Q2 2023 The EW Scripps Company Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Scripps second quarter 2023 earnings calls.
This time all parties are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.
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Now like to turn the conference over to our host Investor Relations Officer, Ms. Carolyn Michelle Lee. 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 strategy. As 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 use a door formulations included in our earnings release or the.
<unk> 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 Scripps Chief Operating Officer, Lisa Knutson, Here's Adam.
Good morning, everybody today I'd like to provide you with a big picture perspective on this moment in the TV land and how scripts is executing on its plan to capitalize on our industry's evolution the.
The television industry is experiencing an era of volatility where the growth of streaming is up ending a long successful business model, but it is a wise and very successful investor recently reminded me just because everything is moving towards streaming doesn't mean it in and of itself is a good business.
For most in the industry the math on streaming alone doesn't work and there's as media investors are well aware the path to value creation is far from certain content creators are rebelling against the new model sparking the most significant strikes in Hollywood history experts have said the strikes are fueled by existential.
Worries over the industry's future and its no doubt that the end result will make the economics for streamers worse.
In this chaotic climate.
<unk> has carved out its own valuable niche linear TV viewing driven by entertainment live sports news and the consumer proposition of free TV.
And despite a temporary hurdle driven by inflation and a soft AD market. We see a return to growth ahead fueled by our aggressive all of the above distribution strategy as we attack our opportunity to increase yield from pay TV and expand upon our leadership in free over the air television.
And create new incremental value through a profitable approach to connected TV.
To be sure linear television audiences are declining consumers are spending less time watching traditional TV and turning increasingly to subscription services under pressure from sub declines the cable programmers are eroding the quality of their product and shifting attention to still questionable ambitions.
Indeed to see that's probably because they simply don't have what we have that all of the above distribution strategy scripted linear business makes use of both pay TV and the growing over the air ecosystem. So it's no wonder that in the midst of this carnage from consumer preferences our portfolio.
Of networks is growing share of viewing.
We expect free OTT TV to play an even more significant role in the new bundle ahead, one factor we forecasted many quarters ago is now coming to fruition the shift of sports rights to broadcast television buy.
By our count at least six major professional rights deals announced over the last six months went to broadcasters from NASCAR to college football to our own WNBA on ion and of course regional deals like the one we announced that is bringing the Stanley Cup, winning Vegas Golden Knights to scripts as local broad.
Caste patients in Nevada, Utah and Montana.
The teams and owners understand well that D. C will be a lucrative opportunity for the future, but that the reach from broadcast distribution in parallel we will be the price of admission to get there.
While we expect more live sports to be a catalyst for growth. We will continue to educate consumers on the benefits of free over the air television as a way to grow our viewership and audience reach.
Our scale and linear distribution underpinned by our network of 109 television stations across this nation is a core asset for us at.
At the same time, we understand that American TV viewers will continue to consume and demand more from connected TV.
So to tackle that opportunity, we have aggressively claim territory in that space as well.
As of this year, our national networks brands are widely distributed across streaming smart TV virtual mvpds and other connected TV platforms, and particularly on the rapidly fast growing fast channels.
We acted quickly to establish a first mover advantage and now are building audience and seeing significant growth in ad revenue.
That's high margin revenue, because our fast networks open up a new opportunity for us to monetize some cost relying mostly on our linear programming streams or original content, we already own as with our two latest fast channel launches court TV legendary trials and last more.
Sure.
In the meantime, linear advertising remains a very large and lucrative marketplace projected by magna to be $54 billion. This year enormous even in the midst of an anemic macro economic conditions.
And that linear marketplace. Scripps has continued to garner profit margins, thus far surpass those of D to C streaming businesses at least the ones that have profit.
Like all industries, we're subject to economic fluctuations. So the current AD industry recession is affecting our growth rates and as a result of that climate, we recognized an impairment in our Scripps networks business.
Our networks business remains strong and as I said, we expect its revenue growth and profitability to rebound along with the national AD marketplace.
The networks come together with our local stations to form the foundation of the linear viewing connected TV and <unk> strategies that had been discussing.
The WNBA deal with Scripps sports could not have been executed without our acquisition of IR and.
And at the local level, we were able to redeploy ion spectrum in two markets to launch independent stations that will become the home of the Vegas Golden Knights.
We have preserved ions reach in those markets through other channels and at the same time, we created two new local station Duopolies. It's another good example of how the ion acquisition has enhanced our economics.
