Q1 2022 Gray Television Inc Earnings Call
Good day and thank you for standing by welcome to the Q1 2022 earnings call. At this time, all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star.
One on your telephone and if you require any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today Hilton Howell Chairman and CEO . Please go ahead Sir.
Thank you operator, and good morning, everyone as Lorie mentioned I'm Hilton Howell, the chairman and CEO of Gray television. Thank you all for joining US on this first quarter 2022 earnings call as usual with me today are graves executive officers, our president and co CEO , Pat La flattening or <unk>.
<unk> legal and development officer, Kevin Latex, our Chief Financial Officer, Jim Ryan and our Chief Operating Officer, Bob Smith, We will begin this morning with a disclaimer that Kevin will provide I. Thank you Hilton and good morning, everyone. Gray uses its website as a key source of company information.
The website address is www dot G R. A y Dot T V.
We will file our quarterly report on Form 10-Q with the SEC later today.
Included on the call, maybe a discussion of non-GAAP financial measures and in particular broadcast cash flow broadcast cash flow less corporate expenses.
<unk> cash flow free cash flow adjusted EBITDA and certain leverage ratios. These.
These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in their analysis and valuation of our company.
Put it in our earnings release as well as on our website a reconciliation to the non-GAAP financial measures to the to the GAAP measures reported in our financial statements.
Certain matters discussed in this call may include forward looking statements regarding among other things future operating results. Those statements are subject to a number of risks and uncertainties actual results in the future could differ from those expressed or implied any forward looking statements. As a result of various important factors that have been set forth in the company's most recent reports filed with the SEC.
The company undertakes no obligation to update these forward looking statements.
Now I'll turn the call to Hilton.
Thank you Kevin.
Quite simply thrilled to be with you today to discuss our first full quarter as the nation's second largest broadcast affiliate group owner quite simply the company is barring on all cylinders, our first quarter financial results exceeded our expectations and we today are.
Guiding to another great quarter, and what will be a truly banner year for gray television.
Once again our earnings release. This morning also confirms that our execution remains best in class.
Our total revenue in the first quarter of 2022 was $827 million, which was an amazing 52% higher than the first quarter of 2021.
Our total revenue blew past the high end of our guidance of 812 million for the quarter.
Our net income in the first quarter was $49 million or 52 cents per fully diluted share.
That figure represents an 88% increase over the first quarter of 2021 on a dollar basis and a 93% increase over the first quarter on a per share basis.
Moreover, excluding transaction related expenses and non cash stock compensation. Our adjusted net income would have been $55 million for the first quarter of this year were 58 cents per fully diluted share.
As you all know.
Our earnings release presents financial results According to GAAP as well as on our own defined combined historical basis, we referred to it as CHP and it gives effect to both acquisitions and dispositions in order to provide more tran.
Barents Sea on how our currently owned stations and businesses are performing compared to prior periods our.
Our results today are just as impressive on the combined historical basis. In particular, we had guided that total revenue will increase from a low of five to a high of 8% over the prior year period on a C H b basis, well impact our company.
Finish the first quarter 2022 up double digits by 10%.
On core advertising revenue our stations finished the quarter up 4% on a C. H b basis in contrast to our anticipated range of between flat to 3% higher than the first quarter of 2021.
Likewise, we exceeded first quarter's 2021 CH b numbers as well as our own guidance on retransmission consent revenue political advertising revenue and production company revenue.
These revenue gains as well as the expense savings reported in our release today are the result of our Peerless combination.
Top rated local TV stations and fantastic professional employees.
Every level of our company.
In August we welcomed the Quincy media group into our fold and in December we welcomed the Meredith television group into our fold.
The Quincy stations today are fully integrated into our company and the revenues and expenses are noticeably better than just this very short time.
Meanwhile, we have progressed about halfway through our integration of <unk>.
Mirrored at the stations.
Those stations and the local teams are busy adding news.
Sales and created personnel as well as technology and sales resources, There financial result, I got it.
So you can keep it quiet that'd be great.
Yeah.
There are financial results for the first quarter more than met our expectations and those expectations will certainly grow as we get more and more of the integration efforts behind us in short we have a very good news to report not just on the financial statements, but on the.
Ground and in the trenches trenches of all of our latest acquisitions.
Looking ahead, we are today guiding to a combined core revenue and political revenue for the second quarter of between 435 million to $445 million.
