investment opportunities.
On the M&A front each of the stations we acquired in 2019 have been fully integrated and are performing very well, including realizing the synergies associated with those acquisitions.
The same is true for our true crime network and Quest multicast networks, which we also acquired in 2019.
This is a true testament to <unk> ability to not only identify opportunities that complement our portfolio accretive to EPS and approximately nine months and immediately free cash flow accretive, but also to successfully integrate and execute on the synergies related to our acquisitions.
Now turning to second quarter and full year 2021 guidance.
In an effort to help forecast our near term results I'll now provide several key quarter ahead financial guidance metrics.
As a reminder, the second quarter of 2020 was most significantly impacted by COVID-19.
Therefore year over year revenue comparisons are favorable while expense comparisons will be less favorable.
But the second quarter, we expect total company revenue to be up mid to high 20% driven by growth in both Ams and subscription revenues, partially offset by political revenue last year.
We forecast operating expense in the second word increase in the low double digits per cent compared to second quarter 2020, driven by increased programming expenses associated with higher subscription revenue.
Excluding programming costs.
We've projected expenses to be up in the low double digit range. The majority of which is driven by premium growth.
For full year 2021, we expect subscription revenue to be up mid to high teens percent based on N V. P. D renewals completed at the end of 2020 and based on stable subscriber trends.
Recall, we will also be renewing approximately 30% of our subscribers during the fourth quarter of 2021.
The growth in subscription revenue is proof positive of our ability to work collaboratively with our partners to drive strong revenue and free cash flow for both companies, both now and well into the future.
As Dave mentioned after renewing our NBC affiliate agreement at the beginning of this year, we entered the year with a clear visibility into the strength of our big four relationships with network affiliation agreements in place covering 94% of our big four subscribers through the end of 2022.
We expect growth in 2021 full year EBITDA and free cash flow also continued to benefit from the significant cost reduction initiatives have been underway for the past 24 months.
As a reminder.
Here's an overview of our updated key full year 2021 guidance elements.
Corporate expense is expected to be in the range of $44 million to $48 million.
Depreciation is projected to be in the range of $62 million to $66 million.
Amortization is projected to be in the range of $60 million to $65 million Inc.
Interest expense reduced due to the benefit of our refinancings is expected to be in the range of $187 million to $192 million.
We expect capital expenditures to be in the range of $64 million to $69 million, which includes nonrecurring capital expenditures of approximately $20 million to $22 million comprised mostly of UHF VHF transitions as well as the continuation of our centralized streaming facility.
Our effective tax rate is expected to be in the range of 24% to 25%.
We expect to end 2021 with net leverage in the low three times absent any other uses of capital beyond do you feel in Virginia.
Finally, we expect free cash flow as a percentage of estimated 2020 in 2021 revenue of 21% to 22%.
Hopefully that additional color, we will provide you with greater context for your modeling.
And with that we'll now turn to Q&A to take your questions.
Okay. Thank you.
We'd 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 that eastern equipment.
Again.
<unk> one to ask a question.
We'll take a quick question from Dan goodness with the benchmark company.
Great. Thanks, good morning.
Strong guide guys just Dave.
Maybe on the pre beyond the start.
Comparable lately.
Just talk about the.
Drivers between Reis executed Bobby Cleveland up I know you've missed more local focus and it's more of a wholesale but rates between rate volume logos and I'm, assuming the predawn probably.
Oh, Great acquisition November just indulge expansion because that will target year end close type of thing Scott.
Alright.
Alcohol up out here.
Hey, Dan I couldn't hear the very last eight seconds question, just a little bit of break up on your phone was the very last thing you asked about Premier I, just said I assume the premium does not include expansion into various television stations, if they're not already covered.
Great.
That transaction wont close until the end of the year.
As it relates to calendar year 'twenty, one you mean.
Yes, yes, that's right I think what the stations that Gray has purchased once they close on those stations. They certainly become opportunities for a greater participation of further in premium but from a driver's standpoint, so a little bit of everything but the good. The best news is the biggest driver of the growth is local sales right because we do nicely on the national side, but it was.
Never the original strategic thesis of the business. When we created this four or so years ago. We always saw that it's really differentiated opportunity and what would we knew would be a.
Competitive OTT AD services, serving market once the streaming Paul streaming took off was that was local right and that's where the majority of our growth is coming.
And across multitude of categories because.
You can just imagine we've you know we've.
We have a broad list of local categories that are broader than the on the national side.
As far as rates and volume go.
