Q3 2021 E W Scripps Co Earnings Call

November 5, 2021

Ladies and gentlemen, thank you for standing by and welcome to the Scripps third quarter 2021 earnings release Conference call. At this point all the participant lines are in a listen only mode. However, there will be an opportunity for your questions. You may queue up for a question at any time by pressing one then zero on your telephone keypad.

You may withdraw your question at any time by repeating the ones Gerald Command as a reminder, today's call is being recorded I will turn the call now over to MS. Carolyn Micheli. Please go ahead.

Thank you John Good morning, everyone and thank you for joining us for a discussion of the E. W. Scripps company's financial results and business strategies, you can visit Scripps Dot com for more information and a link to the replay of this call.

A reminder, that our conference call and webcast includes forward looking statements and actual results may differ factors that may cause them to differ are outlined in our SEC filings, we do not intend to update any forward looking statements we make today.

Included on this call will be a discussion of certain non-GAAP financial measures that are provided as supplements to assist management and the public in their analysis and valuation of the company.

Metrics are not formulated in accordance with GAAP and are not meant to replace GAAP financial measures and may differ from other companies uses or formulations include.

Included in our earnings release are the reconciliations of non-GAAP financial measures to the GAAP financial measure as reported in our financial statements.

We'll hear this morning from Scripps President and CEO, Adam Simpson, Chief Financial Officer, Jason Combes, local media, President, Brian Lawlor, and Scripps networks, President Lisa Knutson.

Also on the call as controller, Dan Persky now here's Adam.

Good morning, everybody and thanks for joining us as we report another quarter of outstanding results.

10 months into scripts this transformation into a fully different kinds of television company investors need to know we are operating from a playbook. Unlike anything else in the broadcast sector in.

In fact, we have become much more than a local broadcast company. Instead, we are a full scale TV company that will deliver outstanding near term results as evidenced by our financial performance and also are well positioned to succeed in the evolving TV marketplace.

While we operate a high performing results driven and fully scaled local broadcast group. That's just part of the new script story.

The other part and what distinguishes us from our local broadcast peers is our national networks business and our focus on aggressively serving the TV consumer of today and tomorrow, we are delivering them what they want to watch however, they want to watch it.

As we move towards the end of the Scripps networks first year. This division is accounting for about 40% of the company's revenue and closer to 70% of our segment profit.

And the networks have helped us to once again increase our 2021 free cash flow guidance.

We entered the year expecting $210 million to $240 million, but now we expect to close it out between 255 and $265 million.

This is free cash flow that will be quadruple our last non election year free cash flow performance of $64 million.

The scripts transformation into a fully scaled television company has made us more productive and far more durable or new asset mix is delivering outstanding results and positions us to capitalize on the future of TV.

And of course, our new free cash flow profile gives us an even faster path to paying down debt than we had as a smaller scale TV company.

In light of the changes we have undergone this year I'm encouraging media investors to evaluate Scripps as much more than a local broadcaster. We now have access not just to local and select national advertising, but also to national advertising from the general market upfront and scatter as well as the burgeoning.

Direct response marketplace.

Now, we absolutely expect to benefit from the continued growth of retransmission revenue on the back of significant repricing opportunities ahead for us and while Retrans will account for about half of our local media revenue. This year similar to that of other broadcasters it will be less than 30% of our total company revenue because we have.

Banded into new marketplaces, where we have significant opportunity for share growth.

Ever since we began remaking this company several years ago, our guiding principle has been to identify consumer media habits early and get ahead of the trends to create value.

We will continue to profit from the important role our local brands play in the pay TV ecosystem.

But consumers have many more viewing options now and those new TV marketplaces also have opened up significant value creation opportunity prescript as investors.

You already know we're the leader in free over the year television. This is a compelling marketplace that has grown to about 40% of U S television households, and at any one time almost 30% of over the air viewing nationwide is happening on our scripts owned network or local channel.

Our leadership in over the air is a cornerstone of our strategy.

And consistent with our consumer focus we are also growing our scale through our local and national media brands in the connected TV marketplace.

<unk> all of our local media brands are available through the major CTV platforms, and creating meaningful new revenue from them. In fact connected television revenue helped local media this quarter deliver industry, leading core revenue results.

On the network side Newsy in court TV already have nearly full CTV distribution down.

Bounce in ion are now moving into the CTV space and over the next six months, we're methodically, adding most of our other national networks onto key platforms as well.

