The E.W. Scripps Company Q1 2023 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Scripps first quarter 2023 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be provided at that time. If you should require assistance during the call you can press Star then zero.
On the call is being recorded I'd now like to turn the call over to our host Ms. Carolyn Micheli. Please go ahead. Thanks.
Thanks, Brad 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.
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. 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 or the reckon.
Filiation of 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, and then Scripps Chief operating Officer, Lisa Knutson, Here's Adam.
Thanks, Carolyn and good morning, everybody I'll start this morning with some of the news we've broken over the last few weeks and sports less than six months ago, We launched Scripps sports because we saw the opportunity to leverage our unparalleled national reach and local market depth.
Free over the air broadcast and all that comes with it is the most ubiquitous and fan friendly of distribution platforms. Since then we've been exceptionally busy two of the deals we've been working on are now public. The announcement, we made yesterday with the Vegas Golden Knights, a thriving national Hockey League franchise and have.
So our partnership with the WNBA.
We're very pleased to be launching our first scripts sports programming. This month, the WNBA Friday night spotlight on ion begins on May 26, what the WNBA gets from US is full nationwide reach through free over the air connected TV services and cable and satellite.
Next week, we expect to announce a high profile titles sponsor for our WNBA Friday night franchise, a blue chip advertisers that believes as we do it's high time women's sports like the W. N D. A R. Given the same visibility as men's sports, which these athletes teams and <unk>.
Fans deserve the broadest of reach and appointment viewing consistency.
We're thrilled to be providing these benefits to the WNBA at a time, a burgeoning appreciation for and interest in women's sports and why wouldn't there be great interest WNBA games are a display of intense competition, while the players athleticism and personalities make for the very best TV.
It's no wonder that last season, WNBA viewership was up 22% and even with limited reach.
Now the vast distribution on ion will give the league maximum visibility so fans everywhere on any TV platform will gather together every Friday night for this franchise TV event.
While the WNBA deal takes advantage of our national reach yesterday's announcement with the Vegas Golden Knights is intensely local <unk>.
Script sports and our stations K T N V N K MCC in Las Vegas will starting next season Bee the exclusive local media partner for this incredibly popular and H L team ending the artisan model in Nevada, and bringing hockey too every TV platform.
A big win for NHL fans, the Golden Knights and scripts.
It's important for investors to hear this from the beginning we've pledged to be very financially disciplined in our approach to live sports even willing to walk away if an opportunity doesn't pencil for us.
Every one of our partnerships will enhance the value of our linear TV business be another catalyst for the continued growth of free over the air television and create shareholder value, while representing a new model for the way teams and leagues can grow their fan bases and continued to create immense value for there.
Our stakeholders.
There is no argument that live sports is the biggest driver of linear viewing and commands the highest advertising rates in television.
We see our expansion into live sports as not only a value creator with the actual games, but another important way to engage audiences with our TV stations and news brands.
We launched Scripps sports as part of a larger strategy to enhance the value of our core assets our scale and distribution.
We are positioning our company to capture opportunities in three principal ways first in the industry growth areas of news sports and entertainment.
Second with existing and emerging TV distribution platforms, and third with data casting and other businesses enabled by a T. S E three dot O.
We are now in the midst of a companywide reorganization of roles and responsibilities that Centralizes management functions, So where executives have the broadest possible view of scripts as opportunity and these three growth areas and are able to move quickly to create value.
Scripps Sports is a good example, the WNBA makes use of islands existing national reach while the Golden Knights partnership opens up the opportunity for us to launch a new independent station in the growth market of Las Vegas with valuable live sports has an anchor tenant for programming.
Both cases are examples of us seeking the best and highest use for our spectrum to increase yield.
In scripts news, you'll see another good example of our focus on our content genre critical to creating value in linear television.
After centralizing operations, we've now deployed our National News resources as the foundation for our company branded network.
Scripps news reaches nearly every U S households over the air and on connected TV and it's designed to fully serve our local stations news consumers with objective fact based reporting <unk>.