If we land just below the midpoint of our traditionally conservative guidance.
<unk> TV will break all its previous records for second quarter advertising revenue in the company's 100 year plus history.
Both on an as reported and on a combined historical basis.
In closing, we look ahead with great excitement at.
<unk> had a strong year for core revenue for continued growth in retransmission revenues for our record breaking political revenue around this important mid term election.
And for growth in our emerging production and studio businesses.
With the wind behind us and with more scale than ever before gray will achieve strong free cash flow that should enable us to delever quickly as we did following the re com acquisition in 2019.
Indeed, with our very strong start to 2022, and our bright prospects for the balance of this year, we anticipate being able to fund our growth objectives for the year as well as pay down a significant portion of our debt prior to year end.
Naturally as our strong free cash flow drives our leverage lower we are actively increasing the equity value of our company that we expect will help our stock price recover to a level that better reflects the fact that our business is as strong as it has ever been and that our prospects have never been.
Brighter.
Next I will turn the microphone over to our president and co CEO , Pat La Platinum, who will address our AD revenues in more detail Pat.
Thank you Hilton.
Very happy with our AD sales performance in the first quarter.
Despite the war in Europe meaningful inflation.
Continued headwinds in the auto category Gray's stations continue to operate at the top of their game.
Hilton review the impressive core revenue gains we posted in the first quarter.
There are many reasons for a 4% year over year growth in THP core revenue across the group.
We're making great progress on developing local direct business, especially in our newly acquired stations.
Our new local direct business efforts have been a focal point for some time and now we are writing between nine and $10 million per month of new local direct business.
Throughout the first quarter and continuing today, we are concentrating on integrating the former mayor of the stations as we did but the Quincy stations in the back half last year.
We clearly inherited a lot of challenge talented sellers and terrific managers from both companies.
Between this talent and great resources stations for both marathon Quincy are having great success with digital products. So they can now offer our advertising clients and this and the skills required at our in House sales training center are playing a large role in their success.
It's clear that there will be revenue synergies in the months and years ahead, as our digital resources and sales trading roll through the former Meredith stations.
Even though the automotive category struggling other categories are growing in fact, the health category is pacing just slightly behind auto.
Well that is good news and bad news to some degree it's a clear victory for in House health vertical sales team and for our stations have done an outstanding.
Who have done outstanding work in developing this category.
Our new travel and tourism team is also beginning to make meaningful contributions to our sales efforts.
We also expect that contribution to grow dramatically in the months and years ahead.
Gambling home improvement and legal categories also continue to grow.
The services group comprising financial legal and health is continuing to post strong results.
And accounted for approximately 29% of our core revenue in Q1.
While we all wish I was stronger and we believe it will come back this exercise in revenue diversifications that beneficial for Gray television long term digi.
Digital AD sales continue to grow in the double digits in 19 markets, both large and small are digital billing exceeds national Bill It now.
As you probably have read money is pouring and pouring into digital video and we are well positioned to take advantage with our Permian OTT sales partnership we've seen digital video revenue grow dramatically over the last two years and we do not see that growth slowing down in the foreseeable future.
We continue to invest in digital sales training and what we believe to be the best digital sales force in the industry.
Recently, we joined Hearst television Graham media and Cox reps.
Investment in cash and resources in an AD sales software package called.
And self service matrix chipsets to facilitate the launch of its new media sales gateway named AD.
The gateway will be a sell side tool that provides both the infrastructure and workflows to automate converged advertising sales and further reduce the friction in broadcast advertising.
For the past few weeks, we've been working on the rollout of admiral across our stations.
The amazing hard work of our sales support team, we expect to onboard all gray stations on the system before the end of the quarter.
This transition should provide more wind in our sales as we move into the second half of what will be a banner year for gray television.
Next Bob Smith will offer additional color on our station operations Bob.
Thank you Pat we have never had such top tough competition in our local markets from other broadcasters digital companies and new entrants. Nevertheless, our stations continue to offer the best value proposition for companies of campaigns, who want to reach the largest possible audiences in local communities communities, even in a slowing economy, our stations provide a superior value proposition compared to alternate.
Advertising options, our stations or are operating at the top of their game and they're only getting better and more efficient of course, our sales efforts will be nothing without our leading local news franchises since the beginning of this year, we have had a number of developments in this area.
