Q3 2021 Tegna Inc Earnings Call
But they are market to the third quarter of 2021 taken out earnings conference calls.
This call is being recorded our speakers for today would be Dave Lucci, President and Chief Executive Officer of.
Victoria Harker, Chief Financial Officer at this time I'd like to turn the call over to talk to Cook them and head of Investor Relations. Please go ahead.
Thank you and good morning, and welcome to our third quarter 2021 earnings call and webcast today, our president and C. E O Dave Lucci in our CFO, Victoria Harker will review take notes financial performance and results. After that will open up the call for questions hopefully you've had an opportunity to review.
This morning's press release, if you have not seen a copy of the release, it's available at <unk> Dot com.
Before we get started I would like to remind you that this conference call and webcast include forward looking statements and our actual actual results may differ.
Factors that may cause them to differ are outlined in our SEC filings. This presentation also include certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable gap measure in our press release with that let me turn the call over to Dave.
Thank you, Doug and good morning, everyone.
During the quarter techno capitalize on continued momentum across our business building on the trends that have accelerated throughout the year strong execution improve subscriber trends and broad strengths in advertising fueled another record quarter, We achieved records third quarter of total company revenue subscription and ever.
Retiring and marketing services revenues and remain on track to meet or exceed our full year 2021 financial guidance for all key metrics.
Our performance this quarter and expectations for growth going forward are the direct result of consistent performance supporting the five pillars of tennis value creation strategy as a reminder, or five strategic pillars are one.
Execute as a best in class operator to pursue accretive M&A opportunities, including Adjacencies three actively drive growth opportunities to organic innovation for leverage our balance sheet for value creation, and five generate strong free cash flow and make capital decisions that support our balanced capital allocation process.
These pillars surveys the north star far longterm businesses ins decisions and our strong results year to date or validation of our strategy and ability to maximize value for short shareholders and any market environment.
[noise] tutorial will cover a results in more detail, but to provide you with context for some of the highlights total company revenue was up 2% year over year, driven by record third quarter a M. S revenue in our records third quarter subscription revenue. These results stand for themselves, but are even more compelling when you consider the record $116 million of blue.
Revenue, we achieved in the third quarter of last year.
[noise] advertising and marketing services or M. S revenue was up 12% compared to the third quarter of 2019 on a pro forma basis.
Evil would excluding the positive impact of Olympics am at M. S was still up seven per cent on a two year basis compared to 2019 again on a pro forma basis.
Our advertising marketing strength and growth that premium put us well ahead of pre COVID-19 IMS levels more than offsetting current supply more than offset encouraged supply chain issues that are significantly impact any auto category and a M. S trends remains strong here in the fourth quarter as well.
Victoria will cover advertising categories in more detail, but I did want to highlight the broad strength the broad base strength this quarter had across even more categories, which supported our records third quarter Ams revenue sports betting is now our seventh largest category in rising growing more than 200 per cent over the third quarter of last year and we.
Expect its growth to further diversify our Ams revenue.
Online sports betting didn't exist in our markets three years ago, but has since expanded rapidly. We're down we've now got legalized online betting in 20 states that we that we reach and that will three more gonna be added in the coming months and our footprint with Maryland, New York, and Louisiana coming online in the coming months pre.
Premium or first to market and industry, leading OTT AD platform continues to deliver differentiated OTT solutions to both local and national advertisers. We continue to experience very strong growth in both revenue and the number of advertisers premium answers, we expect to see significant advertising demand growth over the next three to five years.
Schumer adoption and streaming grows and he gave out space.
Ongoing systems processes and technology enhancements are also driving operational and financial efficiencies at premium on as the business continues to scale.
Premium recently received two industry awards in the AD Tech category. During this the synopsis digital awards, including best audience base buying platform and outstanding brand safety, reflecting the value add solutions that premium provides to customers and an innovative and brands safe way.
Turning now to subscription revenue. This predictable revenue stream is a key driver of underlying growth and durability of our business model.
Subscription revenue grew 16% year over year in the third quarter consistent with a 16% growth rate we saw in the first and second quarters of this year net.
Net subscriber trends are showing improvement for both traditional and virtual of subscribers now at a rate more than 150 basis points better than year and 2020.
Last year, we repriced approximately 35% of persons Scriber at leading big for affiliate rates and we have an additional 30% of our subscribers up for renewal by the end of this year the.