Scripps News now becomes an important driver of high quality journalism across the entire company, while helping US also avoid additional cost.
In addition to building value with journalism in live sports, we continue to focus on both existing and emerging TV platforms.
Our sports distribution and high quality scripts news content will bolster the use of free over the air television.
And we continue to build our connected television distribution as well and we're seeing significant gains in advertising revenue there.
And as you'll hear in a moment, we continue to leverage our strong partnerships with cable satellite and virtual pay TV service providers, who by the way capture nearly two thirds of Americas 120 million television households.
Our third strategic focus is the use of our spectrum for alternative business opportunities through <unk>.
We're well into a collaboration with Nexstar HPE and Sony together, we've built and are deploying a core network that leverages, the new television standard to open up new data casting business opportunities.
Combined nexstar and scripts represent the single largest broadcast spectrum platform and duplicated reach of nearly 90% of U S population.
That includes significant contiguous spectrum, along key transportation corridor is a major selling point for data casting services.
Now this is not a case of a hollow press release, but it's also not yet something to put in your financial models.
Now that we have a core network will next develop out the marketplace testing with the auto industry energy agriculture, and logistics among other potential customer basis.
In addition, we are encouraged by the FCC's new future of TV initiative. Several task forces created last month to accelerate the three dot O transition and ensure that every American will continue to have access to free over the air TV.
While theres still much work to be done to create what bee IAA Kelsey says could be a $10 billion to $15 billion marketplace for broadcasters I'm increasingly bullish about this new industry catalyst and we will make sure investors know when we have the first customers on board acts as a signal of the potential to accelerate the opportunity.
Hey.
Scripps is recent sports distribution announcements the scale of our National News brand scripts news and the opportunity. We see ahead with our spectrum should catch investors attention.
The company is doing what it has done so well time and time again over its 145 year history, creating shareholder value.
Economic cycles are short term hurdles that our strategic focus is long term and we will move into the next economic upturn as we have in the past as a stronger company with a better operating profile stronger margins and greater growth ahead now here's Jason.
Good morning, everyone. We're pleased to be reporting Q1 results that met or outperformed the guidance. We gave back in February despite the challenging economic climate.
In our local media Division revenue was down four 5% and core advertising revenue was down 10% as local and national businesses continued to deal with ongoing inflationary pressures on consumer spending how's.
However, excluding the impact of the Olympics and the Super Bowl in Q1 of last year core revenue was down only 6%.
Distribution revenue was up two 4% to $163 million fueled by growth in virtual pay TV households, and contractual step ups.
As of April we've renewed a third of the pay TV households, we are resetting this year.
Local media expenses declined by about 2% aided by moderated network programming cost by our move to Comscore and by tight expense management in this economic environment.
Local media segment profit was $46 million.
Turning to the Scripps networks Division revenue for the first quarter was $216 million down nine 5% from the prior year quarter, when we reported industry leading revenue growth.
Network segment expenses were $165 million, a 7% increase tied to higher cost for distributing the networks.
Segment profit for the networks was $52 million.
And other we reported a loss of $1 5 million.
Shared services and corporate expenses were $23 4 million.
The loss attributable to shareholders of Scripps was 31 million or <unk> 37 per share.
Restructuring costs for the quarter increased that loss by <unk> 15 per share.
We announced in January that we are undergoing a companywide reorganization and the restructuring costs are related to that work.
It also includes a write down of some programming we were using for our former network true.
We are now leasing our spectrum to jewelry television.
As of quarter end cash and cash equivalents totaled $16 5 million.
Our net debt at quarter end was $2 9 billion and our net leverage was five one times per the calculations in our credit agreements.
Thats a bit higher than the end of the fourth quarter because in our trailing eight quarter calculation, we've begun to lose the benefit of several quarters, where the economy was bouncing back after the pandemic.
In the two years since we acquired the Iron network, we've paid down nearly $900 million in debt.
Looking ahead to the second quarter of 2023, we expect total local media revenue to be flat to up in the low single digit percent range.