These moves open up revenue opportunity in the important fast growing connected TV marketplace with immaterial additional expense and thus attractive margins.

Scripps is playing today and all of the television marketplaces, our programming distribution platforms are diverse and relevant our revenue streams are also diverse and growing our profitability stems from efficient cost structures and operating leverage that provides a scalable platform for growth.

So while we have much in common with our local broadcast peers and we love our local television business. We hope investors can appreciate the differentiated value creation scripts is executing today.

Those of you, who know me well know I love My analogies well to stretch our popular analogy a little further at Scripps, we're changing the tires on the race car as it goes around the track we've upgraded the engine and all the while our quarterly results show that we've also been able to slam our foot down on the pedal.

To increase the speed.

Now here is Jason.

Thanks, Adam and good morning.

Before I start just a quick reminder, about our earnings tables from February 26, which provide an illustrative look at both local media and the new Scripps networks divisions for the full year of 2019 and quarterly periods of 2020 my comparisons today will be on that adjusted combined basis, you can find our as reported results in todays.

Press release.

Let's begin with the local media results for the third quarter.

Local media core advertising revenue was up 18, 5% in Q3 and total revenue was down 15% due to the presidential election last year.

Political AD revenue for Q3 was $7 million compared to $96 million in the third quarter of 2020.

Local media retransmission revenue was up one 5%.

Local media expenses increased less than 10% over the year ago quarter segment profit for the division was $65 million.

Turning to the Scripps networks Division revenue for the third quarter of 2021 was $227 million up 18% from the prior year and above our guidance of up mid teens.

Segment expenses rose, 11% over Q3 2020 adjusted combined results.

Segment profit for the networks was $83 million as a reminder, we have guided to a sequential decline in segment profit and margin because of the expenses tied to launching newsy and two other networks over the air.

Shared services and corporate expenses were just under $18 million in the third quarter.

The company realized Q3 income from continuing operations of <unk> 49 per share.

We had a $33 million gain on the sale of our Denver television station building, we took advantage of the strong real estate market to unlock value with a plan to move to a more functional space.

This and restructuring cost of about $2 million increased income from continuing operations by 25 per share.

As of September 30, cash and cash equivalents totaled $106 million.

That amount includes $34 million from the sale of the Denver building that will be restricted cash until January.

We paid down an additional $50 million on our 2028 term loan during the quarter for a total of $500 million in voluntary debt paydown. So far this year and we expect to use excess cash to continue paying down debt in future quarters.

Our net debt was $3 2 billion and our net leverage remained at four seven times per the calculations in our credit agreements.

With our new cash flow profile, and our 2022 political AD revenue outlook, we expect to move our leverage into the low four times range next year.

Looking ahead I'd like to give guidance for a few key areas.

We expect total local media revenue for the fourth quarter to be down in the mid 20% range. That's because we took in $137 million of political last Q4.

We expect core AD revenue to be up mid.

In the mid single digit percent range.

We expect Q4 local media expenses to be up in the mid single digits percent range.

In the Scripps networks Division, we expect Q4 revenue to be up in the mid teens percent range in comparison to adjusted combined results for Q4 of 2020.

Networks' expenses are also expected to increase in the mid teens percent range.

We continue to expect the networks division to deliver a full year margin of at least 40%.

Q4 shared services costs will be around about $19 million.

Finally, as Adam explained we have raised our 2021 free cash flow range again, it's now 255 million to $265 million and now here's Brian to talk about local media.

Thanks, Jason and good morning, everybody for the third quarter, we're very pleased to be reporting industry, leading local media core advertising revenue that even surpassed our performance in the third quarter of 2019.

This year's momentum in core advertising accelerated during the quarter driven by significant new to television advertising demand for our connected television advertising products and the rise of the sports betting category.

Excluding auto all of our top 13 advertising categories saw year over year growth.

Our largest category services was up 13%.

Travel and leisure move to our second largest category in the quarter up 220% due to spending on sports betting.

Retail was up 6% and home improvement was up 18%.

In addition to a strong AD market, our core revenue is being bolstered by our success, capturing new to TV advertisers.

Last quarter I told you we brought in over 1000, new advertisers.

In this quarter, we again had over 1000, new to television businesses advertising, who have been developed by our local sellers during the pandemic.

Across our footprint, we are focused on maintaining a strong and consistent effort to bring new business to local TV and effort. We expect we will continue to pay off.