The strong performance of our high quality local station brands continue to support our high margin predictable subscription revenue streams.
Our tech knows local and National program combination remains some of the most trusted and desired content across our 51 markets.
Sure He will cover a key fourth quarter and full year guidance metrics in detail, but I wanted to note that would have been dark with dish is October 6th dish subscribers represent less than 10% of our paid total subscribers and so despite the disruption as of today, we remain on track to meet or exceed all our key guidance metrics.
Techno stations also play a critical role in political marketing strategies as the preferred medium to reach targeted constituents in battleground states in every state across our platform.
Looking ahead to next year <unk> is setup to benefit from an expected record mid.
Mid term political advertising here and we have raised our internal estimates for next year quite a bit nearly all of the U S Senate and gubernatorial races that are expected to be the most competitive will be occurring within our footprint.
To provide some color on elections next year, we we expect Senate races, when our footprint in Arizona, Georgia.
Competitive Senate races, in Arizona, Georgia, Florida, North Carolina, Ohio, Pennsylvania, New Hampshire in Wisconsin half of which are open seats, where we expect significant competition, notably the Kelly seat in Arizona and the Warnock seat in Georgia are both repeats of last year's general election, and both seats saw historic Sir.
Spending levels at the local level, we expect to see more engagement for the upcoming gubernatorial races, given the heightened awareness of local issues due to the pandemic, including safety and education as well as anxiety around the economy.
Engagement and spending at the local level are far higher than they were four years ago and is evidence of that is this year's 50 plus million dollars of state and local off your spending we're gonna have compared to $31 million pro forma in 2017.
Now turning to capital allocation as a reminder, Texas best business mix is weighted towards high margin durable subscription and political revenues on it to your basis, which generate strong free cash flow augmenting as high quality cash flow is the continued momentum of Ams revenue driven by the broad based advertising strength I referenced earlier these.
Cash flows fuel our ability to return value to shareholders through thoughtful capital allocation decision, making.
We continue to expect to achieve the high end of 2000, 22021 free cash flow free cash flow as a percentage of revenue guidance of 21.5% to 22%.
As we announced in September are significant progress on deleveraging strong performance year to date and strength of future cash flows drove our decision to update the extended timing for completing our share repurchase program.
This comes on the heels of the significant increase to our quarterly dividend of 36%, which was paid in July and October.
We continue to be active in our approach to capital allocation and our board evaluates all additional cap allocation options to maximize value for our shareholders and as always we remained thorough thoughtful and our expense management efforts staying focused on generating incremental savings through our continued cost management and efficiency efforts.
Now to update you on several strategic initiatives underway of techno.
Since its launch in 2015 R stations verify reporting has fought misinformation and disinformation, helping viewers and users distinguish between true and false information.
During the quarter verify continued to expand across platforms now averaging more than 5 million unique monthly visitors year to date through September and is on a significant pass up this represents a 90% increase in monthly visitors from the same period last year.
Locked on our leading local sports and podcasts network with daily shows for all Big for professional sports leagues and major College programs also continue to grow during the quarter podcasts were downloaded Andrew are viewed more than 75 million times you to date through the end of the third quarter of 36% increase over last year locked.
Locked on now also has a large video presence with more than 90 shows on Youtube and the network recently expanded its original video content with the launch of an insider's program.
Retired professional players.
For now to our ESG efforts, we continue to make significant progress on a diversity equity and inclusion objectives and are ahead of schedule and progressing on our 2025 goals. As a reminder of these quantifiable goals were developed in 2020 and publicly disclosed disclosed at the beginning of this year and they hold us accountable for increasing black and.
Digits and people of color representation across our content teams content leadership and management roles.
We take seriously the important role we have in ensuring our coverage and storytelling reflects all of the communities. We serve are innovative inclusive journalism program is designed to help us accomplish this too unconscious bias inclusive reporting and leadership training.
Equally important is measuring that progress and to that end. We are working with an independent research firm to audit or broadcast digital marketing content across all of our 49 newsrooms by the end of this year. These audits provide actionable feedback to ensure we are making continued progress on fostering a culture of inclusivity and representing the.
Diverse communities, we serve and again hold us accountable.
R stations and journalists were honored last week at the Edward R. Murrow Awards, and we're especially proud of the team at WWF in New Orleans, who received the large market excellence and diversity equity inclusion award for the talk look at the Black experience in New Orleans. This is the first time. This award has been granted by the arty DNA and where.