We expect Q2 local core AD revenue to be down mid single digits.
For the full year, we now expect local media distribution revenue to increase in the mid teens percent range. That's a revision upward from February when we said we expected the full year to be up in the low teens percent range in.
In addition, we now expect 2023 net distribution dollars to increase by more than 40% up from the 30% we guided to last quarter.
Also for the full year.
Bringing down our guidance for Capex as we shift some cash spend into next year.
We now expect 2023 capex to come in between 65 and $75 million.
Turning back to the second quarter, we expect local media expenses to be up in the low single digits.
In the Scripps networks Division, we expect Q2 revenue to be down high single digits and expenses to be up mid single digits due to higher distribution cost and the startup costs for our WNBA agreement.
Second quarter shared services costs are expected to be about $25 million, that's higher than normal for the second quarter, because we shifted stock compensation costs from the first quarter of this year due to the reorganization.
We expect about a $6 million loss and other in Q2.
For the full year, we expect our free cash flow to fall in the range of $50 million to $100 million we.
To place our highest capital allocation priority on paying down debt.
Finally, we're on track with our expectations of realizing at least $40 million in annual savings from our company reorganization.
We expect those savings to be mostly mostly operationalized by the middle of next year and we expect to reach at year end 2023 run rate of around $20 million in savings.
Excluding the programming amortization write down we expect to take about $15 million in restructuring charges. This year. This includes $2 9 million in restructuring recognized in Q1, and the expectation that Q2, and Q3 of the largest charges of the year.
Now here's Lisa to share highlights from both the local media and the Scripps networks operations.
Thanks, Jason and good morning, everyone work at Scrip continued diligently through the first quarter on the Companys restructuring plan as Jason said, we are on track to realize the 40 million plus in savings. We previously outlined we are focused on both aggressively tackling the near term challenges in the media marketplace.
And creating a more efficient cost effective and high performing business. One that is well positioned for long term value creation. While this has been a time of uncertainty for our employees. We are very proud that our teams have remained focused on the work at hand to serve our audiences and communities and to deliver strong financial results.
Al.
The country's economic malaise continues to put pressure on our businesses local advertising remained relatively stronger than national largely to the return of automotive spending, but we do feel pressure across the whole advertising marketplace.
In local media, we continue to see softness in our largest core advertising category services services was down 14% in the quarter with banks and insurance companies showing the largest declines.
Our two strongest performing categories were home improvement and automotive auto hit its third consecutive quarter of year over year growth driven by local dealers and domestic dealer groups and finally need to move inventory up there like we see local dealers as the best opportunity for continued growth in auto this year.
In addition, the chip shortage is about half of what it was at this time last year, which is another good sign of spin into cotton.
Another highlight of the quarter was the NC double a basketball tournament, which brought in nearly $2 million for local core up 13% from 2022.
Now we are looking ahead enthusiastically to the NBA finals in June and the promotional dollars. We expect ahead of that big linear TV event. These two examples highlight the power and value of live sports.
Local media distribution revenue will continue to build this year as we move through the renewal of three quarters of our subscriber households, we've already concluded a third of those renewing this year and we're well underway with other big contracts. We continue to maintain strong partnerships with both legacy and virtual pay TV services as they run.
Ignite the value created for them by local station.
Turning to Scripps networks, we once again are outperforming our peer group in terms of bad Robin now across the portfolio. We saw increases in top general market categories, including pharma and restaurant and declines in CPG retail and media as well as the 20% decline in direct response advertising D. R is very sensitive.
Inflationary pressures as consumers tightened their spending however, our hope is that the easing of inflation will bring back that important category quickly and in the scatter market. We are seeing sequential increase in dollars from Q4 to Q1 and again as we move to a Q2.
Spots in the quarter included a 33% increase in year over year revenue for court TV, which continues to benefit from high profile trial.
And for the full portfolio connected television revenue grew nearly 46% from Q1 of last year due to the growth in audience numbers in hours watched and the timing of our network lunch it.