That's dependent sort of on a number of factors and have a great answer to you on the rate piece, but I can tell you from a volume standpoint, obviously inventory just continues to go up.
With the tailwind of just.
The use of those services. So all the publishers, who we have we have relationships with their OTT inventory is going up just organically right. So we've got additional an additional inventory yourself.
Got it Super helpful. And then maybe just on the core side, Dave Your auto results clearly stood out.
It might be from comp in there, but it sounds like I'm going to assume that you are picking up.
Your top tier markets, maybe Tom.
Tapping into national inventory sounds like the Oems have been most of the advertising has been sort of at the national level, and obviously with the sort of the chip shortage here.
No other supply constraints, it's been more of a challenging ongoing category for the peer group. So maybe just some color around what you're seeing why you've been so successful and then maybe just sort of how you think it trends over the balance of the year.
Yeah, so taking the last 0.1st.
First you know I actually we're very pleased with it given the chip issue because there are up with real supply chain issues out there so and you're right. You think your thesis is right.
The fact that we're in large markets and large economically strong markets that have opened up like Houston, and Dallas, and the Florida, Tampa, Florida or the World Georges.
In Arizona that that you know.
We're in the we're in attractive markets for auto writ large right now in the current state of the COVID-19 reopening, but you're also right that we're doing much better with tier one and tier two.
As opposed to the tier three the local dealers because as we said before theyre spending balance sheet money to grab market share and even with their supply chain issues, knowing that when when that went inventory catches up with supply they're going to get a really good position.
I think it's tougher for the local dealers, which is a little bit more you know week to week in terms of money in money out, but I will say I think so do I will say auto is being held back by the supply chain issues. So it.
It really bodes well I think when they get solved.
Got it Super helpful. Just housekeeping, Victoria, obviously, there's some <unk>.
Peanuts in terms of the cash tax guide that year's unchanged can you remind us what the full year guide was for cash sorry, Yeah. Yeah. No. We were just pointing out the timing of it relative to the cash tax payments for the year remains the same.
Which was what for the year if you remember.
Yeah.
Oh, Oh, I don't think we've actually hold on with giving the effect when we get back yes, I'll go back to you on that day.
I'll get it offline that's fine alright, thanks, guys I appreciate you and John like I said may start here.
Thank you Dan.
Thank you for taking good next question from Alexia <unk> with J P. Morgan.
Alright. Thank you this is David Karnofsky on for Alexia.
And I was wondering if you could maybe just expand on the core AD environment more generally.
Good day 2019, adjusted for Nexstar Dispatch you know how much of your kind of ahead of those levels and then you touched on this a little bit with auto but is this the performance youre seeing kind of across the industry or is it more pronounced.
From the larger markets, where technical operator.
Yes, it's Ed.
David I'm going to ask you to ask the second question or second over again actually once you ask the second question again, I apologize a little trouble on either on your under my end on the phone, but I heard the first part on core to 19.
Sure.
A follow up to the question on core and trying to just get a sense of the strength relative to 19, how that compares in large markets like where techno operates relative to just the broader industry.
Yeah. So.
You know, we don't we don't guide specific numbers on core, but core would be down just slightly compared to 2019, so where does it. So the overall AD levels on core would appear not to be completely back yet, which is actually bodes well for the back half of this year as the economy continues to be made I think it is important to note that these add performances.
Our against this is not a completely reopened economy yet.
As it relates to your question, but I think I understand David Yes large markets are.
Performing better both in last year and better than 19, so on a comp basis large large markets are a good based on both years.
Comps okay.
And then with the new NFL deals.
First can you maybe discuss the significance of having the cartoon on broadcast another 11 years and then maybe secondly, I think Sunday night football in some afternoon games will now be available on streaming just wanted your thoughts on how you think that shift.
Potentially changing tegra is positioning with either distributors or your networks.
Yeah I appreciate the question David I think the I think the number one headline is what you said that the number one content to United States is going to be on broadcast flow next 11 years. So that I think that is the overall great headline for the industry. Obviously the issue of streaming is not entirely new rights of Thursday night football there'd been some simulcast of some weekend Gaye.
Ams on Yahoo, with Twitter in previous years, and stuff, which got very little pickup are.
You didn't ask me, but the Thursday night franchise, which has moved to Amazon I think Mike My peers at all agree they are fine with that because the Thursday night football was never good for affiliates because it took out a lot of local news inventory on non east coast markets and didn't end up being a great economic model. So I think for the same reasons I don't think my guess is the networks didn't play.
