Q3 2023 TEGNA Inc Earnings Call
Okay.
Yeah.
Good day, and thank you for standing by.
Welcome to third quarter 2023 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
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Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Julie Heskett Senior Vice President financial planning and analysis and head of Investor Relations. Please go ahead.
Thank you good morning, and welcome to our third quarter conference call and webcast today, our president and CEO, Dave Lougee, and our CFO, Victoria Harker will review financial performance and results and discuss techniques quarter ahead outlook. After that we'll open the call for questions.
Hopefully you've had the opportunity to review our third quarter earnings result, if you have not yet seen a copy of the release, it's available at tech not dot com.
Before we get started I'd like to remind you that this conference call and webcast includes forward looking statements and our actual results may differ.
Thank you Julia and good morning, everyone.
Turning to the third quarter results reflect our business plan centered on continuing to enhance performance operate optimizing operational efficiency and driving long term value for our shareholders. We achieved a record third quarter for subscription revenue and saw sequential improvement in advertising and marketing services revenue driven by improving trends in key verticals.
Is auto and services.
In addition to the strong underlying results. We also completed our initial $300 million of accelerated share repurchases or ASR, we completed that ASR at the end of August August earlier than anticipated.
Despite a limited trading window, we were able to quickly purchase shares opportunistically in the open market.
This increases our capital commencing this commitment this year to return nearly $800 million to shareholders.
Talk more about our capital return actions in our advantage positioning and a couple of moments.
Turning to third quarter results total company revenue finished in line with our guidance down 11% year over year due almost exclusively the reduction of political revenue from the midterm election cycle last year, excluding political revenue was down just slightly year over year as.
As I mentioned subscription revenue was a third quarter record and up just slightly year over year.
<unk> subscription revenue continues to provide stable and predictable cash flow supported by contractual rate increases partially offset by subscriber declines we expect to re priced approximately 30% of our traditional subs by the end of this year further improving visibility into our outlook.
Despite broader macroeconomic challenges advertising revenue trends were sequentially better than the first two quarter. These quarters of the year and that trend is continuing into the fourth.
Ams revenue finished the quarter down 3% compared to the third quarter of last year. However, underlying advertising trends were basically flat year over year when adjusting for the premium on national account loss. We've discussed on prior calls automotive automotive our largest category within Ams continues to improve and show strong year over year growth now for the fifth.
Incentive quarter auto was up 20% year over year in the quarter also notably services. Our second largest category continues to be continues to be strong with 15% year over year look.
Looking ahead 2024 will be a strong year of performance at Tech now with a very favorable portfolio stations for political advertising in next year's presidential Olympic cycle as well as the summer Olympic games from Paris on our large NBC portfolio of stations and the Super Bowl on our large CBS portfolio compared to last year's much.
Fox portfolio.
Turning to capital allocation, we are enthused about the go forward opportunity at <unk> and building on our strong track record of returning capital to shareholders, our industry, leading balance sheet and resilient financial performance affords us a unique ability to return capital to shareholders through share repurchases and dividends, while we simultaneously pursue work.
Yannick initiatives and evaluate opportunistic bolt on M&A to further augment our attractive growth look at and growth outlook and opportunities.
We're on track to surpass our previously announced capital capital returned to shareholders.
Following the completion of our initial $300 million ASR program earlier than anticipated as I said, we repurchased an incremental $28 million of shares in the open market slightly just just shortly before entering our blackout period.
These repurchases were executed under our existing $300 million share repurchase program on our last earnings call, We announced the second ASR program of $325 million that program is expense expected to commence shortly.
<unk> of these four steps the <unk> the stock transfer to satisfy the $136 million deal termination fee and our reach recent opportunistic purchase of shares will result in us retiring nearly $800 million worth of techno shares.
Looking ahead strong operating performance and disciplined use of free cash flow position us to continue to build on our capital return track record.
As I said, we have an industry, leading balance sheet balance sheet and that provides us that optionality, even after both ASR programs any incremental purchase of shares in 2023, we still expect to end the year with net leverage under three times.