Another Q1 highlight comes from Bell, where our original theories Act your age launched March 4th as the most watched new half hour series in the network's history, we continue to draw more than 1 million viewers a week for this terrific sitcom.
Another recent bright spot for the network is our agreement with the WNBA. Our teams are now preparing to Aaron WNBA games on I am beginning on May 26. This includes marketing the WNBA Friday night spotlight on eye on franchise night, selling advertising and sponsorships for the game and ramping up our distribution network.
We see this arrangement is similar to the way cable networks integrated sports into their entertainment programming.
Viewers have adapted easily the difference here is that audience visits can get these games free over the air from Us, which will both throughout new eyeballs to ion and allow the WNBA tremendous new reach to its growing fan base.
Another big event coming for ion is the Scripps National spelling Bee, please tune into the finals on Thursday June 1st at Juniper.
<unk> person at eight P M eastern to be wowed by an amazing young sellers.
As you know script brought production of the spelling Bee in house last year, and we've built a high quality production of the national competition, which reached more than 7 million viewers in 2022 that was up 150% from the year before.
For this year, we've secured premium blue chip sponsors, including Tyson Sonic PNG and Bristol Myers Squibb, Scripps is proud to be at the steward of this iconic American educational program, which is nearly 100 years old.
Our final business highlight comes from our local newsrooms, we have been working on there are a number of initiatives over the last few years to get new consumer insights. We are learning what we are learning is informing our efforts to reinvent the way local news has created and delivered we know our audiences want deeper more contextual news.
And they want us to engage them authentically.
We also are using technology to plan and produce the news more efficiently and to get more reporters into the field.
In addition, we're fostering greater collaboration between our local newsrooms and Scripps news to provide our communities with the objective fact based and high quality local and National news and information.
All of this work supports our commitment to creating a better informed world and raising shareholder value and now operator, we're ready for questions.
Thank you, ladies and gentlemen, if you do wish to ask a question. Please press one and then zero on your telephone keypad you.
So you can withdraw your question at any time by repeating the ones. They will command if you're using a speaker phone. Please pick up the handset before pressing both numbers again to ask a question that's one zero.
We can first go to Steven Cahill with Wells Fargo. Please go ahead.
Yeah. Thanks, Good morning, maybe first Jason so it sounds like net retrans is going to be better for the year and then definitely an improvement I think in your free cash flow expectations and it sounds like maybe a little bit of an improvement in your EBITDA expectations in the first half of the year. So I can't do all the math. This quickly do you expect to get.
Any net deleveraging by the end of the year or as you swap out those stronger 21 quarters for 23 does it still like it'll sort of stay in this low fives.
And then secondly for Adam So you've got a couple of other sports deals now done which look really solid.
We've seen one of your peers do a deal with a team that was on Diamond Sports group in and they've also.
<unk> said that there could be some litigation associated with that how do you look at the Diamond sports portfolio do you think it creates opportunities are you going to kind of wait and see how some of those things play out since those situations seem a little more complicated. Thank you.
Thanks, Stephen so on the leverage question. So the headwinds we're facing in the evening.
We are certainly putting pressure on our leverage you saw that with the move from $4 seven at the end of last year to five don't want at the end of this year.
And as you referenced that's going to create some challenges on a rolling two year EBITDA. So given those headwinds I would expect to see leverage move up a bit more in the back half of this year, but as you kind of fast forward to next year you look towards the.
The end of 2024, we'll have the benefit of a really strong and robust political cycle.
Three year impact of all the distribution step ups that we have.
Cycling in this year and rebounding economy, we would expect to be at a much better leverage point next year. In 2024, then than we are right now.
Thanks for the question Steve.
Yes, I think we are off to a fast start I think we've told investors from the beginning we expect to do deals that are accretive for scripts and that create.
Additional profit for the company.
And thus far all things look exactly as we as we promised.
I don't want to comment on anybody else's deal.