February we created the Great Media training center in partnership with W. L. B T. Our top ranked NBC affiliate in Jackson, Mississippi Revolutionary Media training program will prepare students for today's unique operating environment. It will educate and train students who attend Mississippi colleges and universities with a focus on historically black colleges and universities in the store.
We believe this initiative will help us prepare students for a career in broadcasting and attract quality talent in a tight labor market.
Over the past few weeks, we have accelerated and expanded our plans to add more local newscast across our portfolio in the past few months three syndicated programs Coincidentally came to an end full court press with Greta Van Susteren, which we produced and distributed for two years people TV, which we inherited with the Meredith acquisition and right. This minute a weekday entertainment program that we jointly own with <unk>.
Other broadcasters in nearly all cases, our TV stations replace these programs with new locally created locally focused newscast through these moves we are leveraging our local news gathering talents and resources in new ways that better serve our local communities and provide better opportunities for our local advertising clients to reach their customers and potential customers.
After the close of the quarter in late April the National Association of Broadcasters leadership Foundation announced the finalists for this year's coveted service to America Awards. The surface to America Awards recognize outstanding community serviced by local broadcasters, we are humbled and honored that five of the six stations in small and medium market categories are owned by Gray.
Hello vision congratulations to W. M. T V. W. I S. W. T O C W BMG and kw PUC last.
Last week, our investigative unit called investigate TV was recognized with a first place National Headliner Award for collision Division. The investigation exposed all federal crashed Anders favor men, despite women being at higher risk for injury in depth behind the wheel. This investigation led to a congressional hearings and a bill addressing this disparity that was enacted into law late.
At year two.
Two days ago, the southeast chapter of the National Academy of television Arts, and Sciences, and a T. A S nominated our most recently acquired television station Telemundo Atlanta, four six Emmy Awards for the 2021 calendar year. These nominations were made in the following areas overall station Excellence News excellence journalistic enterprise hard news report.
Continuing coverage and investigator reporting.
We are thrilled to welcome Telemundo Orlando into our portfolio of leading news stations taken a step back we acquired Telemundo Atlanta on April 1st to serve as the corn.
Affiliated stations that we see as another growth engine for the company to that end. We are very excited to announce on Tuesday of this week degree, we'll be watching the first ever local Telemundo affiliated television station channels in 22 markets when fully built out this euro Telemundo station group will deliver Telemundo as top tier programming with our local Peru probe.
Graham into more than 3.75 million Hispanics, we're very excited about our new partnership with Telemundo and amazing opportunities ahead to leverage our news and sales resources to serve a greater portion of our local audiences and local businesses in our local communities.
The expansion includes the upcoming launch of Telemundo, Georgia, a new network initially will distribute the signal and Telemundo Atlanta too in all Georgia markets overtime, the individual markets will create and launch local content supported by the flagship Atlanta affiliate station Telemundo, Georgia will be the first and only Spanish language media organization, serving nearly all Hispanic resins.
Throughout the state does provide this provides important inefficient avenues for advertisers to reach Spanish speaking consumers across Georgia, especially political advertisers, but a lot of reasons to reach this important part of the electorate in 2022, I'll now turn the call over to Kevin. Thank you Bob.
So speaking of political advertisers Gray television is continuing to punch above its weight on political advertising.
To put this in perspective during the first two quarters of 'twenty 'twenty combined historical basis, our TV stations sold $79 million.
And political ads ever.
A remarkable feat in 'twenty 'twenty was fueled by a presidential primary spending in Iowa, New Hampshire, South Carolina, Nevada, and Super Tuesday States, All places, where gray has a big presence.
Remember too that 2000 Twenty's primary spending in late 2019 in early 2020 was supercharge the supposedly irreplaceable spending from Kennedy, It's Mike Bloomberg and Tom Stier.
As impressive as $79 million in the first half 2020 was we expect to blow well past that figure in the first half of 2022.
In particular, our first quarter political revenues were $26 million plus of $65 million to $70 million of political revenue in our second quarter guide would produce a first half political revenue figure of $91 million to $96 million.
So therefore, even though low end of this range would be a 15% increase over the presidential primary fueled first half of 2020.
Now for the full year, we anticipate political revenue of $575 million, which would be a 55% increase.
Over the last midterm election year of 2018 on this on a combined historical basis.
It's better however to compare again to 2020, when our current station portfolio booked $652 million in political revenue.
Roughly $192 million of that 'twenty 'twenty total came from presidential primaries presidential general election, and the tube, Georgia Senate run out run offs that began after election day.