So on free cash flow generation is expected to further strengthen next year due to the political and Olympics and Super Bowl tailwind as I mentioned earlier.
This often this offers additional flexibility as we make capital allocation decisions across organic growth bolt on M&A opportunities and returning capital to shareholders through share repurchases and our recently increased dividends.
Turning to strategic updates.
In the quarter, we reached a comprehensive multi year deal with ABC. This renews, our ABC network affiliations in 13 markets across the country, which cover 9% of the U S. Serving nearly $11 million 11 million households are partnership combines Abc's popular entertainment sports and news programming with our locals with our strong local stations.
Large audiences.
We believe our success successful negotiation with ABC highlights the win win long term relationships, we have with our programming partners take this local stations provide irreplaceable local news, which is some of the most watch entrusted with elimination coupled with leading programming leading program from program partners like ABC our platforms deliver scale.
<unk> with strong engagement.
The vast and powerful reach of broadcast distribution is enjoying a growing audience reach advantage.
Over other far more fragmented competitors in ecosystem, most specifically cable channels and cable programmers.
One area that highlights that shift is what's happening now with professional sports with the existing artisan cable model in the final innings. The move of local sports from cable to broadcast is is in the first inning of a new era.
Professional sports teams and leagues are more acutely aware than anyone of the seismic shift in reach and distribution and are excited about the chance to reach all consumers not just a smaller and smaller percentage of their addressable market.
These lines this quarter, we announced that Ken's our station in San Antonio will exclusively or 11, San Antonio Spurs games. During this broadcast season with French sensation French sensation, a number one draft pick Victor when benihana.
Capturing attention across the country and it's not the globe, we're thrilled to be disbursed broadcast partner for this year as the current Rs and bankruptcy proceeding plays out look for more announcements to come given our large portfolio of strong stations in big Sports home markets. We are very very well positioned for this shift and opportunity.
And local sports.
Also in the third quarter locked on our leading local sports digital network with daily shows for all four pro sports leagues and major column cartilage programs hit more milestones. Its audience has now gone past 'twenty 7 million listens and views per month, and we launched four local lock on fast channels in the quarter with more slated to launch in the fourth quarter.
Daily Blast live our daily talk and trending topics shelf entered its seventh season. This September now with a larger distribution footprint than ever we've added 20, Sinclair markets and additional Hearst market to our current footprint of 16 gray markets as well as all of the tech the stations and our large reach being our total reach to more than 55% of the U S.
As the programming landscape continues to evolve we believe daily blast live efficient production model will increasingly offer broadcasters are sustainable option for their content needs, while simultaneously delighting our audiences.
Verify our national brand that combat disinformation ended the second quarter with Approx ended the third quarter I should say with approximately 467000 followers across its various dedicated channels.
Weekly verify this show increase for the fourth consecutive quarter with more than $2 8 million minutes watched across Texas.
Station streaming extra in the third quarter and about those streaming as our streaming apps, our techno station streaming apps now.
It reached $677 million million minutes on streaming a 78% increase year over year in the quarter. These apps are now available for all stations on Roku fire, TV and Apple TV devices and in the quarter. We also started rolling out streaming.
Rolling out our apps with Samsung LG, Chromecast and other platforms and expect to have all stations live on these platforms by year end.
Delivering news that matters and impactful investigations that make a difference in People's lives are the center of each and every one of our newsrooms were very proud of the determination and resilience of our engaged employees that enables us to fulfill our mission every day.
Special congratulations and shout out to Ww well our station in New Orleans that recently received a national news.
For their investigative reporting that shines a light on the deplorable living conditions for nursing home residents after hurricane Idaho, Theyre investing investigation led to much needed law changes in Louisiana. The work, we do changes lives and changes loss with that I'll now turn the call over to Victoria.
Thanks, Dave Good morning, everyone and thanks for joining us as you've already heard we've achieved record third quarter subscription revenue and we continue to deliver sequential improvement in both advertising and marketing services revenue.
