Q3 2022 E W Scripps Co Earnings Call
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Ladies and gentlemen, thank you for standing by walking through the scripts quarter three earnings conference call. At this time your telephone lines are in a listen only mode. Later, there will be an opportunity for questions and answers instructions will be provided at that time.
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As a reminder, your call today is being recorded I will now.
The conference call over to your host head of Investor Relations Carolyn Micheli. Please go ahead.
Thank you Alan 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 include 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.
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. These 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 included in our earnings release are the reconciliations of <unk>.
non-GAAP financial measures to the GAAP measures 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 per Steve Here's Adam Thanks.
Thanks, Carolyn and good morning, everybody. Thanks for joining us on this mid term election day.
You haven't already please make sure to take the time to vote.
I wanted to start with the obvious political revenue did not meet our very high expectations. This year.
Early on things, we're lining up in a way that led us to believe our portfolio for the midterm would attract spending that would be a record revenue in 2000 Twenty's presidential election.
But despite a very strong start to the year with record spending for the first half dynamics suddenly changed.
Ryan will be along shortly with the detail Youre looking for but let me make one thing clear scripts. This performance. This year breaks our last record level mid term election revenue in local media raising the bar for midterm election spending.
It wasn't as much as we expected, but in no way should investors have existential questions about political on broadcast.
The Scripps networks Division delivered a solid beat to our revenue expectations at 4% above last year. This comes from a stronger performance in general market advertising and directly as a result of our execution on connected TV, Lisa will share details on the quarter.
Given the comparative results of our peers in the national advertising marketplace and despite the very obvious macroeconomic factors. Our performance is a testament to our profit building growth strategies and the strength of our portfolio with both audiences and advertisers, let me say more.
Much has been written and said about linear TV, but I'm afraid that the term linear is being thrown about without enough definition.
It's certainly true that consumers are taking full advantage of on demand platform for media and entertainment spending less time on the traditional platforms.
But all linear is not created equal.
Programmers like most of our peers in the national networks marketplace depend on cable and satellite distribution and as service decline so does their reach.
Not true for the Scripps networks, which now engage with 70 million viewers a month and rising.
Our network's reach Americans through the same pay TV and virtual mvpds platforms as other networks, but we also have the benefit of the expanding platforms of over the air and connected TV fast networks.
This has led us to growing distribution and reach in growing marketplaces growing audience shares growing C. P EMS and growing revenue.
Earlier this year I told you we had obtained the rights to deliver our network streams into connected TV.
Since then we've secured distribution for nearly all of our Scripps networks on more fast platforms, creating new distribution points for our premium programming on the most popular CTV destinations Samsung TV plus Vizio is watch free the Roku channel and Amazon's Freebie just to name a few.
Our premium networks stand out in the SaaS marketplace and are performing very well benefiting scripts and our platform partners.
That's driven nearly 60% growth in the networks CTV revenue and helped drive our industry, leading Q3 AD revenue growth.
We are now on track for our CTV revenue run rate of more than $100 million next year and we are just getting started.
While the CTV marketplace is growing so is free over the air.
Last year, 32% of American TV households, we're watching free television over the year that was up from 26% and Nielsen says that percentage will grow to 45% or 53 million U S households by 2025.
Scripps has advantage here is that we capture about 30% of that viewing with our local and national brands.
Our outsized share is a differentiator that positions us well for future growth in that marketplace and it's for that reason as we've told you that we are giving otas growth a push through our free TV project consumer education and awareness campaigns that.
The free TV project is gaining measurable traction.
During the early stages of our marketing campaign launched in July and 13th Scripps markets antenna manufacturers, we're working with reported a 30% increase in sales.
I'm not surprised free T V is resonating with Americans right now.
Consumers are bearing the burden of broader inflation and interest rate hikes, while streamers continued to increase prices there.
This has created a period of even greater opportunity for free TV, both over the air and on connected TV right in our sweet spot.
So while we carefully navigate the current negative economic impact on the AD marketplace, and we will keep a tight rein on operating expenses. We will also take advantage of this moment in a way that will benefit Scripps and our shareholders.