Proud that our WWF as the inaugural winner in total techno stations receive 10 National awards more than any other news organization in the United States.
Delivering news that matters and speaks to the heart of each of our communities is at the center of each and every one of our newsrooms. We're proud of the determination and resilience of are engaged employees that enable us to fulfill our mission every day and they do it well and with that I will now turn the call over to Victoria. Thanks, saving good morning, everyone as Dave just discussed our third.
Financial results included record third quarter total revenue driven by subscription revenue and amps revenue yes.
His performance reflects the ongoing resilience and growth generated by our business model, resulting from strong execution across all five pillars of the strategic plan.
As you've already seen our continued strong financial and operational performance provides us with multiple capital allocation opportunities, which we are already being pursued in parallel given are very strong cash flows reduce leverage and resulting firepower.
This is evidenced by several recent announcements, including our plans to accelerate share repurchases on an opportunistic basis, and our previously announced 36% increase our dividend all all continuing to make investments in both traditional broadcast as well as OTT products and platforms.
All further address our future plans for capital allocation in more detail in just a few minutes, but first let's take a look at the drivers of our third quarter financial performance.
As a reminder, my comments today are primarily focused on taking this performance on a consolidated non-GAAP basis.
Provide you with visibility into the financial drivers of our business trends as well as our operational results you.
You can find all of our reported data and prior period imperatives in our press release.
But the third quarter of total company revenue was up 2% year over year in line with our previously announced guidance range.
As a reminder technique she'd these historically high third quarter results, which are even stronger than the same quarter last year, despite being up against $160 million a record political AD revenue last year.
To provide you with additional color on our strong revenue performance during the quarter Harrison details by category.
Third quarter subscription revenue increased 16% year over year, driven by subscription rate increases from renewals and contractual right escalators in existing agreements.
As a reminder, a multiyear network affiliation agreements, which encompass approximately 94% of our big for subscribers begin their next renewal cycle at the end of 2022, continuing through the beginning of 2024.
As you've seen these renewals continue to provide a clear line of sight into the financial trajectory of these high margin revenue streams.
Third quarter record Ams revenue finished the quarter up 22% compared to third quarter last year, driven by broad base strength across nearly all advertising categories.
Notably when compared to 2019, and a pro forma basis third quarter Ams was up fully 12%. Despite the ongoing supply chain issues impacting auto industry and other sectors.
Third quarter Ams revenue did benefit from several Olympics, though not significantly given both pandemic and time zone challenges.
Excluding the estimated incremental impact of the Olympics Ams was up fully 7% compared to 2019.
Now to provide you with some additional color on how the key advertising categories perform this quarter.
Am's show gains across most categories supported by strong advertising demand.
[noise] all categories were up double digits over last year with the exception of automotive advertising. This.
The strength Nami's above 2019 was broad based including services healthcare home improvement sports betting insurance banking and finance packaged goods and education categories.
Beyond this the advertising market continue to strengthen the fourth quarter Ams also pacing significantly ahead of last year with all categories.
Again, except auto year over year.
More notably when compared to the fourth quarter of 2019 amps is up as well.
We expect these positive trends to continue supporting strong and accelerating Ams revenue in the fourth quarter and into next year.
Now turning to expenses for the third quarter.
Non-GAAP operating expenses, where $545 million up 6% compared to the third quarter last year, driven by higher programming fees and premium on growth related expense.
Excluding programming costs and premiums non-GAAP operating expenses were up 2% when compared to the same quarter last year driven by revenue growth.
On a pro forma basis operating expenses without the impact of programming and premium we're down 2% below 2019 level.
Reflecting the ongoing impacts of or efficiency automation and expense reduction efforts.
As a result, our third quarter adjusted EBITDA of $244 million was down just 6% year over year, approximately $15 million driven by the absence of record $160 million high margin political revenue seen in the third quarter of 2020.
Compared to the third quarter of 2019, adjusted EBITDA with up fully 56% driven by the growth in Ams revenue and that subscription profits as well as the continued execution of thoughtful expense management.
Adjusted EBITDA margin was 32% this quarter.
Turning now to our balance sheet, which continues to benefit from discipline expense management and thoughtful capital allocation decisions.