We also successfully achieved all of our key revenue and expense guidance provided last quarter in line with expectations.
Before I drill down on drivers of our third quarter financial results I'd like to reiterate both the board and the management team's focus and commitment to continue to return of capital to our shareholders as you've seen in our ongoing execution on those plans.
As Dave mentioned earlier, we are very pleased that nearly $800 million in cash accumulated during the pendency of our transaction has been committed to share repurchases over the past six months and as you've already seen execution on that return of capital is well underway.
During the third quarter, we completed the initial 300 million accelerated share repurchase program on August 31, a few weeks earlier than we previously anticipated.
The initial 300 million ASR program reduced <unk> outstanding share count by approximately 18 million shares.
In addition in the second quarter.
<unk> 9 million shares were retired through standard general is extinguishment of their termination fee obligation.
As Dave mentioned following the completion of the first ASR and before entering our third quarter blackout period on September 16, we opportunistically repurchased an additional $28 million or nearly 2 million shares in the open market.
As a result total share reduction as of the end of the third quarter was $29 million.
Beyond this as announced in August our second <unk>.
Saar program targeting $325 million in repurchases will kick off this week.
As a result of all of these actions since the termination of the merger agreement in late May <unk> is committed to nearly $800 million of share repurchases through <unk> <unk>.
Elements of the merger termination fee and opportunistic repurchases in the open market.
As a result of this commitment we expect approximately 45 to 50 million shares to be retired by the end of March 2024 based on current market prices.
More than 20% of shares outstanding prior to us undertaking these actions.
Additionally, following the termination of the merger agreement the board declared a 20% increase to the regular quarterly dividend, which was paid out for the first time in October.
As you're also aware, we have an extremely strong balance sheet, including low leverage and we are very well positioned to continue to return capital to shareholders through buybacks and dividends, while investing in organic growth and bolt on M&A opportunities.
We also have manageable debt with no near term bond maturities until March of 2026, and all of our debt is fixed rate at a very attractive five 2% on a weighted average basis.
We ended the quarter with total debt of $3 1 billion and cash of $553 million as a reminder.
Under our only financial Covenant is four five times leverage cap that applies to our undrawn $1 5 billion revolver.
Net leverage ended the quarter at 261 at a time.
All of these well planned and executed actions highlight the strength of our balance sheet, which provides optionality around capital allocation decisions and continues to differentiate us in this current macroeconomic environment.
Sure.
Now, let's take a look at the drivers of our third quarter financial performance.
My comments today are primarily focused on <unk> performance on a consolidated non-GAAP basis to provide you with visibility into the financial drivers of our business trends as well as our operating results.
You can find all of our reported data and prior period comps in our press release.
For the third quarter total company revenue was in line with our guidance range down 11% year over year due almost exclusively to lower political revenue when compared to the midterm election cycle last year.
Excluding political revenue total revenue was down just slightly compared to the third quarter of 2022.
Our record third quarter with subscription revenue, which increased slightly year over year was driven by subscriber rate increases from contractual rate escalators, partially offset by subscriber declines of mid single digits.
As we mentioned last quarter, we have an additional 30% of our traditional subs up for renewal by the end of this year.
On the reverse comp side of the equation. We had previously stated with approximately 60% of our big four subs up for renewal by yearend.
We are pleased to announce we have reached reached a comprehensive multiyear agreements with ABC, representing roughly 20% of our big four subs.
We also look to renew our agreement with NBC toward the end of this year.
Now I'll unpack the drivers of Ams performance in the third quarter and the drivers.
Ams revenue finished the quarter down 3% compared to the third quarter of last year.
Advertising advertising trends were basically flat when adjusting for the previously disclosed loss of a single premium national account earlier this year.
Despite macroeconomic.
Macroeconomic challenges advertising revenue trends improved in the third quarter and was sequentially better than second.
These gains were driven by improving trends in key verticals, such as automotive services insurance and packaged goods.