And yes, you can have your cake and eat it too because while investors in scripts will profit from the disruption we will continue to maximize the significant opportunity we have in pay TV, especially given that we will renew 75% of our local broadcast subscriber households.
Year.
Looking out a bit further I'm drilling even more enthusiastic about the business opportunities. We are developing as a result of ATSG three dido, both for Nextgen TV and the new ways for us to monetize our spectrum.
As you know scripts as the largest holder of broadcast spectrum in the country and we are actively developing near term opportunities with real dollars attached.
P. I E Kelcey consulting service says the technology could add more than $10 billion in broadcast industry data casting revenue by 2030.
While we're not ready to affirm any numbers yet we do believe the amount will be significantly meaningful to us and to our industry.
I'd like to close by discussing an important announcement, we made during the third quarter the creation of a new National News organization called scripts news.
Scripps news combines the team at Newsy with our Venerable Scripps, Washington Bureau, and our local divisions National News resources to form one powerful national news outlet operating more efficiently and more effectively across every platform we own.
Beginning in January the name Newsy will be replaced by Scripps News.
The head of the division veteran in broadcast journalism Executive Kate O'brien joined the Scripps Networks Division in April 2021 to oversee Newsy in court TV. She will now report to me.
Scripps News is the first consumer facing news organization to carry the scripts name well respected in American journalism and by generations of Americans.
We made that decision as a sign of our commitment to serve our audiences with objective fact, based and nonpartisan news and information that they can trust just as our company has done for 144 years.
Commitment that's sorely needed in this country now more than ever here's Jason Thanks.
Thanks, Adam and good morning.
W. Scripps company delivered $612 million in revenue and $145 million in segment profit for the third quarter.
Those were year over year increases of 10% and 13% respectfully we.
We saw growth in local media political advertising and retransmission revenues as well as in Scripps Networks' revenue.
Local media revenue was up 14% driven by political advertising as well as retransmission revenue.
Core advertising revenue was down 12% in line with our guidance as we compare it against revenue last Q3 for the NBA finals, The Summer Olympics and sports betting launch campaigns.
We were the only local broadcast or at that time to outperform our 2019 third quarter number.
Local media political AD revenue in the quarter was 63 million that compares to $56 million in Q3 of 2018.
For the year, we expect to report $200 million of political advertising revenue a record midterm election performance.
Retransmission revenue was up 7% to $165 million.
Local media expenses increased less than 5% from the year ago quarter, excluding programming costs expenses were actually down about a half percent.
Local media segment profit was about $100 million.
Turning to the Scripps networks Division revenue for the third quarter of 2022 was $235 million up 4% from the prior year quarter due to connected TV and general market advertising performance.
Networks segment expenses rose only <unk>, 14% over Q3 2021.
As our fourth quarter, we have cycled through the investments we made to launch Newsy defy television and true real over the air.
Segment profit for the networks was $72 million.
In other segment results, we reported a loss of $7 million, which includes the spend for our national marketing campaign to promote consumer digital television antenna use.
Shared services and corporate expenses came in at $19 6 million.
The company realized Q3 income from operations of 38 per share.
As of September 30th cash and cash equivalents totaled $38 million.
Our net debt at quarter end was $3 billion and our net leverage was four six times per the calculations in our credit agreements.
Now I'd like to give guidance for the fourth quarter of 2022.
We expect total local media revenue to increase in the mid 20% range.
We expect local media expenses to be up mid single digits.
In the Scripps networks Division, we expect revenue to be down mid to high single digits against the exceptionally strong fourth quarter results in 2021.
Networks' expenses are expected to be about flat.
Fourth quarter shared services costs are expected to be about $21 million.
We expect about a $9 million operating loss and other segment results in Q4 inclusive of the cost for the digital antenna marketing campaign.
I'll conclude with updated guidance for a few full year items.
We now expect to pay cash taxes for the year of about $70 million.
We now expect capital expenditures of $45 million to $55 million, that's down from our expectations of $70 million to $80 million at the beginning of the year.