As we pursue the best and highest use of our spectrum for enhanced shareholder value through TV I'm enthusiastic that we'll be able to add data casting through ATSG three dot out to the list of strategies that make use of our massive distribution platform.
We continue to make progress on the work we are doing with Nexstar HPE and Sony with a core network live in four markets a necessary first step as we bring this business to the mobile wireless data marketplace.
Our latest company reorganization was designed to position us for future growth in all of these distribution areas.
Rather than being exclusively focused on the local station group or the Scripps networks portfolio. Our leaders are now charged with executing on opportunities to encompass all of our assets.
This repositioning has already proven effective in sports and news and created efficiencies and distribution marketing and operations.
And we are on track to realize at least the $40 million in annual savings we had projected.
The media business is changing dramatically as it has done many times over our company's 145 year history.
Aggressive, but steady approach to navigating the convulsions has proven to create value time and again for our shareholders just as I'm confident it will this time around.
Over the last five years the company has moved to dramatically enhance our scale and television have more than doubled revenue more than tripled segment profit and expanded margins, leaving us well positioned to benefit from the inevitable return of the AD market.
I'm sure our shareholders along for the ride will benefit too now.
Now here is Jason.
Thanks, Adam Good morning, everyone for the second quarter, we reported financial results that nearly all met or exceeded the expectations. We set in may with a significant beat on segment company profit.
Our segment profit over performance was driven by our Scripps networks segment, which delivered a stronger than expected revenue because of higher ratings and increased demand in the scatter market.
The networks portfolio grew connected television revenue by 18% from Q2 of last year, while a very strong growth rate. It is less than we had projected for network CTV. We're sunsetting, a low margin legacy programmatic advertising product because it's no longer align with our evolution of CTV advertising.
Backing out the impact of that product CTV revenue was up about 80%.
In total scripts networks revenue was $231 million down 3%.
Scripps networks segment expenses were $171 million up about 3% from the prior year quarter, because of higher employee costs and distribution fees as well as the incremental expenses for the WNBA on iron.
Segment profit for networks was $60 million.
In our local media Division revenue was down just 1% from the prior year quarter.
Core advertising was down 5% as local and national businesses continued to deal with ongoing inflationary pressures on consumer spending.
Local distribution of revenue in Q2 was up 14% to $195 million fueled mainly by contractual rates down.
Local media expenses declined by one 4% aided by our move to Comscore and by tight expense management in this economic environment.
Local media segment profit was $81 million.
And other we reported a loss of $6 3 million.
<unk> services and corporate expenses were $23 million.
The loss attributable shareholders of Scripps was $682 million or $8 10 per share.
The noncash goodwill impairment charge and restructuring costs for the quarter accounted for $8.01 per share.
Despite the better than expected Q2 performance the implications of the ongoing economic downturn and resulting impact on the national advertising marketplace has led to the impairment charge in our Q2 financials.
The restructuring charge in the quarter was $8 million we.
Now in January a companywide reorganization and restructuring costs are related to that work.
As of quarter end cash and cash equivalents totaled $39 million.
Our net debt at quarter end was $2 9 billion and our net leverage was five three times per the calculations in our credit agreement that has run a bit higher for the last two quarters 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.
Effective July 31, the company decided to increase the size of its revolver to $585 million and used the revolver to pay down the term loan B, one which was scheduled to mature in October of 2024.
The new revolver better aligns with the company's current scale and provides additional financial flexibility.
Looking ahead to the third quarter of 2023, and the Scripps networks Division, we expect revenue to be down in the 10% range and expenses to be up low single digits. Our revenue guidance compares against the very strong third quarter last year when networks revenue was up 4%.
We expect total local media revenue to be down in the mid single digit range in Q3 local core AD revenue also to be down mid single digits.
By later this quarter, we expect to have renewed nearly all the pay TV households, where we are resetting. This year. We continue to expect full year gross distribution revenue to be up in the mid teens range and net distribution dollars to increase by more than 40%.
For Q3, we expect local media expenses to be up in the low single digits.
That includes the cost of pay increases for key news gathering roles at our local stations aimed at attracting and retaining top journalists to serve our communities.
Third quarter shared services costs are expected to be about $22 million.
We expect an $8 million loss and other in Q3.
Please see today's press release guidance tables for updates on a few below the line items.
For the full year, we continue to expect our free cash flow to fall in the range of $50 million to $100 million.