Scripts also benefited in the quarter from the return of viewers to major league sports televised events.

For the NFL, having fans back in the stadiums seems to encouraged more fans to tune in from the couch.

And the return of strong NFL ratings has been good for our advertising dollars.

In addition scripts collected more than $15 million from the Summer Olympics and the NBA finals.

That is a very good story and totally contrary to past concerns that sports viewing on linear television was declining.

Turning to political advertising, we continue to track reports that show record levels of political fundraising for next year's election, especially this early in the season.

The Scripps footprint includes five highly competitive U S Senate races, in Arizona, Florida, Nevada, Ohio, and Wisconsin.

As well as a highly competitive governors races, with open seats in Arizona, Kansas, Maryland, and Virginia.

And we have at least 20 competitive U S house races, with the nation's highly charged political climate expected to continue through next year's elections forecast call for another record spending year nationally and we expect the same at Scripps.

Our retransmission revenue outpaced our expectations again this quarter as we continue to gain more virtual mvpds subs than we had modeled.

We are pleased with the ongoing growth and monetization of the virtual subscriber households, as part of the pay TV universe.

Finally last month scripts announced a $10 million investment in the esports company Misfits gaming.

As investors are aware people are spending much more time and money on esports and gaming and the companies involved in esports are essentially media companies.

For scripts the commercial opportunity comes from the content Misfits is creating for its fans and connecting our advertisers with misfits audiences.

I'm representing scripts on the Misfits Board as we developed key business areas and content and sales will continue to update you on our esports partnership as it evolves now.

Now here's Lisa.

Thanks, Brian and good morning, everyone I'd like to start this morning with a brief overview of the Scripps networks activities. Since we created the division just 10 months ago.

I am extremely pleased with our progress in all of our key business areas.

Here are some highlights for the third quarter, we've achieved year to date revenue growth of 13% and we expect to outpace our initial expectations of 10% growth this year.

We completed a very successful upfront season, with new business, representing about 25% of our upfront dollars realizing significant ad rate growth and growing overall dollars by more than 20% above the ion encase upfront last year.

We created an efficient and effective organizational structure for Scripps networks Division that was designed to achieve the synergies we identified when we acquired ion <unk>.

And we are still on track to deliver exactly what we promised for this year.

We launched three networks over the air and all nine Scripps networks reach more than 90% of U S television households.

Finally after months of preparation, we launched our popular streaming news network Newsy over the air on October one.

We hired about 120 journalists opened 14 Newsy bureaus, most co located with our local television operations.

Set up at 24, seven news programming lineup created a master control operation and built in Atlanta studio and our existing networks building.

Newsy has already delivered on nearly all the connected TV platforms and has realized tremendous success there with its nonpartisan opinion free and fact based approach to reporting the news.

We are now very pleased to be bringing new Z to everyone with a television computer or mobile device.

Turning to our revenue performance, our third quarter was up 18% over our third quarter of 2020 adjusted combined results.

General market advertising grew about 15% during the quarter and we're seeing significant spending across multiple Scripps networks from top national advertisers, including Procter and Gamble, Johnson, and Johnson, Google Pepsi and Big pharma.

Direct response grew more than 20% in the third quarter, driven by categories, including insurance health and beauty healthcare and pharmaceuticals.

Looking to the fourth quarter, we expect another strong performance from direct response led by health care open enrollment period, we expect Dr to account for nearly half of our Q4 revenue.

More than 30% of our Q4 revenue will come from the upfront dollars, we booked during our very successful upfront season earlier this year commitments.

Commitments from the Upfronts lay a very strong foundation for our revenue growth for the quarter and for next year.

Just about 12% of our revenue for the fourth quarter will come from the scatter market.

On the programming front in the third quarter, we saw every scripts network post and improve share of viewing and its specific key demographic group on a total day basis.

In addition, overall our networks captured a quarter of all viewing over the air in Prime time through September.

This ongoing viewership performance illustrates script leadership and the over the air marketplace.

And we're capitalizing on that leadership by seeking out the best rate, we can capture from anywhere in the national advertising ecosystem.

In addition to our dominance over the air the Scripps networks are making significant moves to gain scale and conducted television distribution.

Through the first half of 2020, we are initiating an aggressive launch schedule for most of our networks on CTV platform. For example balances already launched on the fast service, Samsung TV, plus and will be available on seven more streaming services between December and February.