We now expect free cash flow for the full year of about $320 million due to a lighter than expected political advertising revenue and the macroeconomic impact on the national advertising markets.
We now expect leverage to be in the mid fours by year end, we plan to reduce debt by another $100 million to $125 million in the fourth quarter, bringing our total debt paydown since the ion media acquisition to more than $800 million.
And we remain committed to debt paydown as our top capital allocation priority and now here's Brian to talk about local media.
Thanks, Jason and good morning, everybody as.
As the 2022 election season winds down today, we are pleased to report local media has taken in a record amount of midterm political advertising at $200 million that compares to our last record of $194 million in the 2018 midterm elections.
We did not reach the 2020 presidential election level as we had hoped for reasons, mostly related to our political market footprint and where money was spent on competitive races across the country.
Back on our August earnings call, all signs still pointed to meeting our 2020 revenue number but then we began to see signs of shifting spending patterns, especially in three key states.
The first was Florida, where we had projected a close rates for Senator Marco Rubio, but the polls began to show his lead was widening.
Montana, which has been a significant political player for us in recent elections redistricting resulted in less competitive races in a couple of those markets.
To scale these Florida in Montana alone accounted for a decline of about $40 million and we've seen about $10 million less spent Nashville as Republicans have gained a solid hold on that state.
In addition, $20 million less was spent on ballot issues in our footprint.
More broadly across the industry election AD spending was dampened by lower than projected fundraising.
Early estimates were four $9 billion to be spent in the 2022 cycle, but now it looks like spending will be closer to $8 billion.
Within that $8 billion, we do believe we'll see that local broadcasters grew their share because campaigns continue to turn to us as their primary way to reach likely voters.
Turning to core advertising revenue, we landed right, where we'd expected for the quarter keep in mind, our Q3 guidance had a bit lighter.
Forecasts and our peers due to our comps against several high profile sporting events and several events that were unique to our portfolio in the third quarter of 2021.
In the prior year quarter, our 11 NBC stations broadcast the Summer Olympics.
Also in the 2021 third quarter with the NBA finals, which were out of their normal broadcast cycle due to the pandemic schedule.
The six game NBA finals included the Phoenix, SUNS, which provided a huge upside to our Phoenix ABC stations.
At the same time, we saw significant sports betting activity with a number of Scripps markets launching last fall.
Aside from those year over year comparisons, we did see some displacement from political advertising in our most competitive markets.
Driving the core decline was our services category, which accounts for a third of our core advertising services was down 12% in the quarter.
Our next two largest categories were actually up auto and home improvement.
Auto was up 5% due primarily to spending by domestic dealer groups and domestic factories as they begin to recover from chip shortage issues.
Home improvement, which has maintained its pandemic level strength and it's been a bright spot in U S consumer spending was up 12%.
Gambling was down more than 50% as state cycling through different stages, and the legalization of sports betting.
We expect those dollars to continue to be driven by launches in our markets.
Ohio, and Maryland are our next stage to rollout sports betting.
Beginning in January .
I'd like to close with a note about our mission. We recently received another reminder of the importance of local broadcasters and keeping our communities safe and informed during crisis.
As hurricane Ian was heading towards Florida, our local station Fox pour in Fort Myers began to broadcast from a backup location. So that you can continue to provide lifesaving information to the local residents.
Our station employees suffered their own personal hardships, but they persevered to serve their community.
And now Theyre, playing a major role in the recovery of southwest Florida.
At Scripps, we are proud to serve our communities, especially when they need us the most.
Now here's Lisa.
Thanks, Brian and good morning, everyone.
Scripps networks delivered Q3 revenue results today that beat our guidance coming in at 4% above last year's third quarter. Despite the macroeconomic challenges to the national AD marketplace. We've been launching nearly all of our networks across the largest connected TV platform and those drove our total revenue with nearly.
60% increase in connected TV revenue.
I want to reiterate Adam's comments that were expecting to exit this year and with an annual connected television revenue run rate of more than $100 million.