We continue to place our highest capital allocation priority on paying down debt.
Are 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 operationalized by the middle of next year and we still expect to reach a year end 2023 run rate of around $20 million of savings now here's Lisa to share some highlights from both local media and Scripps networks operations. Thanks, Jason.
And good morning, everyone. We were very pleased with the Scripps networks segment exceeded our expectations for our second quarter financial performance scatter market advertising was the largest we've seen since late 2021, and we also outperformed our expectation our audience ratings in several key areas.
Despite outperforming on revenue our networks business still faces headwinds in the national advertising marketplace. We do see a few bright spots, however, including premium live sport, which has become the new prime time in terms of advertising rates and continue to attract younger viewers I'll talk more in a moment about our script sports strategy.
Which is designed to take advantage of that marketplace.
And we continue to benefit a bounce from advertisers, who want and need to reach multicultural audience. It bounce provides high quality programming created specifically for black viewers and we're seeing nice CPM growth for those shows in fact in the midst of a challenging upfront for the industry bounces commanding low to mid single.
Rate increases.
Turning to the Upfronts more generally in the past years, we've seen that is softer upfront season. It has led to a rebound in scatter as advertisers get a better read on consumer spending.
We are cautiously optimistic about the outlook for the scatter market in Q3 and Q4.
Overall during the quarter general market AD categories were down although we did see increases in consumer packaged goods as well as the entertainment and media category and direct response, we continue to expect weakness until it inflationary pressures ease and consumer confidence returns at.
As Jason mentioned, our connected television advertising revenue is being impacted by a change in strategy that led us to sunset a legacy CTV advertising product.
Although this product in the past has accounted for a significant amount of revenue. It is low margin and out of step with the evolution of the CTV advertising landscape that we are focused on more profitable efforts around our network nearly ubiquitous CTV distribution.
In fact, the launch of our networks across these platforms over the last year drove nearly 300% year over year increase in total hours of viewing we expect network CTV revenue, excluding the low margin programmatic product to be up about 50% in third quarter.
Turning to the local media segment I'd like to hit some highlights in our local core AD performance. We were pleased to realize for the fourth consecutive quarter of growth in automotive, which was up 13% in Q2 and made up 16% of our core revenue home improvement was up 8%.
And we benefited from the Denver Nuggets appearance in the NBA finals this year.
Average unit rates for Premier sports in our markets can be more than 10 times. The average unit rate when we don't have a local team competing this dynamic is an important driver in our script sports strategy.
Our largest categories services was down 12% as it continues to be hit by inflationary factors.
In addition, we continue to see local advertisers exercise caution and book advertising closer to airtime, giving us less visibility into our outlook.
Also in local we're continuing to grow our connected television audience Scripps local stations delivered a 29% increase in the hours of viewing from Q2 of 'twenty two to Q2 of 'twenty. Three today, we are getting about a half million hours of CTV viewing a week across our local station group.
One more note about our local stations.
We were proud to have won 98 regional Emmy and Maura.
Ara awards as well as a bold tele and on the network side scripts News won awards from glad S. P. J and the Telly Awards and has been nominated for two National Emmy.
And I on one three prestigious pro Max Marketing Award. We appreciate this recognition of our employees' hard work and the audience impact.
Turning to our reorganization and our focus is on collaboration and centralization by bringing leadership from Scripps networks and local media together into one enterprise level management team, we are creating efficiencies and cost savings and equally important were creating new business growth opportunities that leverage the power of all of our.
Assets are scripts news now work and our script Sports Division provide two great. Examples of how this is working.
Grips news as part of our Scripps networks portfolio.
As of late June its programming also appears on 31 of our 42 news producing local stations Scripps news shows including morning Rush and in real life are running daily on these stations they are performing well with the local audiences and are offsetting local programming expenses.
In addition scripts news reporting is it pretty frequently on our local news programs. For example, scripts news and local teams have been working together to tell the story of this summer's weather extremes, we've covered warming waters off the coast of Florida sustained high temperatures in the southwest and the impact of the Canadian wildfires on our <unk>.
Air quality here, leveraging the strength of our local market depth with our Scripps news broad national reach is resulting in stories with greater context and the impact.
In addition, we are freeing up local resources to concentrate on high quality local news production and we are building the Scripps news brand with local audiences across the country.