Ion is on Samsung TV, plus <unk> watch free service and we will launch across a number of other platforms and this spring.

We expect to add both grid and court TV midstream on two major CTV platform next year.

And as you know Newsy and court TV are already significantly distributed on CTV.

During the third quarter, our connected television revenue grew 50% over Q3 of 2020, and we expect that to be just the beginning of our revenue growth trajectory and expanding CV CTV marketplace and now operator, we're ready for questions.

Thank you and once again, ladies and gentlemen, if you would like to ask a question. Please press. One then zero on your telephone keypad and you may withdraw your question at any time by repeating the one zero command and freshman lineup of Dan <unk> with Benchmark company. Please go ahead.

Great. Thanks, good morning.

Phenomenon networks results I think and then into Q4 kind of running contrary to some of the maybe other.

And takes we've heard in the marketplace. So maybe two questions for me first Adam you talked and lethal you talked a lot about expanded.

Distribution channels, I guess can you help us sort of some.

Is what's left to do out there obviously you have coverage, but in terms of getting incremental distribution either.

Kind of the breadth that you still have available to you and subsequently the impact that you see that having on us.

What are your blended CPM as you get the opportunity to get into a more dynamic AD insertion environment.

Well I'll just start there and then I'll ask my follow up.

Yes, so I think theres a couple of things there to unpack in terms of OTI distribution as I said were.

Each of our networks are fully distributed 95% of the country, you'll see that we'll continue to expand that even over the course of the next several years and really optimizing that distribution across all of our network. So thats number one.

When you are 95% distributed we still have we still see some growth potential there.

And as I mentioned in CTV, we see that as a big growth area for next year launching <unk> this year and ion.

Ion plus already on Samsung TV and launching most of our network over a CTV platforms over the course of 2020, and we see that as a really big growth area not only for us in networks, but for the company and Adam you may want to touch on CTV growth for the company as well, yes, I mean more broadly.

See expanding our scale in CTV is a critical component of CTV.

Cpm's are as you know Dan.

Measure is higher than what we've seen in the linear space. There are limitations, obviously to the ability right now to test.

Sell some of it but we expect that our focus will be on continuing to push forward all of our national brands onto CTV platforms really all of the CCP platforms, where we see critical scale and we're already there on local and I mentioned during my prepared remarks that our focus on CTV is enterprise.

Wide, but our local media division has been aggressively pursuing CTV distribution and aggressively bringing CTV products to our advertisers, we really see the ability to serve our advertisers with connected television eyeballs as core to what we do with the <unk>.

<unk>, we already serve them with and.

Having the right products.

To bring to them and ensuring that we're able to to help them meet the needs of their campaigns.

I think really pay dividends for us.

Got it that's helpful. And then just to be clear I guess, Lisa obviously, we heard some commentary really for the first time that I can remember.

Like Viacom was willing to be flexible and pushed upfront dollars out of Q4 and possibly into Q1, even though we all know those are firm commence and there is no cancellation.

It doesn't sound like that's an issue for you guys. If anything you've kind of highlighted incremental CPG spend in your commentary. So if you can just talk about the dynamics there that if youre seeing anything on that front, yes, yes.

I would say from an upfront perspective, we laid in a good foundation and we're not necessarily seeing any cans.

Cancellations there.

We did see.

Like others across the industry.

Lack of visibility I would say into the scatter market, we quickly shifted some of that inventory out of scatter and into Dr. Dr. In the fourth quarter is going gangbusters and so it was really on.

And move on our part to continue to maximize yields across our network.

Got it yeah. That's helpful. Your guidance very strong for Q4, so thank you for giving us the dynamics on that I appreciate the color.

Thanks, Dan.

Next we'll go to Michael Kaplinsky with Noble capital markets. Please go ahead.

Thank you and good morning, everyone. Congratulations on a strong quarter and good Great Guide anyway, I just wanted to.

Think about it.

New broadcast standard 83 Pardo.

I'm wondering if it's a friend or faux for the national networks because.

Obviously, we have the ability potentially to have additional spectrum and then ability to launch additional networks.

To fill this spectrum and I'm wondering if that potentially could create a glut of advertising and so forth on Nashville networks, just kind of give me your thoughts on how you see things unfold and of course, we are.

Looking a couple of years down the road, but just your thoughts on how the networks would perform as we see the ability to launch.

I have more of a national networks.

I absolutely see it as a friend the reality is we have such a leadership position today with respect to distribution that.