Consequently, our political guide of $575 million for full year 2022 represents a 25% increase over 2000, Twenty's CHP political advertising revenue, excluding the presidential in Georgia runoff advertising in 2020.
So without a doubt political revenue was remarkable no matter how you look at it.
I'll turn to the other good news now in our release.
As you saw we posted a strong first quarter.
Growth in retransmission revenues at $393 million on a GAAP.
[noise] basis, Retrans revenues increase a whopping, 59% from the year earlier period.
On a combined historical basis, Retrans revenues increased 10% from the year earlier period.
The retrans revenues exceeded our guidance range in part due to the annual true up payments.
Payments for prior periods that were booked in the first quarter.
Looking forward, we anticipate retrans revenues of 385 million to $390 million for the second quarter, and we expect Retrans revenues will exceed $1 $5 billion for the full year 2022.
Thankfully our subscriber counts continued to remain relatively stable in particular are big for pay TV subscribers across our current portfolio stations, including those we acquired for Meredith and Quincy last year declined by less than 2% between the fourth quarter 2020, and the fourth quarter of 2021.
Concludes my remarks, I'll turn the microphone I'm Jim Ryan.
Thank you Kevin and good morning, everyone as mentioned earlier, we'll be filing our 10-Q, a little later today.
And as we discussed on our fourth quarter call and you'll note in our presentation, beginning Q1, 'twenty two grade no longer segregate local advertising revenue from national advertising revenues in our income statements.
The local versus national distinction may be relevant for other broadcast companies, who sell national revenue to a sales rep and sell local and regional ads through their own sales force as you know gray does not use the national sales rep in all of our sales are being conducted at the local level.
So the distinction between local and national for US is irrelevant and we've retired it.
Hilton Pat.
Kevin Cavanah.
I'll cover the key highlights for Q1, so I'll keep my remarks relatively brief and just had a recap them for everybody.
First on Q2 guidance again core advertising revenue were expecting to be between $3 70, and $3 $75 million.
Retransmission revenue of 385 to 390 as Kevin just commented our Q1 had some one time only positive adjustments of about $5 million in our Retrans number in Q1, which we do not expect this to be repeated in Q2.
Political advertising revenue for Q2 will be 65 to 70 million production revenue between 10, and 12 million total revenue $846 million to $864 million.
Our operating expenses for Q2 are expected to be between $5 33, and $5 37 for broadcast and that includes $226 million of reverse comp payments to the networks approximately 1 million of noncash stock comp and 1 million of transaction related expenses.
<unk>.
Production companies will have about $12 million of expenses and corporate expenses are expected to be between 30, and 35 million, including 1 million of transaction related expenses and about 5 million of noncash stock comp.
Again, we're very pleased with our Q2 Q1 results.
Total core revenue again was up 4% compared to you.
<unk> 2021 on a combined historical basis.
We were very pleased with the strong start to political and obviously you can see we have very strong expectations for political in Q2.
As mentioned earlier, the services group, which concludes financial legal and medical represented approximately 29% of our Q1 'twenty two core revenue.
Gaming revenue for the first quarter was about $20 million.
Super Bowl contributed about $7 million and the Winter Olympics contributed about $10 million.
Our trailing eight quarter operating cash flow at 331, 22 was one point to one 4 billion.
Our principal amount of debt outstanding at the end of the quarter was $6 835 billion. Our cash on hand was 247 million. Our total leverage ratio net of all cash was 5.43 times, which is down from our Q4 leverage ratio first lien leverage ratio.
Not all cash with two five times.
To recap.
Our expectations for the full year.
2021 combined.
Our goal obviously to recap some metrics from 'twenty. One so you can put it perspective with our expectations for 'twenty to 'twenty. One combined historical net revenue was 3.15 billion a two year blended average operating cash flow.
Two year blended 2021 net revenue was $3 to $5 billion.
And our operating cash flow at a combined historical.
Basis in 'twenty, one was about $1 billion in R. L. Eight operating cash flow on a combined historical basis was about $1.2 billion.
Our 2021 free cash was $443 million or blended two year average combined historical 2021 free cash with $626 million as.
As we discussed in our Q4 call and we'll remind everybody today that for 'twenty 'twenty. Two we expect cash interest of about $300 million cash taxes of 190 million routine capital expenditures of about $125 million preferred dividends of $52 million.
Our required term loan D amortization of $15 million.