Discuss more in a moment about our connected television distribution, but first I'd like to continue with another bright spot in the quarter general market advertising revenue.
We grew our general market AD revenue by 7% commanding higher AD rates as a result of growing or maintaining viewership levels across our network.
The Scripps networks audience as measured by Nielsen grew 5% among total viewers this quarter.
Both are 4% year over year growth in Q3 revenue and our viewership performance outpaced our peer group.
Most of the other national networks, we're below or barely above last year's Q3 AD revenue.
Meanwhile, linear TV viewing is down 11%. So we're proud to have turned and best in class performance again this quarter.
Because of our growth against the linear trends the Scripps networks now account for more than 4% of all linear viewing and 26% of over the air households.
As you know O T. A household is an area we're working to grow.
And our steady and loyal viewership positions us to rebound quickly along with the national economy.
Last quarter I told you about our experiment to create the technical capacity to test local political advertising on our ion stations. We were pleased to have fully launched our sales effort in the third quarter and as of today, we've taken in about $8 million of political advertising revenue for the full year.
This is a bit short of what we said we expected in August and that is due to the same shifts in spending that Brian referenced earlier.
So we knew this would be a building year for networks and we look forward to growing our political advertising category, even more during the 2024 presidential election.
During the third quarter, we successfully completed our second upfront season at the networks portfolio meaningfully increasing both rates and new business. This year, we built on the momentum of our first year and retained nearly 90% of our new advertisers from last year and we grew our list of new premium <unk>.
Advertisers by nearly 10%.
In addition, we significantly outperformed the market in terms of rate growth, both at ion, which was up mid single digits and that balance which was up in the high teens range.
Our upfront dollars will again laying a solid foundation as we move into next year.
As I mentioned previously we've launched nearly all of our networks across the spectrum of connected TV platforms in recent months with a big slate of those beginning in third quarter.
All of our streaming channels are now on Roku, Samsung TV plus.
Amazon Service Freebie videos watch free.
Fox <unk> and Comcast owns the amount, it's still early but our programming at finding audiences on these services and that is resulting in our meaningful CTV revenue growth.
[noise] bounce and grid fully launched on Directv satellite streaming and AT&T U verse platforms in third quarter and I'm happy to announce we've reached an agreement with Youtube TV to launch ion in bounds for their five to 6 million subscribers on their basic tier.
Youtube TV will also relaunched newsy seemed to be scripts news and continue and will continue to carry court TV.
Now I'd like to spend a few minutes sharing our successes at bounds which's been serving African American audiences for more than a decade.
Over the past year and a half we have recommitted to building this brand to serving black communities I'm excited to share that we're delivering on our promise.
She is already making strides in elevating its content with strong storytelling, that's related <unk> and authentic Johnson is an original series written for bi and about Black men. This show completed its second season with great reviews and strong ratings performance.
Now we're also airing the original series, finding happy which gets voice to the black female perspective, because it's written for <unk> Black women. This show along with a renewed social media strategy around cultural connections has created significant engagement, while driving younger viewers to the network, we're seeing double.
Digit increases not just in our social media impressions and audience growth, but also in bounce revenue.
We are pleased to achieve the vision results this quarter that exceeded our strong performance last year with growth that was better than the national AD marketplace overall.
As the economy rebounds, we are poised to capture eating giving greater growth as we expand our margin and now operator, we're ready for questions.
Thank you ladies and gentlemen, if you do have any questions. Please press one then zero on your Touchtone phone.
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Again for questions Press, one then zero at this time.
We'll first go to the line of Dan Kronos with Benchmark Company go ahead. Please.
I appreciate all the color you guys gave us pretty actually solid national results everything considered.
Maybe just first.
Brian If you just double click on political for a second you guys have sort of a unique perspective I know it was early and initial but just any thoughts on how sort of the consortium with magnate performs because I know you guys did it sort of a you know a good.
Good job, explaining the shifts and what you thought was sort of more of a fundraising challenge there would be helpful to hear what you're seeing on sort of a cross platform.