Hard for it so I think of that less is something of Amazon stealing something that is something that the networks didn't prioritize obviously the issue of having a simulcast of the afternoon. Aside from Sanofi Ballgames is not something that we're entirely thrilled about although not entirely new the games had been on the NFL had been in the Verizon App in the past and stuff like so this is Matt.
Not entirely new but.
It is something that to your.
<unk> is part of the value consideration and exchange with the networks on reverse compensation and I can tell you. When we did our NBC deal at the end of the year that was taken into account from because even though it has not been announced we were sure. It was coming relative to Peacock and so I think it just gets it.
It gets merged into the economic relationship between the affiliates.
And the networks and that's why it's important to have scale like we do.
With these networks.
Very helpful. Thank you.
Okay.
We're taking the next question from Vasily <unk> with Ken on body suits.
Thank you good morning, I wanted to ask you a bigger picture question about the premium so clearly the it's doing very well can you talk about what the competition looks like and how it's positioned versus the competition and do you expect the competition.
To go up obviously, if youre doing so well it has two right so and how would you be coping with that.
Yes, so we've always imagined to be a lot of competition in this space for good reason, because there's just a tremendous amount of players and a lot of inventory. So there's room for a lot of players right. So this is as I said on an earlier question. This is an expanding marketplace of inventory, but I think what's unique to US is the focus on local right. We've got we've got local sellers and 40%.
Of America, right and with our partnership with Gray.
We are close to 75% with our national sellers and it's the local piece right just like in the display business 15, 10 years ago, where a lot of the big players you know needed local partners to actually sell it like Yahoo did in the newspaper business instead of.
Having a third party seller have Kevin a commercial oriented we decided to create it ourself. So from a from a local standpoint, there is less competition and will be less competition. Some of the big players will try to get in there, but having our sellers and having a very defined proposition, it's not just pure programmatic play.
Where we've got you know we were the first to be tag certified in terms of security and fraud protection relative to a space, where there's a lot of room for fraud and.
And so having this direct relationship with our publishers and is it is it is a compelling proposition to our local lebron and national advertisers that does help differentiate us that said as we've said prior the market's moving fast and we will do we're always looking as to how we you know we.
This has been an entirely organic rebuild business to this point with very little M&A, but we're looking at we're always looking at bolt on acquisitions that can strengthen the business.
And also perhaps even further.
Strengthen our position in the marketplace those acquisitions don't necessarily need to be very large.
But just know we're not standing Pat.
Technology and competition will be for sure in that space, but we like our position today looking forward.
Thank you Tom would you mind, telling us who like the top two top three top three competitors are.
No that's not an easy question because it really depends on the marketplace. They have first of all you have the cable players right or selling their own TV everywhere category in the marketplace, you've got players like Hulu and others that are trying to get into the local side, probably Paul probably come to the large players in Silicon Valley, we're trying to get the space.
As well.
But right now I'd say, it's more.
You know the Mvpds and a handful of other.
Demand and sell side platforms that names you've heard of.
Thank you very much.
Thank you per se.
Thank you we're taking our next question from Stephen <unk> with Wells Fargo.
Thanks. So I think this is your first year in the new fronts was just wondering what maybe you learned from that process and if you can comment a bit about the trends are experienced there and one of the things we've seen in some other traditional forms of advertising like radio is inventory getting increasingly integral.
In the digital AD sales process was there any opportunity for premiums reached to extend beyond OTT and could we end up seeing some core AD sales done through some sort of a digital process.
And then sticking with advertising.
I think that sports betting theres been some articles that local has been a big beneficiary of it. So just wondering if you could comment on sports betting how much is it up on like a medium term sort of time horizon, and where you think you could go and then lastly, there was a little bit annoyed that the Tokyo Olympics could get canceled just wondering if that were to happen if that's a material.
Oh event for you all as it relates to any of your annual guidance. Thank you.
Well, that's a lot Steven got it alright.
So in terms of the Iab news fronts I don't have a lot of feedback on that yet actually those were early last week.
And so I still got to get it down a complete download on that so I can't I can't I mean, I know our teams very enthused about the response, but I'd be.
I don't have the the nuance to that to give you a fair a fair answer, but I'd be glad to offline.
Ladies is let me tell you later this week as it relates to premium on billing as to be able to expand beyond digital at the core.
I can't I can't say to that specifically, but I will say the team from the beginning has been very innovative and big thinking about the opportunities relative to what we can do you mentioned the Iab news front as part of the headline there was our attribution.