And our routine quarter routine dividend would be a little over $30 million.
We're going to.
We're going to reaffirm that we currently anticipate that our free cash flow before common dividend acquisitions investments.
We will exceed $800 million into early 'twenty, two and obviously, if political skews to the high side that free cash number will skew.
Accordingly higher.
We are very well positioned starting 2022 and look forward to a very successful year I'll now turn the call back to Hilton.
Thank you very much John and before I turn.
Turn it over to the operator to ask for your questions I just want to reach out to our station in Louisville, and say congratulations on the Kentucky Oaks and the Kentucky Derby Tomorrow. We have received your photographs and are thrilled about what youre doing there and Louisville. So go after it operator at this time.
I'll open up for questions.
Thank you and again as a reminder to ask a question. Please press Star then the number one on your telephone keypad again that is star one on your telephone keypad to ask a question.
And our first question is from Dan.
From benchmark your line is open.
Great. Thanks, Good morning Super strong results I guess, maybe if you guys can yep.
I'll address the topic of yours quickly get it out of the way just in terms of what you're seeing around core.
Th a core guide looks pretty strong.
Relative.
You guys are maybe 8% higher on political.
We have anticipated at this point so.
Maybe if you can just talk a little bit initially just color what youre seeing.
When youre talking booking windows, just anything on that front would.
You could start.
So I'll start off as far as Q2 goes where as you said, we are pleased with where we're guiding and core.
<unk>.
Especially may and June at current.
Expectations at current pace look to be reasonably strong in the call. It low to middle single digit range April was a little bit soft.
But not alarmingly. So it was just a little bump in the road and were encouraged with the <unk>.
Positive pace in May and.
June and I'll, let others comment on probably certainly in some markets and political displacement already.
Yes, I can jump in as phosphate.
We are seeing some strong political in certain markets and.
There has been some displacement that being said as Jim.
Just mentioned.
We're optimistic about May and June .
Several categories are as also mentioned.
In the last 20 minutes.
A pretty healthy automotive as mentioned is still a challenge.
There will be for a while but but we are making it up in other categories.
And as Pat mentioned.
Our new direct business, we're developing probably 2000, new accounts direct local accounts a quarter on average and that continues to grow and we think that'll just get.
It will increase as the year goes on.
I think one category to highlight.
<unk> would be what we call entertainment, we're seeing strong growth in second quarter, that's sort of local local performance venues.
State tourism boards.
Really healthy growth in that in that category, coupled with all the others, we talked about earlier, so it's a pretty healthy quarter.
Got it thanks very helpful and up on.
On the aforementioned political.
I think I'd be lying by stay at home that wasn't hoping for some more colorful words for you this time around but Kevin did as fast so.
Some thoughts on what.
If ROE V. Wade ends up getting overturns, we've heard that there's already been.
Ah palimony coming in on issue. So can you just kind of talk about the balance between.
Whether it's Rachel.
Alright story, all versus the issue and where you might be seeing.
For outperformance.
Circles.
I'll, let me just say we have no idea what's going to happen.
On the decision our politics, but what is what is known as in the last three days.
There are packs and candidates.
On both sides that have had fund raising records.
The release the week is galvanized folks on both sides I would if we had this call last week, we would've said the interest in the in the campaign and fund raising.
Is just as strong as we.
I have seen in 2020 and higher than we'd seen in prior years and that bodes well for a strong political season.
The primary and Ohio was obviously.
Eight.
There are a lot a lot of intense voters there.
And a lot of adds clearly we're going to see.
We think that the week is only going to focus more people on the elections and that's going to drive more fundraisings. We've already seen that will continue and as you've heard me say many times no campaign manager wants to Andy campaign with money left in the bank raised the money they've got to spend it so.
We couldn't possibly more specific in how it impacts other than to say it probably is focusing people to get involved.
Donate money and that's good for political advertising.
And Dan I don't know if I have colorful words for us, but one thing that that Jim has always said on these calls is that 90% of our political revenue.
Sorry, I misspoke, 50% of our political revenue comes in in Q4, and we're seeing a much earlier than ever in history.
Beginning of political ads I mean, we were having ads for 2022 that began in Q4 of 2021 and have certainly occurred as you've seen with our numbers through the first quarter and.
Currently.
They are booming.
It changes from state to state, but the primary advertising is very strong both parties are very competitive and enthusiastic both have raised lots of money.