We've built a scalable platform and were we to have the opportunity to expand into additional networks for us. It's a matter of essentially almost flipping a switch, especially given how much of the spectrum, we actually own as a result of the ion deal.

So recall that.

You can be in the multi cast space, but in order to actually efficiently monetize your networks you have to have enough scale to both take them to the national advertising marketplace and ideally get them Nielsen rated the fact that we were able to launch three networks. This year true real defy and.

Z instantly to more than 90% of U S households, I think gives investors a clear view of the competitive advantage. We have given the ownership of spectrum and were we to choose to bifurcate or to expand that spectrum with additional <unk> III <unk>.

Abilities. It would actually just lead to additional revenue opportunity for us with very minimal expense.

Got it thanks for that color.

My other question is about.

Auto advertising I know that we obviously know all about the chip shortage and so forth.

But maybe Brian do you have any visibility from from the dealerships or when we might see that kind of.

Transitory environment kind of move to a better environment in terms of product coming out to the market and the prospect of seeing advertising I mean, certainly it doesn't sound like it's going to happen in the fourth quarter, but do you have any visibility as we kind of look to the first quarter next year.

Hey, Mike It's Brian.

Yes.

Clearly the chip shortage is creating inventory challenges for local dealers.

The good news is that local dealers and many of our markets are still advertising, whether it's used car or just keeping their brand out there or pushing the models they have.

They were not far off from flat.

The third quarter the individual dealers.

The primary decline is coming from the dealer groups and the manufacturers and I think that will be consistent through the first half of next year.

I expect that the individual dealers will remain active but I think until product starts rolling out and it does vary a little bit by brand. We are seeing some brand starting to get some cars back.

We've seen some of the foreign brands that have done better managing our having access to chips. So it really depends.

Brand to brand, but if I had to handicap. It I think that the first half of the year will probably still be soft from the manufacturers and the dealer groups and I think individual dealers will continue to.

To be active.

Alright, thanks for the color that's all I have thank you. Thanks.

Thanks, Mike.

Next one line of Steven Cahall with Wells Fargo. Please go ahead.

Thanks, Good morning, maybe.

Maybe first just on CTV AD I'm just wondering if at some point you might give us any data on what your digital revenue is and we've heard that there's been a little bit more cost in stack and CTV just because of the competition for things like home screen. So I'm curious how youre thinking about stack as you try to drive more viewership.

On to the CTV networks, like <unk> and others as you build that part of the business.

Well right now we see it is entirely upside.

Lisa described our plan and we've got a matrix that she has provided US we can't provide it to you but that literally as a roadmap for an aggressive rollout schedule moving all of our brands into the CTV space and so the first order of business is for us to get all of these premium programming channels with no.

Mental expense to move into CTV services, and and begin then to really do the customer acquisition and the first thing is distribution and then to do the customer acquisition. So that we can put our brands our premium channels in front of people and then of course to monetize it.

I still see this space is very immature I expect significant growth ahead, we're not going to break out our CTV revenue for now, but I would expect that youll continue to get significant color from us.

In local and national on the efforts, we're making in the CTV space as I said. This is an important component of the future of television, we're very focused on serving audiences and advertisers everywhere theyre going to be and so you should expect us to aggressively move our brands and our business into CTV.

In order for us to improve our operating leverage in that space and we see it as an opportunity for us actually to enhance our margins over time.

Okay, Yeah and then.

Jason I think we've had a few free cash flow upgrades recently I assume we can just expect those to go on every quarter, but seriously I'm curious what's been outperforming your expectations as you move through the back half of the year.

So the free cash flow move has really been driven just by the strong rebound in both the local and national marketplace. You know the revenue rebound throughout the year has been the catalyst that's driven that so it's really been sales execution and strong strong rebounds in the market that's driven the free cash flow guidance to two upgrades at this point.

Throughout the year.

Great. Thank you.

Thanks Steven.

Our next question is from John <unk> with Wolfe Research. Please go ahead.

Okay.

Thank you Adam I expected more analogies I may ask this but based on how you let them, but let me just start with when the streaming services talked about adding NFL games to the platforms. There wasn't really a lot of concern on what it can mean for the broadcasters and so.

A couple of months and can you share what you're seeing and if theres been.

Any impact to speak of on the business and then separately.

If the supply conditions across the market.

I guess increase does Dr provide a hedge relative to what the broader market might see and is there a way to maybe talk to growth youre seeing in Dr relative.