As I mentioned earlier now that we've achieved the debt reduction targets. We established after closing or 2019 acquisitions, we have a number of additional tools to create ongoing shareholder value and a track record of doing just that.
More organic and inorganic investments dividends and share repurchases.
Taken it ended the quarter with total debt of $341 billion, producing net leverage a 339 times more than a full term below last year, achieving our previous full year guidance of low three times by end of year, one quarter earlier than planned.
We expect to end the year with net leverage of approximately three two times.
As a reminder are only financial covenant is related to our $1.5 billion revolver and we obviously have plenty of headroom under it's five five times leverage cap and do not have any debt maturities remaining for several years.
Create further balance sheet efficiency and reduce interest expense, we plan to refinance the remaining $137 million of our 2024 notes at the beginning of December using funds available under the revolving credit facility.
This will reduce interest expense by approximately $4 million in 2022 and is neutral to net leverage.
Even with this straw we continue to have plenty of capacity under a revolving credit facility, which provides us with significant financial flexibility as of September 30th there was more than $1.3 billion of unused borrowing capacity under our $1.5 billion revolver.
As you seemed throughout our history, we continued to generate strong free cash flow driven primarily by our high margin durable subscription and political revenue and the thoughtful management of our balance sheet.
We achieved free cash flow of $137 million in the third quarter.
As a result, we are not only reaffirming our 2000 22021 forecast of free cash flow as a percentage of revenue of 21, 5% to 22%, but now fully expect to achieve the high end of that range.
As Dave mentioned earlier earlier this year, we meaningfully increased a return of capital to shareholders through a 36% increase in our quarterly dividend, which was already paid in July and again in October of this year.
As a reminder, we also updated the expected timing of are opportunistic $300 million share repurchase program in September which will complete one year earlier subject blackouts.
As we've discussed before we will continue to assess capital allocation options through the lens of maximizing value for our shareholders. This includes expanding our audience reach and services to support customers across all of our local station brands and platforms.
To this and we continue to evaluate all opportunities, including organic and inorganic investments quarterly dividends and share repurchases, all while continuing to reduce our leverage to target levels as we have done throughout our history.
As you saw in our third quarter release, we provided guidance financial metrics for the fourth quarter and remain on track to meet or exceed our full year 2021 key guidance metrics.
To help model other near term expectations. We've also provided several fourthquarter financial guidance metrics in our press release, including the following.
For the fourth quarter, we expect total company revenue to be down year over year mid to high teens percent again, driven by the absence of $264 million political revenue.
Partially offset by continued growth Ams and subscription revenue.
We expect operating expense in the fourth quarter to increase in the low to mid single digits percent range compared to the fourth quarter of 2020, driven by increased programming expenses associated with higher subscription revenue.
Excluding programming costs, we expect fourth quarter operating expenses to be flat to down here every year.
For full year 2021, we accept we expect subscription revenue to be up mid to high teens percent based on Mdpv renewals completed at the end of 2020 as well as improving subscriber trends.
As a reminder, we repriced approximately 35% of subscribers in the fourth quarter of 2020, and approximately 30% for subscribers are up for renewal in the fourth quarter of this year.
For full year 2021, EBITDA in free cash flow. We will also continue to benefit from the more than $50 million of targeted annualized cost reduction issues that have been underway for the past 24 months with more to come in the quarters ahead as we continue to expand on these efficiencies.
Turning now to an update on our 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.
Interest expense is expected to be in the range of $187 million to $192 million.
We expect capital expenditures to be in the range of 64% to $69 million, which includes non-recurring capital expenditures of approximately 20% to $22 million.
This is comprised mostly of UHF VHF transitions as well as the continuous continuation of Essentials Asian of our streaming facility.
We continue to forecast an effective tax rate in the range of 24% to 25%.
As I stated earlier, we've already achieved our year end net leverage target of low three times and expect to close out the year at approximately three two times.
Finally, as I mentioned earlier, we expect to achieve the high end of our 2000 22021 free cash flow range of 21.5% to 22%.
Altogether, we expect both the fourth quarter and the full year to finish with the same strength and momentum as we've seen all year.
I will now turn the call back over to Dave for a few additional remarks before we take your questions. Thank you Victoria before we turn to Q&A I want to address one topic, but I am sure you are all interested in.
As we stated in our press release on September 21, we have received and the board has been actively considering acquisition proposals were carefully evaluating these proposals against our standalone prospects.