And then grey has done something with our acquisitions that I think positions us even better because Bob and his teams locally we have been adding news and local news everywhere and he mentioned that in his formal comments, but what's important about that is that as the b.
Venue that political advertisers prefer to use to reach voters that might.
Be the deciding votes and so we have more and more local news that they will have a position in inventory to by political ads and so I think it's going to be a gargantuan year.
In this mid year election, and I think it will likely rival if not exceed any previous presidential election.
Alright that made me feel better Hilton. Thank you, Sir alright lets good Dan.
And just.
Yes, I'll, let you go with US having just I know there was a true up in Q1.
Some pretty positive things out of them.
Up some slack just if theres any update on your thoughts on net retrans for the year.
Nope no updated thoughts.
So what I figured thank you guys I appreciate it.
Thank you Dan.
Thank you and our next question is from Jim Goss from Barrington Research. Your line is open.
Thank you.
Yeah.
I was going to ask.
About a third earlier comment regarding the.
Integration of the Quincy properties and about halfway through Meredith.
And that comment as it related to the transition of some of the news coverage and aside from the what you just said about the political importance I wondered if you might talk about say how many.
Programs might be syndicated programs might be replaced by a.
Local news efforts.
Or how many hours and what might be the typical impact on AD revenues and syndicated cost reductions and making that transition and you might related to what you just experienced and how it might have helped insulate some of the recent results.
I can take that one.
Well go ahead Bob.
That's right.
No as I said.
Jim.
Hi.
Recently replaced people the syndicated show that Meredith.
Was producing with news and a number of our largest markets and while I can't quantify the effect I would tell you it'll be material.
Not only on the cost savings side, but also on the <unk>.
Increased AD revenue given that we're rolling out.
A number of new news casts in those time periods.
Hilton mentioned this.
Bob did too in his formal comments, we're putting.
More news and it seems like every week and because that's that's not only.
Helping us serve our communities, but also good on the business side of what we do and.
So I see that continuing long term I'm happy to turn it back to you Bob or Hilton for more comments there.
Yeah, I would just add that.
The.
One point that it did not inflate our first quarter because a lot of those shows as I mentioned ended April <unk>. So that came after the fact.
However, our overall goal is to.
We believe in localism in a big way and so whenever we can replace syndication and often a lot of syndication is poorly performing and put local news in there. It's a win win for US we have all of the local avails.
Inventory and we think it serves our communities well and we have in some markets and I think I've mentioned this on prior calls, but we have some syndication freeze stations right now that have no syndication at all and it's all local content. Charlotte is one of them logo is one of them, we're almost there in Hartford and.
That's a long term goal is to have less emphasis on syndicated program and more emphasis on local news and will continued to grow in that area.
Okay and is it fair to think you also benefit.
Terms of saving the cost of the syndicated programming by whatever you wind up spending less what you produce.
In addition to the AD revenue benefits you get.
Yeah, absolutely, yes, we do.
Okay.
The other thing you mentioned you had cut cut back several programs you are syndicating, the greater Manchester and that it was your own plus a couple from Meredith.
Guessing.
Are you sort of getting out of that whatever strategy, you might've had no credit ancestral sort of waiting in the waters a little bit but.
Or is that just specific to those particular programs.
Yeah, Let me this is hi, Jim it's Kevin.
Yeah.
These are all these are all coincidental and.
Sort of coincidental endings that we're not not plan a.
Greta.
Greta show was an experiment, we said that when we launched it two years ago, we wanted to try and national.
Sunday talk show out of out of Washington.
We're very happy with the way the show was produced we're happy with the content of the gas were spectacular.
The show was really well done it just.
It didn't quite find the audience that we had hoped for and the Sunday shows ended April 1st.
<unk> is now on our air actually more often than she used to be doing more she's able to do more talk backs in less time spent preparing for Sunday show. So it really was a win win those stations got back a half hour on Sundays that they're generally able to put local news and.
People T V was a show that was produced by.
Produced by Meredith that we inherited it to didn't get much do just didn't get the traction we had had hope for Meredith historically had hoped for so that came to an end. So again coincidently on April one and then right. This minute as Bob mentioned in his remarks, that's been around for a number of years that was a re com and some other folks put that show together.
Harsh and forget it out for five six or so years ago at 11 years 11 years ago actually okay, Yeah and that too is it kind of ran its course.