At Scripps Sports, we're looking ahead to the premiere of the Vegas Golden Knights on our second station in Las Vegas, and Salt Lake City as well as seven other Scripps markets. We have converted our ion signals in Las Vegas, and Salt Lake and to independent stations that are live local sports and we are still broadcasting ion in these markets.
Keeping our national reach intact.
This is a great example of how scripts drives value through our strategy to best monetize our large spectrum holding by taking a broad view of all of our assets.
And through our new approach, we are creating incremental cash flow growing our over the air audience and increasing our value through live local sports.
Also in the sports Division today marks 10 weeks of WNBA Friday night spotlight on ion ratings for these games have grown 42% since our first broadcast on May 26 advertising demand is strong and sports premium average unit rates are running 70% above those of our typical ion programming Dilip.
During younger and more diverse WNBA fan.
As we move through our reorganization work and into operationalized. Our changes we are on track to realize the $40 million plus in savings. We previously outlined and we remain focused on both aggressively tackling the near term challenges in the media marketplace and creating a more efficient cost effective high performing business one that is.
Well positioned for long term value creation 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 can withdraw your question at any time by repeating the one zero command and if you're using a speakerphone. Please pick up the handset before pressing those numbers. Once again, if you have a question press one zero at this time one moment.
Well first go to Dan <unk> with Benchmark company. Please go ahead.
Great. Thanks, Good morning, Adam two high level questions for you.
One obviously given the comments around <unk>.
Sports.
And Atms and where all the dollars are flowing.
We know historically, what your view is about bison acquisition, obviously some of your peers have decided to move upstream in terms of.
Or are some of those deal I'm just curious given the landscape right now sort of what your appetite is for maybe potentially being a little bit more aggressive.
If you think that you can monetize.
Better or more effectively.
Some of those licenses that may be available out there that might be a little bit more costly.
Yeah.
Thanks, Dan.
I think we've been appropriately aggressive I still think it's necessary to bring discipline to these discussions.
I can tell you we're about two months out from the start of the NHL season, and sale sales for sponsorships and ads.
In Las Vegas for the Vegas Golden Knights has gone exceptionally well I think that gives us a better understanding of what the opportunity is like with additional.
With additional.
Rights negotiations.
Both locally and nationally we have also been very pleased as Lisa described I mean, we're seeing at this point with the WNBA every ion WNBA telecast in July has been rated higher than ESPN best WNBA telecast, so our thesis around bringing these <unk>.
<unk> events to over the year and a broader audience I think is bearing bearing fruit and as Lisa described also that led to a 70% premium in AUR is or average unit rates for prime time with WNBA over ions traditional primetime audience.
We definitely see the payback there.
We arent going to do is irrationally invest that's what got the RSA ends into the position they're in and what's necessary is both an aggressive play for us to move towards sports, but also the understanding that we are bringing something of incredible value to the teams and leagues linear distribution that reach.
<unk> almost all of our all of the households in a market or across the nation and so that's that's that's key to our strategy. The other thing I would say that we've seen great success with is that when we have distributed our.
Our linear broadcasts with ion on CTV, we're bringing a product into the CTV marketplace that nobody else is bringing to fast and Thats live sports and the feedback we've gotten from our distribution partners. There too has been very very positive. So we definitely think we are positioned to continue to play aggressively.
But we will also play prudently.
Got it that's helpful and just kind of a good segue into sort of a high level of follow up I wanted to ask I mean, obviously, there's a lot of noise out there.
Writers strike the actors' strike et cetera, I think you guys have been pretty savvy in your own content aggregation, especially on that topic, Adam I, just wonder as we head into more unscripted programming. If you can just sort of give us your thoughts on what's happening in the ecosystem around it.
Outside of just dollar strive to live sport and the fact that you guys have a bunch of them.
Available content in the can as it were that people needed outlet for advertising.
I'm actually looking forward to the fall premieres because there won't be very many fall premieres and the audience on an ion I think is.
Is used to what they tune in on a nightly basis for ion is already the fifth rig broadcast network oftentimes fifth on cable as well when you discount or take out live sports and news. So from our perspective that consistency I think is going to bode well for us from an <unk>.
And share perspective, as we head towards the fall, which typically can be disrupted by by premieres on on network television.
I think ultimately the strike as I mentioned in my prepared remarks is going to lead to higher costs for streamers.
Theres clearly going to be progress made with respect to residuals on streaming platforms.