I would say diamond sports in general and the collapse of the Rsi model does open up significant opportunity for us and broadcasters and I think there are a number of opportunities continuing to present themselves whether they be because.
The <unk> is not going to be in a position to continue to carry a team's sports or because our league is looking for an alternative vehicle to reach more Americans you saw that with the WNBA. The WNBA was looking to expand reach.
I would tell you.
That certainly the Golden Knights wanted to talk to us about the breadth of our reach because they recognize that engaging more fans both in their core market as well as in their sphere of influence is essential for the growth of their sport. So we bring that.
Beyond just the collapse of the RSM. If you continue on with an RSA or with cable youre essentially looking at a declining audience on that platform, regardless because of cord cutting.
We would continue to look at opportunities to expand Scripps sports locally and nationally and I expect we will have more to say about that to come.
Thanks, and if I could just follow up with one for Lisa we found that connected TV revenue growth and the guidance for the year. As you then think about what the company's doing and in sports. It seems like the sports audience is a very kind of connected TV first type of audience. So is there anything that you're doing too.
To have that content sort of front and center for the connected TV world, whether it's app launches or branding or marketing on connected TV platforms hasty.
Hey, Steve It's Adam I'll I'll take it.
First of all I think youre spot on I mean, the opportunity for us to bring sports to eye on or to any of our local stations is not just about bolstering hotelier, it's about bolstering linear TV and we see our distribution in the connected TV marketplace as linear.
TV, it's not on demand it's alive, it's linear it's just being delivered over a digital platform versus otas versus pay TV and you know we execute that all of the above strategy. We are definitely working with our.
Our CTV partners to ensure that they recognize the opportunity we bring to the table when we're bringing this live sports because as you know live sports is not something that has historically been available on the SaaS platforms will now it will be an eye on and now it will be with with any local sports deals that we do.
So we're really ambitious and really excited about the opportunity we will certainly be doing some marketing of the WNBA on all of the platforms, where the WNBA as existing fan base as well as the ion and WNBA fan bases that we wanted to expand into or whether it be on social on linear television.
The connected TV marketplace.
Thank you.
And next we'll move on to Dan Koon said with benchmark. Please go ahead.
Awesome. Thanks, good morning, everybody.
I have a bunch, but I'll try to limit myself to a handful Adam just around sports.
Can you talk about your ability to potentially increase programming around some of these marquee wins. That's a thought do you fill in some other hours with the original sports betting other stuff that we've seen in the past and is there any way I know the league generally.
Your responsibility is there any way in a few markets.
But you were able to participate in some of the Rev share as you launch those initiatives.
Yeah, absolutely I'll start with the second question on every deal is different.
And so for example yesterday with the Golden Knights announcement, we also shared that we would be partnering together on the D to C opportunity with the Golden Knights. So.
It's going to be a.
Nuance from market to market or from League to league, but I would expect you should continue to see us.
Our work to continue to participate in one way or another in D. C. The premise of our partnership with these leagues and teams is that over the air broadcast and everything that it brings with it is the top of the funnel. It brings the greatest reach.
And so we recognize the opportunity for both the leagues and the teams to create additional value further down that marketing funnel, whether it be through sports betting through D to C thru ticketing and merge and on some of those elements, we expect to participate going forward.
And your thoughts around incremental programming around those yes did you mean adjacent programming or did you mean, yes exactly.
And poly scheme, but like even beyond like additional half hours or something just dedicated to that stuff that might replace ion program. You've got a thought or are you just not.
Yes.
Well no I mean, we're definitely looking at working with the leagues on adjacent programming they've been very very open to recognizing the value that that adjacent programming can have with respect to promoting the products promoting the the live games and their brands in Las Vegas, we'll we'll be producing several.
A different.
Additional shows both with the Golden Knights and through our news operation in order to support the Golden Knights brand in the ratings of the games.
We expect to use our ABC station is a massive promotional platform as we stand up that new independent in Las Vegas.