There was no masterplan, Jim to kind of strategy here. It was as I Hope you guys have seen from Gray, we tend to try we tend to try things and we hope we fail fast.
When they're not working.
Sometimes things work for a while and then they stop working and we have to fess up and make decisions and move on and we don't want to things that arent working.
<unk> to take our time and resources and as Bob mentioned ending.
Ending a syndicated show in adding local news is a win win for us.
And as you mentioned a eliminates the cost it's a it's really it's a triple win for us.
Okay.
Thanks, Thanks, very much I appreciate it.
Huge them.
Thank you and our next question is from Aaron Watts from Deutsche Bank. Your line is open.
Everyone. Thanks for having me on.
Just wanted to quickly follow up on an earlier question on the AD outlook Q, It's clearly very solid and political flowing in do you have any good visibility beyond Q on whether the current economic backdrop that consumer confidence is concerned about.
A macro slowdown or yet leaking into the AD buying decisions and commitments.
I suppose this is mark pointed out what youre seeing a little further out beyond <unk>.
And we are as usual other than the immediate quarter in front of us.
And this has been traditional in the business for a long time now we really don't have a lot of visibility.
Business tends to get plays quarter by quarter.
So.
No we.
We would be no better.
You know estimating or forecasting what what the overall economy is going to be doing in the economies in our markets in Q3 and Q4 than anybody else. We main remain optimistic we're pleased with results from Q1, what we expect for Q2, So we don't see any big.
Red flags, but we don't have a ton of visibility either.
This is Kevin I'm going to accentuate something Pat said on the call. You know, we just went through a quarter with a <unk>.
A major war in Ukraine and.
Historical inflation.
And yet the consumer in our market and the businesses, who advertised in our markets have remained really strong. So despite the macro headwinds that are out there our business remains strong and you saw it not just in Q1 results you see it in our Q2 guide. So we don't know what the future's going to hold in Q3 or Q4, but we're cautiously optimistic.
Because.
We're doing fine despite some.
Some real pressures out there in the macro side.
Yeah Fair point Okay.
And I apologize if I missed this but we've heard about some increased rates of sub churn from the mvpds, you've always seem to trend a little bit better in the past and some of the market averages can you just speak to what you've been seeing from your sub base of late.
Yeah, what we said.
On a we look at the full year from quarter.
Fourth quarter of 2020 to the fourth quarter of 2021, our total sub big for a pay TV sub count declined by less than 2%.
Okay, Great and then just one more and I appreciate the time.
Given some of the continued pressures on network broadcast viewership primetime specifically curious how that.
Impacting your business or decisions with AG clients and I appreciate that prime ads are not a main driver of grades revenues, but from a perception standpoint, considering lead and lead out strength.
Net network programming trends that I imagine can matter indirectly from a viewership or sales perspective. So anything you can kind of give on color there and maybe also if you could speak to here.
How your local news ratings are performing with late relative to Brian .
It's Bob Smith, I'll take that prime is less and less important really every year.
We don't depend on the networks.
Local news is we've mentioned a few minutes ago was where we drive our revenue from.
Prime time.
Yeah.
Is.
When you're looking at about 12% of our revenue and network Prime.
So it's nothing like it was a 10 or 20 years ago, and again that goes back to our emphasis on developing local news content.
50% of our revenue comes in local news.
Okay as far as ratings go on the ratings are holding up we're doing I can tell you that as you know we have so many number one stations.
And they continue to perform very well.
Okay. Thank.
Thank you again.
Aaron.
And our next question is from Steven Cahall from Wells Fargo. Your line is open.
Thanks, first maybe Hilton just on the.
Political commentary that you made I think you said that now you expect political to maybe be above the 2020 level.
I don't know if that's included in your current free cash flow guidance or if that prognostication would be upside to free cash flow guidance and maybe just a little bit of help there.
No Stephen that's not included in any of our free cash flow guidance, that's just aspirational because we see.
We see a lot of political stuff, that's starting earlier and earlier every political cycle.
Stephen Our guide of 575 million.
<unk> unchanged.
Yes.
At that.
Point out that again, it's you're running about 25% better than 2020, when we back out the presidential which obviously not happening now and you back out the Georgia Senate run off.
From November December of 2020, so we take out those things, which you can get an apples to apples comparison, our guidance had already 20%.
25% better than 2020.
Gotcha.
And then on the Telemundo deal that you announced could you just talk about what the upside could look like.
Assume those are.