Our strategy has long been to take the content that we're already paying for and to negotiate for the vast rates and to move that content into with those linear streams into fast with no additional cost as I said for high margin revenue.
The other thing I think that will happen will will be that as the streamers end up with higher expense structures even than they have today. They will continue to look for new ways to offset that expense or to monetize their own kind of own sunk cost and I think that will open up additional programming opt.
<unk> for linear broadcasters like us I think it's now becoming.
Are recognized by the streamers that having distribution on linear, particularly over the year is not cannibalizing their D to C products it actually can.
Can represent a significant opportunity to be a barker channel for their <unk> products and so we expect to benefit on the content acquisition side in that way too.
Got it and just if I can squeeze one last one in I don't know for Adam relief just on the network are the networks guide.
We've heard that national and improving sequentially.
Really strong quarter relatively speaking <unk> been taking share I know you guys are up against a tough comp. There is some element obviously the sunsetting of legacy product that's in there.
But is there any other noise that's going on in Q3, because it sounds like based on your Upfronts and everything else that Q4 should be.
Substantially better it feels like things are getting better I would overall perspective, the guidance a little bit.
Trying to reconcile the fall.
All right.
Thanks for that question certainly some of the noise in the CTV product that we're sunsetting and offsetting some of that low margin revenue. So that certainly is a factor I would also say that the D. Our marketplace continues to be really.
Hampered by the fact that inflationary pressures are keeping.
Folks from being able to spend and so we do see a little bit of green shoots in the Dr space and certainly the fourth quarter is typically third late third and fourth quarter are typically the higher quarters for Dr advertising we.
Continued to see strength in the scatter market and I think we're.
With this being the last quarter of a broadcast calendar upfront certainly there are cancellations in third quarters that we have to then rewrite in the quarter and so you may see some of that being masked by the cancellations that we're rewriting in the scatter market remember scattered typically it's about 30% higher than anything.
We sell in the upfront so that could bode.
Some upside potential.
For us in third and certainly as we move into fourth quarter. So hopefully that helps clear it up a little bit but.
I know.
With half up three quarter or half of our revenue sort of in the.
The upfront and scatter market, we do see some.
Real potential I think over the next several quarters for that to continue to improve.
Got it yeah that was super helpful. Thank you Lisa Thank you Adam.
Thanks, Dan.
And next we'll go to Steven Cahall with Wells Fargo. Please go ahead.
Good morning, Lisa I, just wanted to maybe dig into those comments just a little bit more so if we think about the Q3 guide, which does imply that the revenue growth rate at networks gets worse quarter on quarter can you maybe help us back out what that transition in the CTV product does to that I know that there is some.
Risks and opportunities from what Youre, saying in the third quarter and you want to be a little bit conservative.
But.
Are you trying to imply that the AD market is worst in Q3 than it is in Q2 or is it just kind of a mix of all that it's getting to that guidance number. Yes, I think it's the mix of all of that I am not implying that it's getting worse in fact, as I said and I think my prepared remarks, where we are cautiously optimistic about third and fourth quarter scatter I think.
Advertisers continue to book later and later in the cycle and even the upfront and I'm sure you and reported on this with some of our national peers.
Even the advertisers were waiting longer and longer in the upfront.
Negotiations to really book the dollars and so.
Some of that is the visibility that we see into third and fourth quarter and some of it is certainly.
Dr comments that I made earlier.
CTV piece of this again is really about a decision strategy that we are employing in terms of really looking at all of our products and making sure that we have high margin products and those that we believe are.
Yes.
No not as profitable or we're certainly taking a hard look at those.
And over the course that both on the local and national side for sure.
Thanks, and then Adam I think you've tried to remain at the forefront of free free TV and getting a lot of your broadcast content into connected TV too. So I'm just wondering how you envision getting a lot of this network content on the CTV going forward, especially as you start to add more sports into the portfolio.
And maybe in this period, where there is less content, making sure. It shows up on folks home screens when they log into a connected TV and so they know what's there and can find it.
Yes, I mean, I think you're right, we've been particularly active over the last year and a half since we acquired ion first very quietly acquiring the rights to the programming for the vast marketplace, which was essentially relatively nascent at the time and now.
Obviously growing very quickly I think there is ample evidence that.
Audiences appreciate free which I think will continue to benefit our holdings in our streams on CTV as well as OTI with respect to sports I mean part of what we negotiate for is the rights to ensure that nationally when we are.