Relative to everything else in the segment.

Thanks for the question.

So look I mean, right now for the here and now I think Brian gave you. Some good color on the impact we're seeing today with NFL higher ratings across the board. That's obviously good for our advertising rates and for the marketplace.

Relative to the 2023.

Contract I am actually elated by what we see in the new NFL contract with respect to the way. The NFL has sort of engineered their distribution I think they've engineered their distributions. So that it can have their cake and eat it too they are both going to maximize their distribution opportunity for them financially on digital platforms and more importantly for us bring more football back to.

Broadcast so first having more football and ABC is going to be good for scripts given our portfolio makeup. That's that's just basic but more broadly as a company that's focused on growth of the OTT marketplace I couldnt be more excited about the NFL decision to maximize their distribution back over the year the 2023 call.

<unk> is really going to be a catalyst for the further growth of over the year, because next year cord cutters and cord nevers, they're going to have two choices for football. The first choice, they're going to have is going to be to sign up for multiple different subscription services, and then try to navigate when and where to watch their games on Sunday Monday and Thursday.

And we just see that is confusing and clearly economically inefficient. The other option will be for those same consumers to plug in a digital antenna and turned to broadcast television for free live HD football so to us the choice will be obvious and we're going to make sure that consumers understand how to make that Choi.

<unk> and how to make the choice that makes the most sense for them more football on free broadcast is good for TV. It's good for the NFL. It's good for American football fans, and obviously given our position in the over the air marketplace, it's going to be really good for scripts. So we're very excited about what we see in the new NFL contract not only am I not.

Concerned about the digital rights, but the fragmentation of digital rights actually means positive momentum for OTI.

Alright. Thanks.

I think the supply chain.

Oh.

At this point, sorry, I'm still cut up in that answer.

Yeah.

Yes.

In terms of supply chain, we're really not seeing any.

Issue as we move through the fourth quarter, we've talked about automotive that has been the one category that's been adversely affected.

A little bit in retail here and there, but nothing material retail is a growing category was up in third up and for US as I said in my prepared remarks of our top 13 categories 12 of them are up only automotive was down we're seeing the same trend now through fourth quarter October was very strong. So we're just seeing no real impact of the supply chain beyond auto.

And then Brian just to dig into that a little bit more I just wanted to ask because let's just say that were to increase.

Dr provide a bit of a hedge or.

Those advertisers are they more sticky and that kind of environment or would it all be a direction of ascent.

Yes, so I'll start on the local side I think Dr is always an option for us to be able to fill our available inventory, but again, we haven't needed. It I mean again I talked about our commitment to developing new business a thousand new advertisers on the air in the corner in the quarter if that was a.

A deliberate focus for us over the last year, we're having a ton of success and as a result of that that's putting a lot of pressure on inventory and it's actually increasing our CPM. So we haven't had to fall back on the dealer marketplace, but on that throat over Lisa who probably has more active there yes.

John I mentioned earlier.

Our priority in maximizing our.

Yield across our network is really pulling that lever in the fourth quarter in particular, where the Dr dollars.

As I said are on fire and the CPM are high.

And thats, mostly driven by the health care open enrollment.

We will continue to look at and.

Certainly in the first quarter and beyond.

As we have better visibility into the scatter market.

We'll just continue to maximize that yield if it's if it's Dr where we can glean the higher rates and Thats, where we will place.

Our inventory otherwise, we will continue to maximize rates in the scatter market.

I said, we're not seeing necessarily cancellations that we're seeing like lack of visibility buys are just not there happening and sort of.

Just in time versus placing buys throughout the quarter, but also Lisa.

As a reminder, from what you had said in your prepared remarks, we have very little exposure right now in the fourth quarter to the scatter market.

14%, 12% what percent of the 12%. So the reality is the that the yield management machine I think that was the thesis behind our ion acquisition and bringing our networks together has really insulated us from anything youre seeing in some of the other networks and I think you saw a guide for fourth.

<unk> that really stands out on the network side as a result.

Thanks.

Great. Thank you.

Our next question is from Craig Huber with Human Research partners. Please go ahead.

Thank you.

Question on costs. Please on the cable network side can you just help us think about that.

While the investment spending you guys are doing on the cable network side.

How it impacts the fourth quarter, but also similarly look into next year. Please some follow ups.