My T V and CW stations that you have some conversion opportunities I'm guessing those don't really generate much in the way of of Retrans at the moment maybe.
Maybe the AD sales are better as well. So can you just kind of help us think about what the the value impact could be from your larger Telemundo deal.
Yes, we are.
We're not converting we're not dropping any affiliation where we were able to add Telemundo and 22 new markets. This year.
Hi, adding an additional channel to stations, we already own and over the last several months, we've been quietly buying low power TV stations in our markets and folks who I'm wondering what we're going to do with them to plan had back the plan has been to buy some willpower television stations.
Literally to serve as a telemundo affiliates for these markets because they're low power they tend to cover smaller areas.
Then full powers. So some markets we have to have two O powers to cover the DMA.
So we're not dropping anything in favor of Telemundo Telemundo is additive.
So as we said we're going to begin with.
The national feed and in some markets, we'll will have local news and local insertion of commercials are.
There will be many that never have that there will be many that will start off with a national feed or the Atlanta, Georgia and Atlanta feed throughout the Georgia markets and then as the market can support.
Local ads and local news, we will we will convert the station to a more of a local feed. So this is not going to be a material driver.
But we think it is going to be a growth engine is certainly going to help or we think it will help our stations.
Our local AD sales and help us leverage our what we do with sales and what we do at news to reach a greater part of the audience.
So not not.
Not material to the company, but probably probably materials with some of the markets, where we're adding telemundo.
Thank you and then maybe just lastly, Hilton I think at the end of the last call you talked about maybe being in a position to look at some share repurchases by the end of this calendar year. It sounds like you're incrementally bullish since then.
So kind of the same where if the November cycle hits. The way you think it could then that that outlook is still possible.
Those are always opportunities for our board to consider and we look at it every quarter.
And so we will be looking at that as we see through the course of 2020 to sort of turn out and so it's more likely than not if the optimistic side of the year turns out that we will see something along those lines.
We'll just see what our board comes up with but yes. It is certainly an opportunity.
Great. Thank you.
Thank you Steven.
Thank you and again, if you have any questions. Please press star one on your telephone keypad.
A question from Alan <unk> from loop capital Your line is open.
Thanks for taking the question I've got a couple here first Pat could you drill down a little bit more on digital the numbers seem pretty impressive you quantify for example, how much of your core revenue is coming in digital.
It's a I'm not going to give you the exact number but it is in the teens and.
And I think that's a.
Pretty solid number and it is growing it continues to grow quickly.
On what is now.
Relatively significant base, so we're pretty happy with our efforts there.
Okay, and Jim more Hilton can you give us a little more insight.
Lana Assembly projects, how much you think capital expenditures are going to be for the year I recognize that there's a shortage of production space for all the content that's being developed.
The revenue opportunities there as well.
We don't expect to see a large amount of capital expenditures there just enough to get our studios up and going.
Okay. So the third.
The $30 million that you spent in the first quarter would that be a run rate for the year.
It will be.
It'll be in around 100 million, but in later years, the CIB, which is unique there will be issuing bonds that are separate and apart.
From anything on our on our balance sheet and that will offset what we have here because the property itself for the studios are are uniquely benefited by.
The tax free bond capacity that we have there.
And before the end of the years those bonds will reduce the capital expenditure for creating these studios.
Okay, Thanks, and Kevin could you just give us some sense in general.
The tone of reverse comp discussions I think the thought was that the networks wanted to raise the prices prior to the new NFL contract, Yeah, I've heard some rumblings that they're asking for more again.
Can you just give us some sense of the tone there.
So what I said on the last call was out a we believe a gray Meredith and Quincy had large step ups in the last.
Two rounds of.
Reverse comp or network affiliation negotiations as in networks.
Prepare for the NFL renewal conversation and that the going forward that the increases would be.
More muted than what we had seen in the recent rounds.
You know I can't tell you.
Can't tell you with the industry's hearing overall, because we're not really in those discussions right now we've got some up at the end of this year, we'll have those conversations later on but that's our general sense of where things are at.
Okay. Thanks, a lot.
Thank you and there are no further questions on queue do you have any closing comments.
Thank you operator, I want to thank everyone for joining us today, it's been a fantastic quarter, we expect a fantastic Q2, and an even better full year results and so we look forward to talking to you at our next quarterly report. Thank you.
And this concludes today's conference call. Thank you for participating you may now disconnect.
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