When we are acquiring national sports rights as we do with the WNBA, we have the right to distribute that into the vast marketplace. We then have worked with our distribution partners to ensure that it's accretive to the overall deal I would tell you.
The SaaS marketplace itself has become very competitive so I'm really really glad that we have that first mover advantage and are in where we are at this point our brands are garnering significant hours of viewing and the content is premium. So I think it puts us in a really good position from a operating leverage perspective as we.
As we work with those distribution partners they want.
<unk> that are well known they want content that is well loved and thats, what they get with the Scripps networks brands. So.
It feels a little bit like the early days of even like Youtube when everything was sort of a pile of stuff and then they became the culling down we're more premium content got better positioning what we see today is that given that ion for example is the only broadcast network.
In the SaaS marketplace, because we have those rights and no. Other broadcast network can do that and given that we've been so aggressive moving our multicast channels, which is monetization of sunk cost into the SaaS marketplace. We think we've got really good placement on these platforms.
So between <unk> and.
And CTV, we expect to continue to see significant growth in the consumers' adoption of.
A free TV supported by advertising.
Great and then maybe lastly for Jason just as Youre doing the big year for Retrans with the net number up I think 40% as you said.
Is there anything that's different than what you expected better or worse and within that what's your expectation for <unk>.
Subscriber attrition is this year. Thank you.
Yes, so subscriber churn for us continues to be down in kind of that mid single digit range has been for a while and continues to be.
In terms of the progress we're making so as of the end of the second quarter. We had renewed about two thirds of the total subs who are for renewal and by the end of the third quarter will be north of 90%, Yes, I would say generally we're really pleased with the progress, we're making and we talk often about maximizing our opportunity in pay TV ecosystem and when you look at the progress we're making on both gross and net.
I think you can really see that kind of coming to fruition.
Thank you.
And next we can go to Michael Kaplinsky with Noble capital markets. Please go ahead.
For taking the questions I appreciate that so mine is more of a kind of a macro issue. This cycle seems somewhat unusual given that there's been such a prolonged national advertising weakness and that there hasn't been a follow up of weakness are extreme weakness of local and I was just wondering if you had some thoughts.
Given the past cycles, how this cycle is different than what.
You are kind of how it casting that you'd think that national advertising is starting to show some sort of visibility or some sort of improvement I was just wondering.
If you Peel that local is going to kind of come back as well or do you feel like it we might see local drag for some period of time.
Hey, Mike It's Lisa.
Okay.
A couple of things to unpack there one and I think we're seeing.
Our alert one of our largest AD categories automotive.
Come Roaring back certainly over the last several quarters and second quarter auto was up 13% over Q2 of 'twenty two.
And that was we had a strong April may and June and we're continuing to see that same trend as we move into third quarter. So that has certainly helped to buoy.
The local AD space in particular.
<unk> improvement has also been a category that is.
Really.
Bounced back in the last couple of quarters for local and I think that youre going to continue to see that as well.
And that's one of our top five categories.
One of the areas that are certainly has taken a hit a bit in the local side is the services category, which is made up of <unk>.
Several different things.
Medical financial legal and so on and so forth and that's really I think tied to discretionary spending and inflationary pressures in peoples pocket books that kind of thing. So I think it's a little bit of a mixed bag.
Even in automotive for example, the National AD marketplace I think there was.
And stories, saying that it was down in the high teens over the course of the summer versus as seen increases on the local side and and that's really being driven I think by trying to get the cars off the lot and the domestic dealer groups were up like 35% in the quarter and foreign dealer groups were lit.
Bit down.
Domestic manufacturers in terms of the automotive space were up 26%. So I think youre seeing some resiliency in the local space, especially as you know automotive.
Has rebounded as well as home improvement.
Lisa I appreciate the comments on the auto.
So.
And in terms of the percentage growth is it coming more so from the dealerships or is it coming from manufacturers.
Interesting that some have said that.
In terms of moving cars up a lot.
Chris had said that maybe there's.
Just not enough cars.
Maybe it's a function of different markets are you seeing auto.
A rebounding you're currently in in certain markets and then if you could just kind of go back and then tell us whether or not it's more promotional advertising or is it more.
Manufacturers versus dealers sure.
I would say, we're not necessarily seeing.
Any trends geographically that I would point to.
I would say it's.