Yes, so Craig we had sized as we were building newsy to launch over the air plus launching two networks earlier this year somewhere in the $25 million to $30 million range in terms of the both from a capital perspective, but also expense and Thats, where <unk> seen a little bit of a dip in our.

Margins.

In third quarter, certainly rebounding and expanding next year and so we expect to be in the 40% range.

In 2022.

So quickly growing those networks in fact, two of the new networks that we launched.

Earlier this year defined true real.

<unk> already outperforming the former networks that we're on.

<unk> multi cast switch, where <unk> and <unk> plus and they were around for 10 years. So we're growing those networks we have made.

Think minimal investment towards what we think is the growth opportunity there and just one thing Craig I can't let it go without sort of reminding everybody that these arent cable networks rate cable a marketplace that ultimately one way or another is sort of in decline. These networks do have cable carriage in many cases, but they reach 90.

Percent of U S homes over the air and we're moving them into the into the connected TV marketplace, where we expect to see continued growth in distribution and audience size.

I appreciate that and then a couple of nitpicky, So I guess, Brian if I could ask.

Retrans subs, maybe I missed this but how much of those down the net retrans subs in the quarter year over year.

And then also wanted to ask you.

Sports betting is that a top five category for you now.

What do you think thats going here and maybe you can give us an update on a number of percentage of the states that your TV stations are in.

They have sports betting.

Sure first of all relative to our sub.

Changes Craig they improved in the quarter, we were down less than 2%. So some incremental improvement there and then over the course of trailing 12 months, we're under 5%.

In terms of the decline and then shifting to sports betting.

Sort of a top five category because it's rolled up in our travel and leisure category, which is by far the driving.

Segment of that we also have like casinos and lottery.

Events concerts, tourism and stuff like that in that but probably now.

More than 80% of the category is travel and leisure so by itself would be a top five it.

It rolled up inside of <unk>.

And leisure is now the second highest.

Performing category did surpass auto which is the third in terms of how we're thinking about it.

It's sports betting is rolled out now and still less than half of our markets I think some of our biggest states and opportunities are still to come when we think about Ohio, We think about Florida.

<unk>.

Right now, Louisiana is about to come onboard, Maryland is about to come on Board and New York is is pending so.

It's been a terrific two year run I think its established in some of the early states of Indiana and Michigan. It just rolled out in September in Arizona, and Theres Big spending going on there and we expect that to continue and so as other states now come online, especially some of our bigger ones, we see a lot of <unk>.

Opportunity moving forward so.

I still think its very much early in the game for some states. It's nowhere in the game and for other states.

Settling into.

A normal advertising cadence and look I. Just think this is the beginning I think as more of the country introduces sports spending and it becomes more standardized.

As we look at Europe, and other places the majority of spending in sports betting or the majority of activity in sports betting happens in game.

That's not the case, yet in the United States and so as sports getting gets rolled out and theres laws and rules that kind of become standardized the opportunity for a much more active and involved in.

Engagement with any game I think is a big opportunity for us moving forward, but that's a couple of years down the road. So I think we have a couple of years of good.

Development launch spending and then beyond that as it settles in I think it moves to the next phase which is its most active.

And my other question, Brian I think you said core AD revenue for the fourth quarter people should expect up mid single digits. If you take out auto how would that number look please.

Obviously, even better a couple of points better than that.

So we're.

And of course, our comps are.

A little.

Easier, we had $138 million in political over really five weeks last year. So as you would expect we had a boomer October.

As a result of kind of the clearing out of that November is off to a great start, but I think youll. When it's all said and done we'll see exactly what we saw in third quarter, except for automotive.

We will see very strong performance.

I would expect growth in nearly all of our tough categories.

And then my last question guys.

Are you sensing at all any slowdown.

In the U S economy as you look at your National <unk>.

It works and also local TV station side of things just curious on your thoughts there. Please.

I'll go first and then throw it to Lisa, but we just reported that our third quarter of 2000.

'twenty, one was better than our third quarter of 2019, and Thats, where the major dip in automotive I think thats. It and you see the strong performance in new business and local activity I think thats, a really strong indicator.

From our view the economy is very healthy.

I would echo Brian's sentiments were not seeing any.

Pullback at all.

Great. That's all I had thank you. Thanks.

Thanks, Greg.

And to the presenters we have no further questions in queue.

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

Okay.

Ladies and gentlemen that does conclude your conference. Thank you for your participation you may now disconnect.

We're sorry your conferences ending now please hang up.

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