Meanwhile, and importantly, our team remained sharply focused on the continued day to day execution of our business and strategy as evidenced by the strong quarter. We've just reported as I'm sure you understand that is all we will say at this time, so we won't be taking questions on this topic during Q&A and with that operator could you. Please now open the line for questions.
Thank you and if you'd like to ask a question. Please signify pressing star one on your telephone keypad again.
One to enter the queue.
We will now take our first question from Dan Colonel of the Benchmark Company. Please go ahead.
Great. Thanks, Good morning, maybe just obviously will supply cheese then.
Focal points can you guys just touch a little bit more as we go into the queue or just.
Obviously furniture other smaller categories being impacted but it sounds like it rises for settings, largely offsetting that all those needs a little bit worse, just maybe talk through.
With a little bit more granularity kind of what you're seeing in your expectations and also if you are anticipating any impact on the premium business.
Hi, Dan Yeah, as it relates to the fourth quarter actually we still see the broad growth against all our categories, except Otto and Otto with I would not say is getting worse I mean, it's just it's been bad all along here for quite some time, so don't see any real movement, one direction or the other on auto or remains negative but.
As I said about the third quarter is true with the fourth to everything else is up so as far as supply chain issues hitting anything else, we're not really seen impact and we're seeing nothing notably just good trends like including including retail.
As it relates to premium yeah premium on his premium onto doing great, but yes, it's auto is a big category premium so.
It's been impacted too obviously not quite the same way dimensional or just given the tailwinds of premium is a business, but every advertising businesses affected by Otto in premium is definitely.
No exception to that but premium is doing fantastic.
[noise] got it.
Super Helpful. And then your Q3 political was.
A pretty big number of days or non political year, obviously, we all saw what happened in Virginia, and New Jersey.
I know that you will not at this point in time color on any lemons for next year, but just how do we start thinking about the read through.
You gave us some sort of state by state color, but this relative to 20 quantity how do we think.
'bout Rudy grew for your expectations.
Well, let me start with the Big picture and then I'll go a little granule about the Y so when the on the what I would say look.
All the trends show and I will talk a little bit more about the law and a little more granularity all the trend show just more record engagement right, Virginia was just another example of that so when we look at all forecast out there are trends. This year just on fund raising on a comparative rates basis to four years ago. We're reviewing it now that used to be.
You compared mid terms of midterms in presidential to presidential and that's still the case, but we're not going to be surprised if the amount of spending an ecosystem next year is not that far south of 2020 now what that will mean exactly for US is all a function of footprint and what state is go cold and go hot but as I've said multiple.
Pines, we've got all the competitive Senate seats, I mean, I think we've got.
Up next year. This is our big governors here alright, So we've got we have a.
I think we've got nine seven under the nine competitive seats.
And the Governor side, and we have a total number of races on the governor of.
24, right so.
I am sorry of 2024, and we've got seven other noncompetitive and we've got 24 Senate races too and.
Nine of them are listed as competitive and we've got almost all of those so it is a great footprint for us, but the other thing I think really matters is when you're talking about this year's political that's not really being driven obviously, the Virginia Governor's race was big but that's not the big driver of our growth over four years ago. It's it's local stuff valid issues for instance.
In Maine for instance of clean Energy initiative was.
Neck and neck with the Virginia Governor's race for the top spending in the quarter and I think the reason for that I touched on it briefly and my my script and my remarks scripted remarks.
Just think about it from what's happened since 2019 Covid.
Totally engaged a whole new population local local races. They have been engaged in national races, before but after Covid and you saw this Virginia Governor race. The school Board the district Attorney right. The every every elected local officials in Georgia, it's going to be the secretary of state given all the election issues to have that kind of.
Energy and and spending didn't exist in the in this decade right, but now people have been woken up to the importance of their local local governments. So I think we're going to see an enormous long tail.
Of local spending beyond the same frothiness, we're going to see in the competitive.
Federal seats.
That is really helpful color J, thanks for all of the incremental granularity.
Thanks, Dan.
We'll take our next question from Arthur of Hebrew Research. Please go ahead.
Yeah, Thanks to questions.
Dave.
President Biden finally made a couple of nominations the FCC.
Any kind of.
Thoughts on.
The personnel would it means how the nomination process goes and what the implications or regulatory if they are approved down the road.