Rollout that we also announced early last week and that attribution does cross between OTT and linear core. So we're already we are bringing.
You know offerings to marketplace to do bring technologies to both as it relates to premium on being applied itself. The core. It's an interesting question, but those are the types of conversations that are going on all the time as it relates to sports betting and local yeah. It's growing really really fast I mean, it's gone fairly from for us.
Pretty de Minimis last year too a lot in the first quarter of this year and Ed.
And this is before opening up a lot of states and we've got a lot I saw a report the other day.
From a standpoint of there's a tremendous amount of space in our markets in our footprint that are moving forward. The most aggressive what I saw was Ohio.
And you know, Texas is now and if you're in Texas is a game changer for us on that topic. So.
If I may make sure I'm answering your question, then Steve, but yes, we see nothing but blue.
Blue Sky in terms of the growth of that category, which is already significant in this first quarter.
And just anything on the Olympics, all right and you have to buy to let you ask me about Olympics I don't know you know I've been reading everything you have relative to whether or not you think your question is what am I get canceled or not but it's immaterial to our outlook.
That's where I'm going so the next thing I was about to say is that.
As I've said recently, our central without acquisitions really starting with below Steve we are now much less.
Dependent on NBC and the sales of that have changed over the years and while it's good for our NBC stations. It takes dollars away from all of our CBS ABC and Fox in the quarter. So you know it's.
It is now.
It is.
You know the incremental Ams revenue was not that much and it's probably less than 1% of our total revenue for the year.
If it happens.
That's great. Thank you.
Oh.
Thank you we'll take our next question from Kyle Evans with Stephens.
Hi, Thanks.
I'll pile on with premium on here is there an opportunity to add another T V station group there you mentioned that with.
75% seems like 100 would be the goal there a.
Second question is the conviction that you have to grow the multi cast business. The true crime Quest and recently announced twist I'm interested to hear kind of your plans there and then lastly, Victoria. It sounds like you have excellent visibility on the network side of the Retrans equation and you spoke to growth going forward.
So we could get you to put brackets around 2022 on a gross basis.
Alright, Kyle I'll take.
Our premium and multi cast and looked at Victoria answer. The last question. So in terms of another group, yes. It is possible.
Im not signaling anything there, but it absolutely is potentially possible our multi cast we're always looking at the opportunities right. So we are in terms of our own footprint right. Now we're kind of now with the addition of twist where kind of.
Pushing the envelope of the amount of signals, we can press onto our spectrum, but that technology always continues to improve right with not to get in the weeds, but the kind of encoders that we used to be able to multiplex our signals. So as those encoders improve and if that technology allows for more offerings than we may very well do that but right now.
We're focused on a twist is just getting off the ground.
Quest, our second one is killing it UN fantastic and that we're very hopeful about twist in the same way. So yeah, we'll be looking at more opportunities potentially that we'd probably need a technology development here, which is not unlikely for that to continue to grow and I'll, let Victoria take the question I am sure that David is not going to let me give you 2022 outlook relative to that but we do.
Has that would be correct, yes, well [laughter].
Has that about 30% of repricing coming up at the end of this year as well. So it will be looking to give you some more guidance as the year progresses, but it would be.
Not very disciplined of me to give it to you before we even get into those negotiations yeah. Kyle just like last year, you know obviously we.
That's why we ended up doing that pre release in the first quarter is because we really couldnt give you a fair guide.
Especially with the NBC deal up at the same time, but with 30% of our subs up it's just more responsible for us to give you that.
After we do that but yes.
It will be.
There'll be an up arrow.
Okay fair enough. Thank you.
Hi, Scott.
Thank you for taking the next question from Doug Arthur with Huber Research partners.
Yeah. Thank you Dave.
It's been a little over a month since the Supreme Court.
Ruled on the third Circuit Court appeal I'm wondering.
In the week of that now and you've had time to talk to.
N B and your legal team.
What is sort of your summary of the significance of that decision.
Doug I think it's no different no I told you when we can.
<unk> talked before about it since the ruling first of all we still don't even have a new chair of the FCC named yet so it's unclear who's going to be driving it. So there's really not an FCC. The lobby at this point right I think that it remains because of the need so going back to that decision, let's let's let's focus let's just start on a real.
Positive about it and then with the Democratic FCC, the lack of clarity that relates to it. So the great news starts with the nine day nothing ruling by the Supreme Court takes effectively takes the Philadelphia Appeals court out of the oversight position of the FCC, which has been in the.