Hey, Dan It's Adam I'll take the question on our connected TV efforts for political we definitely think that connected TV increased its share I don't think it increased its share isn't nearly as much as I think folks originally thought it would.
But.
No. We we use this year, primarily as sort of a test and learn opportunity for us and I think first and foremost the technical and sales executions that we learned this year will really benefit us in 2024. So I think there's some things that we're gonna change about the way we approach this moving forward.
I think we're going to continue to see more dollars flow into CTV and I think our sales apparatus will be we will be certainly more fine tuned in the coming cycles to be able to take advantage of that of that shift.
Hey, Dan, it's Brian I'll, just add that since.
And a lot of recognizance talking to a lot of the leads that the political shops and from what we're learning CTV, obviously did pick up a couple of share points in the cycle.
We believe broadcast local broadcast picked up a couple of share points in the cycle.
I think the.
The area that probably saw the biggest decline was in digital that looks like it lost a few points.
And radio declined as well so yeah, I think as I said in the prepared remarks, we feel good that local more than held its share of the AD dollars.
Got it that's really helpful and interesting to see how it develops out and my guess is you're CTV portfolio expands the other sort of top of mind question I'll ask Adam So I'm sure Brian will answer this one.
Retrans, you know little bit light, obviously with incremental sub decline.
You guys clearly have strong footprint coming up I think its about evenly split one Q2 next year.
Just any updated thoughts on net given just kind of the broader conversations being had on the space right now.
We're going to really throw you off this is Jason so I'm going to answer. This one so from a net retrans perspective, I think the messaging is pretty much aligned with what we've said the last couple of calls that when you look at this year based on the cadence of pay TV renewals and an affiliate renewals were gonna see net retrans from a margin perspective, a little bit of a headwind.
The dollars that are pretty flat, but when you looked at that 75% renewing that Adam referenced earlier next year that we expect some really nice margin and dollar expansion in 'twenty three.
Okay. So no impact from any other economics any economic scenario, Alright, and then I will I'll try at least and I'm sure I'll get Adam.
Lisa just on the network sort of evolution here.
I think you guys really have expanded distribution quite nicely I guess I'm, just trying to get a sense of how you're cross selling your thoughts on sort of evolving your go to market strategy here.
Into Q4, I think we had said that.
Pretty consistently that pharma has been very strong I don't know if that has receded dominant typically driven Dr. But how.
How that might be sort of a leading or a contributing factor to what you guys are seeing.
Yeah, It definitely Dan I think of all of the categories in fourth quarter in our guide the lightest probably N D R and I in particular, Dr. Ted I think from a recession perspective, because again, it's it's a call to action. The one 800 number or dial and I also think you know.
Third quarter Dr.
Was <unk>.
Light for the quarter and made up for it with political dollars as well as general market advertising in CTV revenue and so our approach to selling our portfolio is not changing.
Cross platform and cross our portfolio, which we think is really compelling and our story is all about reach as Adam said in his comments.
70 million viewers, a month across our portfolio, which is really really compelling to advertisers.
Alright, great. Thanks, very much appreciate the color everyone.
Thanks, Dan.
We'll move next to the line of Steven Cahall with Wells Fargo Go ahead. Please.
Maybe first for Adam or for Lisa just on Scripps networks, I think we're seeing margins now that are kind of well below where they were when you acquired ion pro forma for the other bits in there I know you've invested a lot between the content and the marketing and the distribution. So I was just wondering if there's any good way for us to think about kind of where.
Those segment margins head from here.
And Lisa with Youtube TV, I think there may be seven or 8% of pay TV subs do you expect an immediate revenue pick up from the launch on those services or do you have any sense of kind of what.
The demo that subscribes to Youtube TV does that cross sell pretty well against your your demo for those networks. Thank you.
Hey, Stephen I'll take the first question.
I continue to see the business is a 35% to 40% margin business I think we've now cycled past the the increased expense that we put in as investment with the launch of three networks last year as Jason referenced I also think that when you account for the dislocation, which we which we think is.