And then I got a follow up yeah.
First of all I, probably use this opportunity to to first of all.
Just congratulate commissioner Rosen, where cylinder nomination as well as.
Gigi sewn for her nomination as well I think in this in political environment would read recently, it's unclear how that nomination process is going to go I think that.
There's some speculation that Republicans will perhaps oppose the the new commissioners nomination presumably.
Mm.
Commissioner Rose and we're still won't have problems with the chairs, but there is I think some uncertainty over in the near term what the commission is going to look like what it's going to be two two or even two one or something for a period of time. So all that does is put a little more uncertainty in the process for a period of time, Doug So I think.
It doesn't provide in the near term a lot of clarity.
Around anything.
Okay, and then and then on add categories listening to Fox last night, obviously, they called out sports bidding.
Which is a big platform for them, but they also talked about travel we're getting better have you seen that as well.
Yes, yes, same with entertainment too. So these these COVID-19 impacted categories.
Are definitely coming back nicely in fact, we're seeing some of them above even 2019 levels.
Okay, great. Thank you.
Yep.
We'll take our next question from Tim Cough Barrington Research. Please go ahead.
Alright, Thank you a little bit more of this political Dave.
Yeah.
Some were speculating that can in Virginia for example was.
Maybe a little bit more centrist than some of the extreme positions to come out and maybe that's been appealing to candidates no sort of curious if you think that if if there is some more in moderation a little more centrist.
Look in the country, rather than the divisive issues. We've had lately if that would have a negative impact on your political spending because it might not be quite as contentious as it has been recently.
I would disagree with that Jim I think the young can race is a prime example of that he definitely as Republicans go with the centrist and Mcauliffe is whatever you believe mcauliffe is and yet the spending was through the roof. So I think that.
Even even with centrist candidates, it's a it's a fight.
It's an incredible excess apparently it X essential flight for each party to win the seats. So.
No I don't see that as from.
Okay. If anything do you have any comment yet if anything Jim it might be the opposite right. If either party runs a fringe candidate and makes erasing noncompetitive right then it's.
That hurts us from a spending standpoint, so both parties put up people closer to the center then to the wing of their parties. That's a good thing in terms of spending because it makes the races more competitive.
Alright, well, maybe the next conference call you might.
I assume you're looking at all of these individually.
Triste in here you're on sites.
Right Okay.
On the sports betting issue, that's a brand new category and I know, it's coming in with the absence of a lessening of the traditionally a very strong category an auto.
But can you define.
Define at all how that's affecting you know.
Cpm's.
In some ways, a new category realists, having political come in where the issue is.
And supply for those AD spots in the impact on pricing.
And it sounds like this is the early stages of emerging that that way.
Maybe you could speak to that.
Potential yeah, I know, it's a good question Jimmy look it's any the end of the day pricing is a function of the aggregate demand right. So how many dollars are in the system and it's very much that we're a little bit like airline pricing. We've got this is an industry, but as a company, especially been very sophisticated over the gotten much more specific over the years about yield management relative to pricing so any.
New category that comes in and adds dollar to the system is absolutely a positive on on Cpm's.
Just as the the temporary departure of auto was a negative so but the it's really about the net so when you have the bottom line is when net advertising is up you can presume that cpm's are up as a result.
Because of the overall overall supply and demand equation, but yes, best sports betting has been Ah a very good thing for the ecosystem and and.
It has.
A lot of very nice upside.
Mmm.
Okay and finally, just one quick follow up on premium too.
Are you still looking for additional partners.
As you try to expand the reach to 100% of the country.
Yes, we as we've said in the past and say when they were searching for them, but we are open to them, we do have inbounds.
But we're also we bug Gray Gray is Ben is and has been a tremendously good partner and we're still on boarding more of their stations in there with their Meredith acquisition will be adding more stations to their footprint relative to what we're doing so we are we've got some organic ads from our side going on through their acquisition.
Alright, thanks much.
Thank you Jim.
And as a reminder, if you'd like to ask a question. Please signify pressing one we'll take our next question from Craig humor of Hebrew Research partners. Please go ahead.
Thank you we start with some housekeeping questions of what could you talked about political which are pro forma 2018 political $280 million.
The case.
Yes, exactly right Greg.
Okay Cool and then net retrans in the past, Steve because we've talked about you expected up mid to high.