A way of ownership modernization for 20 plus years, Okay. That's the great news.
You know medium to long term for the industry.
The flip side of that is with Democratic FCC right now in current commissioners have been in the past have been.
Somewhat opposed to ownership of all types is that you know that.
That rule as it is written as it relates to end market.
You know allows for.
You know the ownership of two big fours in a market on a case by case basis, but it does not put the burden of proof on the FCC as to why they.
Wood rejected right. So so it's sort of a jump ball in terms of how that's going to get utilized in use so no not any closer than it was after the ruling frankly in 30 days to know where that might go and how that might go so which is why we're just trying to be.
Very measured and fairness to all of our investors about the timing of that opportunity, which is obviously a big opportunity for <unk> over the medium to long term, but we can't we don't have a lot of visibility in the short term.
Okay got it. Thank you and then just a clarification the revised.
Growth outlook for premium is that.
Is that.
Adjusted for the small amount of political you had last year or is that all inclusive.
It's all inclusive political was in last year's numbers. So your question's a good one because that that growth is coming despite we won't have the same political number this year.
Great. Thank you.
Yeah.
Thank you we'll take our next question from Craig Huber from Huber Research partners.
Yes, Hi, Dave.
Clear on my end.
You said, the Retrans subs were down close to 4% year over year better than the down 5% or so you've talked about previously can you just if that's true just quit.
If you would please but also more curious is there much discrepancy between the your larger markets versus the more midsize morpheus infrared follow up.
Yes, I'll take the second one first there's not the distinction there was on the market size that maybe there was a year or so ago I think although I think the small markets have continued to benefit from the rollout of the virtual mvpds, which weren't fully rolled out a year ago. So that's probably given them a little bit of an artificial boost in our mindset right now in the quarter, but.
So, but no because again, we're looking at net subs Craig.
So not a big market change and you're right to the first to your first question. That's right a signal that you know our most recent month and so we got two of the three months in the first quarter under our belt and they were both under five and the second month, which is February net I guess, we all know what the second month of the quarter would be.
Is downhole was closer to four than it is to five.
In terms of we hopefully if there is a there is and if there is a you know.
It's a small sample size, but in the <unk>.
Accelerating our rate of improvement.
And then also can you update us on the sports gambling.
But you may have in terms of gaming and gambling what percent of your core AD revenue was that.
Tom.
I assume it's not quite a top five category forward, maybe you could clarify that by stimulus Spyros do you think you'll get through eventually.
Yes, so you're right on both counts Craig it's not a top five yet, but it's not hard to imagine it being.
Not too distant future.
Okay, and then can you maybe we haven't heard you guys talk about this for a while <unk> three point, though the opportunity on that when that's going to be fully rolled out in all your markets et cetera, and I'm. Most curious to hear from you what do you think.
The business plan is from your standpoint helped drive revenue. So is there any material benefit it will be.
But to see them in your numbers and how long do you think it might take.
Beneficial so let me take the second question first because the answer is I think you need a pretty close to full national rollout before those business market start to evolve and you'll get it get displayed I also think and I'm just going to be the same answer Ed before I know I sound, a little bit like a robot on this but I continue to believe we are still a ways.
Away from that full national deployment, and given how fast technology is changing our our company's personal view is is that you know there's a lot of interesting business models out there discussing I mean.
Discussed relative.
Relative to data casting and a lot of other things, which we all think are interesting, but I think we've learned from.
New digital technologies and past experience that you know.
That things change fast and so we continue to believe that the best business model may be something that evolves from outside the broadcasting system, but it will benefit since we own the distribution and again I know I've I've used this metaphor before but again.
One of our strategy executives looks at it this way we look at ATSG, three Plano sort of like an iPhone. It's the platform right a lot of other third party money.
He's a very creative platform in this case, a built out nationwide distribution of IP delivery without latency right and we think that the best business model May come from third party investors and entrepreneurs, who will then come up with those ideas and like Apple as the owners of the distribution system will benefit.
As it relates to the rollout we've launched several large markets.
And this year, we're planning to you know we've launched.
Last year, we launched Tampa, Seattle, Denver, and Portland in March we added Buffalo right now we're currently planning to launch.
Another DC Charlotte Atlanta, and a few more TVD this year, but that still doesn't get to half our portfolio, but if they are big markets and it's moving quicker.
My last question, if I could for Victoria.
I just have to keep your cost outlook.
Excluding programming with or without premium for the second quarter.