Sort of natural is part of what's going on on the macro on the macroeconomic level. We're back at a 35% 40% margin business. So I would expect us to continue to drive towards that Joan.
You know look I think we have to wait and see based on based on what happens in the national AD marketplace, but our thoughts are exactly in the same place as they've been.
Steven to answer your question about Youtube, where we're really excited about Youtube TV, because I think the demographics.
Skew younger on Youtube that we're excited about that for our ion bounce and also reintroducing scripts news into our Youtube. So are we.
Do you know that it takes time to build revenue and people to find you said applying some advertising dollars against that to make sure that audiences find us on Youtube.
As they have found us quite nicely on the rest of the connected TV devices.
Thank you and then.
Jason I know, you're not guiding to free cash flow or EBITDA for next year, Yeah. There's a lot going on you've got the higher cash interest and weaker AD trends, it's a big year for Retrans. So I think what we're trying to figure out is between free cash flow dynamics and EBITDA dynamics do you think you'll be able to delever.
Our next year from that mid fours, where you expect to end at the end of this year I think that's a big one where we think the stock is going to be sensitive to kind of to the up and down based on that so would love any color there. Thank you.
Yeah, So I guess I'll start by saying you know the $4 six we're at right now we're really pleased with that that's actually ahead of where we thought we'd be at this point in time, when we did the higher media acquisition by the end of this year, we'll have paid down $800 million in debt since we closed on the acquisition. So again pleased with our progress to your point, we're not giving guidance right now we're still finalizing up our budgets.
For 2023, but I would say, we remain committed to debt paydown has and pushing towards deleveraging as our number one capital allocation priority.
Okay.
Yeah.
Thanks Steven.
We'll go next to the line of Nick Zingler with Stephens go ahead. Please.
Yeah, Hey, guys.
It's about core revenues they were in line in the quarter.
But I'm curious for the expectation for for Q, because its obviously falls within that local media guide of mid 20% growth I think if I kind of take your political our revenues.
Revenues that you'd mentioned as of today and trend out some retrans I'm coming to our core growth of down 12% year over year in <unk>, which would obviously be similar to what you just did in <unk>. So curious if is that kind of sounds right obviously.
If so it would imply an uptick from <unk> to <unk> as we typically see it actually similar to last year, so that obviously wouldn't be implying too much caution and <unk>, but.
Given some of the.
More weaker thoughts, we've heard going into Porky from others, but maybe you can just kind of unpack core expectations as we move into the holiday season.
It's Brian .
I think your you know your math is good that's the right range for us to be thinking about us Okay. I think the biggest.
Factor in a.
Down call it low double digits.
<unk> analysis would be the heavy political that we've had obviously you know for the <unk>.
First five weeks there are some markets, where boy I don't feel like I've seen too many our regular advertisers on the air certainly living in Ohio, that's been the case.
But we have other markets that have been very saturated and so theres been significant core displacement.
That will open up starting at seven o'clock Tonight, or so, but you know I think.
We will remain open for business. There's a lot of November and December is still a business to be booked.
Many of the markets that we're not saturated by political had been having good core performance and so we think that will continue but I think you know when your crowd out so much over five weeks you can't get much more momentum than what we have.
No. That's fair and then the can you repeat the Florida in Montana commentary were you, saying that the softness in those states from the political aspect impacted revenues in the quarter by $40 million or was it $40 million across both <unk> and <unk>.
Yeah. It really was over the whole cycle. So you know when we had done our early modeling.
Montana, which has been a very significant political state for us.
We had expected to very competitive house district, redistricting reset, Montana and really softened. It I would tell you, though that doesn't change how we look at Montana.
And the next two cycles with Senate and governor up, but it'll be very competitive there and then Florida you know as I mentioned in my prepared remarks.
Rubio would.
Be a little bit more competitive I think one of the things that we started to recognize and kind of talking with posters and others who are there.
While it might have only looked like he was running three or four points ahead there've been several million Republicans that have moved to Florida in the last two years and once you factor them into the modeling the belief was that the lead was much greater since they werent in that sample. So in addition to that we had hoped and expected that Florida would put sports betting.