Twenties this year to confirm that appreciate it and also maybe a preliminary outlook for net retrans for next year.
Yeah. So we don't we don't we don't guide quarterly on on net Retrans will update you on that soon but it's doing very very well and as for next year is since we've said we've got a number of deals up at the end of this year like we did last year, we probably won't be guiding on net retrans until after the first of the year, Craig, but yes, it will be up next year.
Sorry, I was talking about full year 21, the mid to high twenties is that still the case you're expecting.
Yes, we'll be close we will be close very close.
So just to understand the real dish, you're not thinking it's gonna be a material impact.
So to your overall outlook for retrench, reaffirm that or urinary retransmit the bottom line the right.
We simply said was simply said is understood stick with what I said was simply is that as of today all.
All of our key guidance metrics remain on track.
Okay.
I believe last quarter, Dave you told us that your net Retrans subs were down the low 4% in the second quarter year over year, what was that number in the third quarter. Please.
Now closer to the mid threes Craig.
And it's a combination of traditionals.
The decline of traditional so slowed a little bit for us.
And the virtual conversion rate is now higher so there's sort of more virtual players. You also include in virtual CBS, all access which is.
That's that's got some growth, but some of the other.
Some of the other providers are doing very well too so on the virtual side. So it's just a combination of the two an overall sub trends right now.
Down mid <unk>, which is as we said about a point and to have better than a year ago.
And I would like to ask a premium on if I could in the past we've talked about you thought it could be up 45% to 50% of revenues. This year is that still your expectation.
Click that to some number perhaps below that and how much was it up in the third quarter. Thank you.
Yeah, we don't we don't give we don't break up quarters Craig's. So it just it was up very nicely.
And the answer is we continue to shoot for 45 to 50 and.
A lot of money comes into the fourth quarter like it does on the personal side of the business. We don't have exactly the week to week visibility to premium and the way digital is built.
But we continue to believe will do very well.
Great. That's all I have thank you.
Thanks, Greg.
We'll take our next question from client.
Please go ahead.
Hi, Thanks.
Just one quick kind of follow up on legalizing sports betting what do you think we're in.
And is there is there a kind of a land claim like.
Like that goes on that you think will taper off in the future. How do you think that kind of demand for advertising will look longer term. Thanks.
I don't it's great question I don't know exactly long term, but I think if it was just to stay the way. It is today in terms of products than you could say, there's a there's a battle for customer acquisition that may be tapers off after four or five years, but I think there's going to be new products right. I mean, I think even though we have online gambling today, we really don't have lie.
<unk> bedding much and have lives betting gets more and more.
Consumer adoption and with the technology providers too I think that's potentially.
Another growth engine to the whole sector, but.
But it is a good question, but yes, I think at some point overtime years ahead. There is the customer acquisition Battle, Michael down a little bit.
But we don't have visibility to doesn't certainly not anytime soon.
So early evening.
Early innings, that's right remember to you got a tremendous number of.
You got a tremendous nothing less than half of the states have legalized online and for US that includes Texas.
Which is not on which right now is not on board for 22, but just think about that since we're in 87% of the state and obviously a very sports passionate population. So I think my own view is this will be like state lotteries 30 years ago, It's only a matter of time till states do it.
Thank you.
This call.
We'll take our next question from Steven Wells Fargo. Please go ahead.
[laughter].
Thanks, and I joined a little late so sorry, if any of these.
Have our repeats, but maybe versus a follow up on Kyle question on sports betting I'm wondering if you look at this at all on a per household basis kind of like you might be with political because obviously, you've got some sensations in places where it's not legal yet. So I'm. Just wondering if you have any metrics on the kind of per household advertised.
And sports betting today, and then to help us think about that opportunity as to as to where that could go.
Over time.
Yeah, I don't I don't maybe members of our team may have.
So I'm getting feedback on the call my the only one hearing it on my the only one.
Sounds good to me you guys to find them. Okay. Good then I'm the only one here.
You know we look we look at it from the standpoint of GMA, which is basically a proxy for households, right. Obviously, so we do look at it that way there may be members of our team that are.
Analyzing to per household basis, I haven't seen it but again market size as a proxy.
Think there are we're trying to I think get figure out what type of Psychographic and agent demo characteristics.
Our predictors of whether a market might get more than others, but so far what we see a market lights up it's very hot.