The work we've done with the WNBA and the NBA also recognizes that there is an opportunity for additional partnership around other programming, but keep this in mind, we have a really good business in Ireland and so when we model. These deals we model them understanding that we expect to beat our hurdle rate and so.
Likewise with adjacent programming, we have to make sure that the economics makes sense to us. This is not a passion play for US. This is a business opportunity and we're always looking to identify programming that will draw in a bigger audience, a better audience more valuable audience, not just put sports programming for the Sega.
Sports programming, so we really want to make sure that anytime we transition from for example, a very popular procedural two sports programming that it's going to benefit our platform.
Got it no that's fair and that's very helpful. Thank you.
Jason just on the distribution side, well actually first housekeeping, what's kind of your thought.
On the pace of political after you reported Q1, we've seen a little bit of downtick from some of the peer group.
Color on political assumption.
Q2 political assumption.
Oh, Hey, Dan it's Lisa so.
I would say our political forecast for 'twenty three is on par with the last two years off cycle election year. So.
We expect to be in the $23 million to $25 million range for the year.
In Q2 is kind of similar to Q1 of them.
You know first quarter activity.
Was a little bit ahead, I would say and I would say Q2.
Certainly there is some races in Kentucky, and Colorado Springs that are helping.
Helping us to potentially.
Yeah.
Maybe.
To be a little bit ahead of <unk>.
Q1 of 'twenty, one but.
And of course, there is still building.
I think Kentucky. Its primary is next week, so that money is.
No.
Being built as we speak.
Okay.
No.
If you're referring to kind of Q1 of this year versus kind of Q2, I would say generally we would expect in the same ballpark.
Okay perfect.
Yeah.
With all the pieces.
Obviously very strong for Q2 and for the full year.
I mean, I think you said in the script in the prepared remarks or at least with a really rough like a percent. So.
We know there's been mixed the virtual hurdles been outperforming in Q1, and you're raising your guidance. After what I think people generally view is a little bit of softness in linear reporting from the big Mvpds.
Help us think through kind of the rate versus balancing maybe are sort of your sub expectations embedded in the balance of this year given the dynamics in Q1.
Yes, so we.
And I think we referenced earlier, we actually had our most recent reporting and obviously, we do receive information on a bit of a lag was really positive. It was actually up when you netted in the virtual growth against the upturn on the traditional.
That being said we've over a longer period of time, we don't take one quarter as is our new number that we based our models off of.
We in general believe that net sub churn will continue in that down mid single digit range on a trailing 12 month basis and that is consistent with what we have baked into our outlook and so.
So that is kind of baked into the up mid teens on the.
Gross.
<unk> side.
And next.
Pardon me and next we go to Michal Krupinski with noble capital markets. Please go ahead.
Just a couple of quick questions here in terms of your guidance for your National media going into Q2 I was wondering is keeps an eye on performing equally or is one performing better than or.
Or less than the guidance.
Yeah.
We definitely look at this as a portfolio and we sell as a portfolio. So.
I would I would say the malaise in the economy is.
Certainly across all of our network.
I would tell you because I often it has more exposure to general market and scatter I think in my prepared remarks, I mentioned that scatter has improved from Q sequentially from Q4 to Q1, and we're seeing that same trend in Q2.
And those networks that are more dependent on the general.
And Dr advertising are probably a little bit more exposed.
And then certainly eye on it.
Gotcha, and then given your expansion into sports programming I was just wondering what would the company consider owning or taking investments and support teams.
Look right now our top priority is de levering so as we've said before.
We're an opportunity to come up that made sense for us we would we would look at it but that's not really part of our strategy. We are a media company, we'd certainly look at the opportunity. We do have a very modest investment in an E sports.
Our team.
That team is or that series of teams is almost more like a media company itself.
But I would say the most important thing to signal would be look where we're really focused on paying down debt.
Got you and I know that other broadcasters that made a big deal about starting to build out their core.
I know that you have already built core your core and several of your markets potentially offering data casting how much is left to be done on that and I assume that you plan as the basis. So can you give us a thought about annualized capex that you plan to allocate to building out your core and then Adam it sounded like you're pretty optimistic about getting.