On its ballot for this year that didn't happen and so all those things rolled up to why our Florida in Montana would be two of the places that were fairly significant and kept us from getting to our early optimistic targets.
Got it got it very helpful. Last one for me you mentioned the digital the digital space loss political AD dollars, specifically when you refer to digital do you mean, maybe more like the social media players just cause I would I would still expect like CTV as a digital platform to gain share, but just a.
Or if a kitchen like maybe where specifically within digital.
Political ad spend shifted out.
Yeah, Nick look I agree with CTV I think we'd look at separately and we've broken that out and as we said that did pick up a couple of share points I think as we think about digital specifically, what we're seeing is Google and Facebook and to some people we've talked to it looks like they may have been down as much as 50% are in the money that was Alex.
To those platforms.
Wow, Okay, great alright, thanks, so much guys I appreciate it good luck.
Thanks, Nick.
We'll go next to the line of Pat Mccann with Noble capital markets go ahead. Please.
Good morning, I, just had a question or two on behalf of Michael Pinsky.
Could you guys just given the the shifting political spending and kind of what you mentioned earlier.
Does that have any.
Implications I guess for what will be the battleground markets in 2024 and kind of how we should look at that going forward.
Look I think we're it's Adam.
I think we're obviously going to do the same kind of analysis. We do ahead of every cycle to determine where the races are tight where the issues will be on the ballot and what the opportunity will be for US first for 'twenty three and then for 'twenty four I don't think we've seen any sector.
Fuller change to political spending that give us any pause relative to broadcasters take in fact, as we've said a couple of times, we actually think the broadcast space will have gained share during this <unk>.
During this cycle, but we will as we always do and assessed our footprint for the opportunity as we move into the next year.
Pat It's Brian I would just add you know we're sitting here on election morning, but know that we're already looking ahead and you know in 2024 33 Senate races will have 17 of them a couple of them. We would expect at this time to be pretty competitive crews in Texas tester in Montana, We think will be very aggressive cinema in Arizona, Ohio.
Brown and then.
A couple of big Governors races. We think are our June 14, Montana will be another big race. So you know, we know where the races will be you know as we get closer we'll see how competitive they are where the money shifts I mean, I think that's certainly what we dealt with here the monies in the system you just gotta be where the races are close and tight and then a lot of money moves there.
That's certainly what we have seen now you know in the last couple of weeks and unfortunately that that last run of spending here over the last couple of weeks, having money went into Pennsylvania in New Hampshire, Washington, New Mexico, Georgia, North Carolina.
Don't have states and then we don't have stations in any of those places. So I mean, there are other places that money kept going and we benefited from that but a lot of money moved to those.
That maybe would have been near March of our markets, but our markets werent as competitive as we would've hoped down the stretch.
Gotcha. Thank you.
And then one other just a discount.
Just kind of you mentioned, some Q4 pacings guidance, but just kind of on an ex political basis sort of thinking ahead to say.
December .
Is there a kind of a how would how should we look at you know.
Revenues are sort of ex political in Q4.
Look I think you know as I said.
There's still a lot of business to be written.
You know.
December we expect to a lot of points still to be written there. So you know I wouldnt move beyond our guidance other than to say that we do have some momentum in a couple of categories I'll speak to I'm sure somebody who's going to ask you about automotive anyway, but you know we spoke about the fact that automotive was up 5% that's a first.
Water in years that we've seen.
Quarter to quarter growth and it built through the quarter in third quarter automotive was down 12 in July up four in August up 25 in September and I will tell you that in October and November we continue to see more than 20% growth in automotive. So that's one one key category that's now coming.
Back fairly strongly and I would guess I would just also add that I think we're starting to feel like the biggest pressure from supply chain is behind us because not only do we see automotive now gaining momentum, but other categories or subcategories that last year were held back by supply chain issues like apply.
<unk> Hot tubs, all of those categories are up they're up double digits. So we feel like finally, the supply is catching up and providing an opportunity.
Excellent. Thank you so much.