That doesn't seem to be.
Very very much so I.
I guess, what I'm, saying is it.
Suggest as it pretends that it's probably pretty similar per viewer by market.
Yeah.
And then I think the queue for guidance for non programming costs flat to down any view on maybe what nonprogramming expense does.
In the in the next year or so taking a lot of costs out of the business, but I imagine some <unk> going to start to come back. So how do we think about that that.
And I'll, let Victoria to take that one yeah. I mean, obviously, we're not ready to guide relative to next year, we have a number of industries that continue to.
Expense reduction efficiency automation kinds of things I don't know they would rise to the level of the 50 million annual takeout that we have previously but a lot of those will continue in there in the base business, obviously offset a little bit by Covid.
Covid related teeny kinds of impacts, which do come back as we everyone starts to traveling.
But we will never it will never go back to <unk> levels, we had pre Kobe Bryant.
So we have we are definitely as we have mentioned in previous calls we've got a lot of built in permanent efficiencies. We learned through Covid that will be maintained and just remember we've brought on board new <unk>.
Verify other types of.
Which have come on board last year. So they will also be contributing to expense.
With revenue production that didn't exist last year.
Great and the last one for me kind of a sticky one on the dish blackout I think it's rare to see one during football season, certainly one of any duration.
Should we expect that may be dishes using your acquisition interest will go but against you to try to like things out and get a little bit better deal or just any other commentary that would help us frame with the risk and opportunity is on that renewal. Thanks.
Yes, even I am not obviously going to comment done in negotiation or speak to the motivation of the other party to negotiation other than I would say.
Blackout two additional unfortunately are not uncommon as I think is very well known right apparently that 200 stations whacked out in the last year over time, so it's not.
It's not as rare as potentially it should be but.
Otherwise, we're not going to comment on a negotiation.
Okay. Thank you.
We will now take our next question from Paris, and the Congress of Tcf Fox. Please go ahead.
Okay great.
Thanks for taking the question.
I wanted to ask about the auto headwinds and really just to get a sense of how big of an impact.
That is if there's any way to give us a sense of how much as a percent of AD revenues.
<unk>.
And a supply problems have impacted your advertising if you were to compare auto that you're seeing now versus maybe 2019 before the pandemic and everything got unusual how much of a percent headwind is that with the thought that when Otto normalizes, maybe that could come back.
Well I put it this way.
Absolute dollars.
Martin, but for <unk> in the third quarter.
I think we reported right we're up.
20.
21% in 2022%.
Pro forma it's 22, but X auto that would be if Otto was just normalized would be plus probably close 2029.
Okay, Great that's helpful and then.
One kind of follow up on the.
Kind of a local presence of your television stations I was wondering if you could comment on the audience trends in local news with the fact that that is obviously key kind of support for things like political.
And for your franchise and the new cycle has been through some gyration between.
Kobe coming in easing.
And the.
The economic and kind of political thing so what can you tell us about the news audience trends at this point.
Yes, obviously those vary by market both in terms of station performance in the dynamics of the market and what the local issues are but obviously, we did see an incredible surge.
In the heart of Covid writes them for that March to sort of September time frame in 2020, and then some of that pulled back as frankly, the and the heightened local news issues sort of dropped out a little bit people started one morning going back to normal a little bit then an adult diverted came back things deep pullback and there is some clearly are daytime numbers varied by that.
Morning News is continues to be down because so many people are still working from home and working on a different time frame, but that's actually benefited the late news cast, especially in our 10 o'clock news market's so we see different trends between 10, and 11 o'clock news cast but.
So it has changed a little bit the mix and remains to be seen what that will look like you know because I don't think we're ever going back to the way it exactly was pre COVID-19, but all the topics I mentioned to you last year relative to local issues in your elections next year will also be a driver of interest in those newscast I didn't used to be the case as much but now you see those low.
Opal issues the like the school board issues that were so prominent here in northern Virginia, and the Virginia gubernatorial race, I think you're going to see that become a massive.
Culture War political battleground next issue next year and that is good for local news ratings.
Okay. That's helpful. Thank you very much.
Thanks pardon.
Okay, I think that's so cute.
Okay, Yes, I would like to hand, it back to you day for any additional or closing remarks.
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<unk>. Thank you everyone and have a good day.
Thank you that concludes the call. Thank you for your participation you may now disconnect.