I'm curious if you could talk but thats the full year. If you would just we get a sense of how much the cost on that basis may come back as we can.
Keep it all through this year.
Yes.
We haven't guided for full year, but we have said is that we had the $50 million expense takeout target on a year over year basis, and we had achieved it we expected to achieve it by the end of 'twenty, one and we are now about 12 months early on that so you can count on the 50 million take out year over year, but we have not guided full year expense beyond that.
Okay. Thank you guys.
Thanks, Craig.
We're taking our next question from Jim Goss with Barrington 30 sites.
Thanks.
I was wondering if you could talk about the sustainable post pandemic costs and expense savings from art and applications.
And.
I'll just talk about the post pandemic viewership and the impact in pricing if you get a greater share of younger viewers who Sam.
Sampled broadcasting.
Im sorry, Jim I had myself on mute, let me take the second one of those questions first one viewership.
I know theres been hi, Paul.
Publicity about cause some network events program being way down hopefully Oscars were way down, let's just point out nobody watch movies last year.
That maybe that had something to do with it and I know that some NBA noise, but now the NDA is back up but even on the leaving the network content on alone the local viewership looks pretty sustainable so far now it would be fair right. It's not it's not the nation is still not a back to work mode right. So that's how that changes and I've said in the past I think that people are staying at home.
Really affected local news viewership levels TV viewership levels negatively, but really improved our early evening news and our late news, which had been up on an average you know together early news in late news had been in aggregate about up 7%, but we'll see how the sustainable that remains but youre exactly right.
If that stays sustainable that will help us on AD prices, but we also really worked hard to take access to younger viewers and get them.
Having sort of what I would call a sticky relationship with them on our digital platforms, which you saw on 'twenty, we've aggressively rolled those out between you know verify is now ubiquitous on Snapchat as an example, and things like that rolling out our OTT platform is on Roku and things like that so we also are very hopeful we've got a given our digital growth in audience.
As we've got a new sustainable digital audience for other monetization as well so.
I think we're pretty hopeful on that relative to expenses I mean, the $50 million is permanent right. I mean, we are it's there are costs that we have taken out of our operations.
Through a number of different initiatives and that both were in place and things that we accelerated our new things we learned during the pandemic and I think we'll.
We'll be looking to find some significant.
Additional permanent cost take outs in 'twenty, two as well and I would just say that the management team has done a really great job.
And really embracing technological change so that we can do it in the ways that best reduces our redundant costs in a scaled company something I think we've always been very good at.
And while well not hurting and in fact reinvesting in things.
Things, where we make the value of the most which was is in product and sales.
Okay.
Or are you able to take out.
Maybe off this space more than people.
In terms of not cutting into the bone, but Cisco.
The excess yeah, yeah, that's exactly right that's our whole goal right.
People are the most important capital you have in this business more than way more than it was even 20 years ago.
We have gotten out of a number of leases already we had a major a major business operation in Dallas that was third party office space that were getting rid of and we are also getting rid of some other backend separate office space integrating those into our stations et cetera. So yes, we are reducing our real estate costs.
Okay, maybe one follow up I think you've talked about true crime a little earlier I was wondering how many markets.
That programming is in right now and how much time, it's in and is there a syndication of that.
Two are you keeping to your own stations.
No to the true crime network is deployed throughout the country I forget Jim I don't have the exact number but it's the vast majority of the country and quest is headed for similar numbers. So yeah. It's distributed.
Beyond our 40% its distributed on me, but double that.
In the rest of the rest of the country and quest is headed there too with the deal we've got with a very other large broadcasters, so and likely with some other large broadcasters, we sort of when called swap we have commercial relationships, but we can sort of help each other in distribution in markets, where we're not and so but its.
Distribution is large and quest is larger not as large but growing.
And I think we will get twist, there as well.
Okay. That's all I have pronounced thanks.
Thank you. It appears there are no further questions at this time I'd like to turn the call back to the who for any additional or closing remarks.
Well, thank you operator, and so thank you everyone for taking the time to join US today as I mentioned at the start of the call. We are very enthusiastic this year about our positioning for future growth and shareholder value creation this year and beyond.
The execution of our strategy as you've seen has resulted in exceptional results to date and our strong quarter and full year guidance reflect our confidence in the same for the months and years to come we look forward to continue to update you on our progress in delivering value to our shareholders and all our stakeholders, including our many local communities who depends on us and they are there to serve every day.
Thank you for your questions and have a great day.
This concludes today's call. Thank you for your participation you may now disconnect.