We'll go next to the line of Craig Hover with Hover Research partners go ahead. Please.
Oh, great. Thank you Brian I guess my first question is your Retrans subs, what was the year over year percent change and those that affected your retrans revenues in the third quarter.
Hey, Greg it's Jason So we were down on a trailing 12 months mid single digits. After talking last couple of quarters of being down in the low low single digits.
This slight change in subscriber churn really from our perspective, just brings that trailing 12 month trend back in line with our modeling assumption that we've had for a while now of down mid single digits.
How are you thinking about that number as you think about next year and in your in your budgets do you think that's a reasonable range to be in for next year or do you think it could be worse better what are you thinking.
I think we've thought that was a reasonable range for a while now and we will continue to think that mid single digits as a reasonable range.
Okay. My next question. Please net retrans for this year.
What are you expecting that to be the percent change versus last year.
So net retrans this year based on the timing of pay TV affiliate renewals is down a bit for us this year, but net dollars of flat.
But when you look ahead to next year with 75% renewing we expect nice margin and dollar expansion.
Okay and then.
And is there anything else you can tell us about the core advertising I know you've talked to this a bit here post the election.
Some of the other categories I mean, I guess my bottom line is I'm asking is from a macro perspective have you seen a significant pinch from the headwinds on the macro side in your core advertising or is it just too hard to break that out in your mind right now.
Look I don't think it's too hard to breakdown you always have the.
Inconsistency of a fourth quarter, where you have political that dominates five or six weeks and so you have the markets that are just completely consumed by it you also have the markets that you expect it to be fully consumed by it and then suddenly wound up a little bit lighter, but I do expect a lot of momentum now in the next couple of weeks and then I spoke to.
Auto there Craig.
A lot of momentum there and we talked about you know the.
Travel and leisure being up home improvement up so we do have some categories that are up but we are also seeing the effects of the economy and and you know some of the prices and the implications that are having an impact on some services or.
Grocery and and other.
Other subcategories.
But look overall I think.
You know we feel good about some of the build that's happening.
Especially in categories that were dominated by supply chain challenges over the last two years.
And then back on the your political comments and I appreciate what you've given us so far I mean.
Every one of your T V pure play peers out there shouldn't leave it reported disappointing political numbers for the third quarter the outlook for the fourth quarter here I mean, it sounds like you're part of what Youre, saying, here's the overall fund raising was meaningfully lower not the 9 billion, but that was roughly about 8 billion.
In total that sounds like there was a big part of it in your mind of a shortfall you also talked about political dollars shifting to markets of scripts is not in U.
You mentioned, Washington, Georgia, North Carolina, and all of your other peers have all of it just like you guys had a shortfall here in political where those dollars go when you say that on a net basis I mean, who's really benefiting here at the end of the day. It was it just the top 20 markets that the pure play guys on order and it's all the network guys owning those stations.
Look I think to a Craig it's Adam a couple of things first post primary there were some candidates that one that were very popular with the electorate, but were not popular with the big donors and those candidates probably led those candidates winning the primaries.
Robley led to some of the shortfall in fundraising.
Second of all the widening of the races in certain markets allowed dominant candidates to build war chests and hold onto their dollars and not necessarily spend them.
Okay, and then you have the you have the effect of the <unk> of the portfolio or the footprint. So I don't really believe that.
This resolved itself in any way in any sort of negative way for broadcasters I mean in reality, we broke our last record for the midterms.
If anything I think it just didn't meet our expectations of surpassing the presidential cycle, which is which is a which has got a different dynamic working for it.
The American people are very entrenched where they stand.
And I think early in the summer the spending didn't necessarily.
Didn't necessarily move people off their positions.
And races widened.
So I don't think there's an existential question out there around political revenue and broadcasting.
Okay, great. Thanks, guys.
Thanks, Craig.
We have no further questions in queue at this time.
Great. Thank you so much Alan thanks, everyone for joining us today take care.
Ladies and gentlemen that will conclude your conference call for today. Thank you for your participation and for using AT&T event teleconferencing.
May now disconnect.
Yeah.