Some revenue from data casting is are you kind of factoring that in as of 2024 prospect and if that's right can you cut when do you think that.
You might we might start to see some meaningful revenue from data casting.
Thanks, Mike Yeah, we are live with our core network in four markets.
Youre pointing to exactly why we want to really get right. The marketplace's development before we do signal any additional significant capital investment I think we're really along with Nexstar taking a.
Our prudent approach to building. This out we have the most important thing we have is the spectrum to reach 90% and duplicated population and as I said a lot of that spectrum lined up on transportation corridors check we have that in hand, I think the next thing we're thinking about is.
What's the marketplace look like for this how do we work in collaboration with private <unk> networks to create a more efficient data platform for industry looking to two.
To push a lot of data through in a secure way as we develop that marketplace. We will definitely be sure to be reaching back out with invert to investors and sharing more details on how that's going I think it's probably early to tell you that this is something we're modeling into 'twenty four I do think we're going to see revenue in 'twenty four but.
Do I think it's going to be the kind of material revenue that investors are going to.
Get Super excited about not quite yet I think I would rather under promise and over deliver so let us work on the marketplace and then we will definitely be back to investors with a high level of transparency as the business comes together.
Thanks, Adam I appreciate it that's all I have.
Mike.
Next we go to Nick <unk> with Stephens. Please go ahead.
Hey, this is dean on for Nick We were just wondering if you could peel back the onion on the go to market for the Golden Knights.
And WNBA broadcast because we're under the impression that the shoulder programming most lucrative aspect of those partnerships.
Maybe if you could level set us there sure.
Sure Deane look we really are working off of a different playbook.
So whatever you sort of know about the sports business model from the past, it's very different today with us. So for example, we put together a deal with the Golden Knights that allows us to acquire the rights to the Golden Knights bring to them full distribution both in market.
And beyond and monetize.
The Golden Knights, the Golden Knights live games, so for us.
That means essentially a minimum of 69 regular season games and the potential for even first round playoff games.
And we expect that to be to be an accretive opportunity for us whether theyre shoulder programming around it. This is not a deal done on what I would refer to as Halo economics, let's overpay for sports and then try to make up some sort of cost around the sport we're really.
Looking at deals that are accretive to us with a P&L within the live sports window and the same is true with with the WNBA or deal with the WNBA brings them full distribution on multiple platforms through our over the air platform.
So that every Friday night, we're able to deliver all of the WNBA games to fans across the country in the local markets as well as nationally and our deal has us.
Creating profit for our company thinking about the beginning of the game and the end of the game.
Obviously, we expect to be able to retain a lot of the new audience, we're bringing but the economics that we built these plans off of do not count on a quote halo effect from overpaying for live sports.
Okay.
That's helpful. Thank you.
And just a follow up if I can we sold the CBS affiliate for boat and pass come to a resolution and we were just wondering if you could add any color on how that resolved and maybe does this uphold the sort of status quo for networks as intermediaries or you think the affiliates have gained some additional.
Leveraging these.
The mvpds negotiations.
Well look I think there's no question that what you saw happened there was the affiliate body.
Step up and require fair compensation for the distribution of our signals.
And I think what's clear is the virtual mvpds recognize the value of the live feeds coming in from our local stations as a result of everything from the local news to you know now the local sports we're talking about so that value that value should be.
Should be fairly compensating.
For us.
I don't think it changed anything structurally or legally I do think there are.
There are occasions, where companies like Scripps company's with other assets not just local broadcast stations are able to also do direct deals with virtual mvpds youre, starting to see that as well in the marketplace, but at the end of the day I think this is an affirmation of what we said to investors there is tremendous value in the.
Our local distribution of these fees and the virtual mvpds, they want that local feed because otherwise they lose.
That which makes TV inherently geographically local sitting.