Generally up across the country local dealer groups, just to unpack sort of second quarter local dealer groups were up 6% and we see this really.
As a great opportunity and in the coming months, especially if they're clearing last year's models off the lots and then bringing new and next year's models onto the lot. The domestic dealer group as I said, we're up 35% year over year. So that gives you some insight into.
The dealer groups and local dealer groups as I said foreign is still a bit down.
Down about 5% year over year, and then manufacturers.
And we're up 26% year over year and.
Foreign manufacturers were up 58%. So I think that that gives you a little bit more insight not necessarily a geographic issue or a geographic.
Play here, it's really I think strength across the board in our local markets.
And Lisa can you remind me what I think you already mentioned this but what was the percentage of auto as a percent of total advertising and then what was it at the peak.
This quarter it was 16% and I think at its peak it was probably.
Low twenties.
Okay, Great alright, thanks for the color I appreciate that sure.
And again it is one zero for question I'll move now to Craig Huber with Huber Research partners. Please go ahead.
Great. Thank you maybe Stuart if I could look to your comments on the Hollywood strike, obviously part of it's because of all of them for three months here.
Do you view that it's going to be.
A significant headwind for you guys or or beneficial or sort of neutral impact. If this thing keeps dragging on and on.
I don't see it as a significant headwind for us.
Certainly not near term like I said, I mean, I actually think it could benefit us with respect to audience.
And in third quarter.
Longer term.
Depending on sort of what the deal ends up being I also think it could benefit us because.
Recall.
We benefit when companies, creating programming look to offset those costs through distribution deals and as I said I do believe that.
The streamers in particular have recognized the value both economic and from a marketing perspective of doing deals with their content in the linear marketplace not being both it's not cannibalistic and I also think it's the Barker channel that everybody has long believed D to C.
Probably needs.
I don't I don't necessarily.
Don't necessarily think it's much for us obviously for our local stations.
Not ideal for us not to have the kickoff of the.
The season, but to be Frank.
Some of the networks have continued to move some of that content.
Yes.
Drop the exclusivity and move some of that content to their streaming platforms. So I know that will be programmed well I know, we will have compelling content and I expect it to be mostly a neutral issue for our company I know it is not going to be neutral for for others, but it certainly is.
The near term.
Neutral to positive.
Hey, Greg its lease at one of the theories that I have is after this is over and as Adam said as studios need to monetize.
<unk>.
Right.
Perhaps some of the increase in cards I think that there may be a proliferation or a flooding of the market of new content and shows available to us which.
I would assume.
Given the.
The amount of supply made also drive costs down so that's something that we're keeping definitely an eye on.
Do you worry at all that this strike with the lack of original content scripted content.
To help accelerate core cutting does that did she gets a significant issue for you at all.
No I mean, I don't I don't think this strike is going to be beneficial to the streamers and so people still want to be entertained they still want to watch TV and so ultimately.
I don't I don't see this as.
Driving cord cutting any further I think there are other other.
Other questions in the marketplace right now.
Cord cutting that R.
Our.
That are bound, but but but I don't necessarily see the lack of new content. This fall season.
As or as or I would even say beyond this fall season, because much of it is already locked and loaded.
As the existential for cord cutting.
And then also at your local TV stations, I guess, that's down 5% core advertising performance in the second quarter and a rocky environment out. There can you just break apart if you would how local did versus the national categories.
Certainly.
When we when we take a look at the.
Local versus national certainly local or national over the course of the last several quarters.
Ben.
It hit a bit harder similar to what we're seeing in the network side right and it's the same the same.
Ah and.
National macroeconomic trends that have.
And that has.
Played out in the local side. So it's certainly it's been hit a bit harder I would say similar to my comments about Scripps networks, we are starting to see some.
I would say green shoots on the national side less less declines certainly than what we've seen over the last several quarters.
And my last Nitpick question, the sunsetting of the CTV product can you quantify that for us either a percentage or dollar basis, how much that's impacting the revenues.
In the coming quarter.
We did I think within the script for Q2, we talked about sort of our growth with and without it we're not breaking it out as we kind of move forward, but we said we were up.
17% inclusive of our 18% inclusive of the sunsetting, we would've been up 80% in CTV revenue without but we're not providing any detail beyond that.
Okay, great. Thank you.
Thanks, Greg.
And currently have further questions in queue.
Thank you Brad Thanks, everyone for joining us today, Brad is going to go over the replay information now have a good day.
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