Sitting in Cincinnati and watching Wcbs is not a good experience for that virtual mvpds and so there was a lot of pressure from across the industry to ensure that we were we were structured appropriately and that the local affiliates were fairly compensated by the networks.
Okay. Thank you.
And next we'll go to Craig Huber with Huber Research partners. Please go ahead.
Great. Thank you a few questions first on this new sports program that you guys are talking about how would you model. This in terms of how long do you think it might take to.
To get the margins for those.
Hours a year.
Putting the program programming on your.
On the networks and local television stations to be accretive or in line with margins, where they're at right. Now is it. After the first season do you think almost right away how long as you can see how what are you modeling I'm curious.
Yeah, Hey, Greg Jason Yeah, we model these deals to be gross profit positive year, one and you know so take the WNBA deal. For example, we have a profitable programming lineup today on Friday nights. So we modeled the WNBA opportunity to clear our internal hurdle rates on the existing program profitability in that time slot and we're taking that same approach on <unk>.
All the deals you know each deal needs to make sense from a financial perspective and be viewed as something that can be accretive to the enterprise and I can tell you that we've already walked away from an opportunity where we were pretty far down the path on it because end of the day, we could make the deal economics get to a place that made sense for us.
To reiterate what we've always said we're focused on improving the near term operating profile and economics of the company and long term value creation. So we're not we're not feeling like we need to sacrifice one for the other we bring something very significant to the sports deals and Thats. The reach that these leagues and teams really.
Rand.
Okay, Great and then the Big picture I asked you guys. This question a lot.
Call it two or three months ago.
Gnomic front given all the market is doing or obviously, if a national big National platform here to how you guys are feeling about the U S economy do you feel about the same as you felt two three months ago less of this public call worse or better about the economic backdrop here that youre operating in.
Hey, Craig it's Lisa.
It certainly does this downturn.
Looks a little bit different than previous cycles.
<unk> been getting some mixed signals I think GDP is growing albeit slowly in the job market is resilient, but there is volatility in the financial markets, which is also I think putting pressure in the advertising marketplace.
Thankfully C D. TV continues to grow and as our growth drivers certainly for us and I think the growth in automotive that we've seen in that category, especially on the local side over the last few quarters is also pointing to the resiliency I think on the advertising marketplace. However, inflation I'm worried.
About looming recession, I think we'll continue to put on.
You know some pressure on our advertising revenue.
Yeah.
Okay, and then you mentioned auto over the last three quarters, it's up obviously off of a low base could keep it at the macro environment. The last few years and stuff et cetera can you give us some numbers around that how much it was up year over year in the quarter and I think you said auto you expected it to be up as a category for television stations. The rest of the year I just want to confirm that.
Yes, the first quarter auto was up 4% over Q1 of 'twenty two.
It was a little bit lumpy through the quarter I think January it was up significantly looking at Q2 and continuing to improve in fact in April it was up 16%. So I think we're still obviously.
Book in the quarter and I would say.
In some cases and bookings are coming on later, but we really see that continue.
Continuing to improve.
The dealer groups are up 12% year over year foreign dealer groups were up 1%.
Local dealer groups, which is the largest dollars were up 8% and we see that as the best opportunity to grow auto and coming from.
And I think you guys said your core advertising outlook, where things are pacing out so far this quarter for the TV stations.
Trucking down low single digits is that similar for all three months of the second quarter here.
I think there are some one time anomalies.
Certainly looking at Q2 in terms of Bee.
Yes.
Where things play out with the NBA finals and things like that.
And I think we are.
I had it.
You know relatively strong April because of the auto category.
And certainly some rebound in home improvement so.
A little early to tell.
I I think what we're finding is that advertisers.
Our buying closer and closer to air date, and so that's causing us to have a little bit of a lack of visibility.
Certainly advertisers are looking for flexibility with their spend.
Hey, Craig right. One clarification I think you said down low single digits, Our guide was down.
Mid single digit so far yes, sorry, if I misspoke, then that's all I had great. Thanks, guys.
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Thank you, Brad and thanks to everyone for joining us today have a great day.
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