As a reminder, the underlying advertising improvements began in second quarter and are continuing into the fourth.
Within Ams, we are thrilled to see our two largest advertising categories automotive and services continued to perform well automobile automotive advertising generated growth for the fifth consecutive quarter with third quarter up double digits year over year.
The services category was also up double digits year over year with the strength in home services, such as HVAC electrical pest control in plumbing.
Category is facing headwinds in the current macroeconomic environment include media Telecom restaurants health care and banking.
Now turning to premium as you've heard over the prior quarters premium continues to strengthen its position in the convergent TV marketplace by winning additional local advertisers that are allocating larger spending dollars to streaming.
During the quarter premium introduced programmatic selling capabilities, enabling agencies to leveraging their managed services our hands on keyboard buying workflow.
Similar to last year <unk> revenue was down year over year impacted by the loss of a single large national accounts. However, premiums primary focus is on the growth in local OTT revenue, we're uniquely positioned to win.
Fremont local revenue was strong up double digits year to date.
As a reminder, the national account loss impacted Ams by two points in the first three quarters of the year. However in the fourth quarter. The account impacts will be four points on Ams given seasonality.
We cycled the loss of this account at the beginning of 2024.
Looking ahead to 2024 will be a strong year of taking on given driven by favorable portfolio of stations in key markets benefiting from a robust presidential election cycle, The Summer Olympics and the Super Bowl.
Taking this high margin subscription and political revenues produce annuity like EBITDA and free cash flow and horizon more than 50% of our total revenues on a two year basis.
Turning now to expenses for the third quarter for the quarter non-GAAP operating expenses of 576 million finished in line with our guidance range up 1% compared to the third quarter last year, driven by higher programming fees.
Excluding programming costs non-GAAP operating expenses for the quarter also finished within our guidance range down 1% when compared to last year due to expense management and ongoing operational efficiencies.
Third quarter expenses coming out of the merger termination were slightly higher than previous run rate as we increased activity around employee development recruitment and retention as well as our renewed strategic planning efforts.
We expect fourth quarter year over year expense to be lower as well.
As expected our third quarter adjusted EBITDA of 166 million was down 38% year over year, primarily driven by the absence of high margin political revenue from midterm elections and higher programming costs.
Yes.
We continue to generate strong free cash flow of $60 million during the quarter, driven primarily by our high margin durable subscription revenues and the thoughtful management of our balance sheet as we've historically done.
Now turning to 2023 outlook as you saw in today's third quarter release, we remain on track to meet all of our key guidance metrics for the full year.
And provide forward guidance for the fourth quarter on key financial metrics.
To help you model, our near term expectations like swap for a few fourth quarter financial guidance metrics.
As a reminder, we expect to be disproportionately impacted on a comparable basis in the fourth quarter by the absence of 170, <unk> hundred $79 million of high margin political revenue on the midterm election last year.
For the fourth quarter, we expect total company revenue to be down mid to high teens percent year over year, primarily driven by the absence of political revenue I just mentioned.
Excluding political fourth quarter revenue is projected to be flat.
We forecast operating expenses in the fourth quarter increase in a low single digit percentage range compared to fourth quarter 2022, driven by increased programming expenses.
Putting programming costs, we project fourth quarter operating expenses to be down low single digit percent year over year.
Now turning to full year 2023.
We'd like to reiterate that our full year 2023 guidance elements in ranges remain the same as announced last quarter and we remain on track to meeting or exceeding them.
As a reminder, you can find our 2022 actuals for all of these metrics in our investor presentation on our website.
For the year corporate expense is expected to be in the range of 40% to $45 million depreciation is projected to be in the range of $60 million to $65 million.
Amortization is projected to be in the range of $53 million to $54 million interest expense is expected to be in the range of $170 million to $175 million.
We expect capital expenditures to be in the range of $55 million to $60 million, we forecast an effective tax rate in the range of 23, 5% to 24, 5%.
Even after the impacts of both ASR programs and the incremental repurchase of shares in 2023, we continue to expect to end 2023 with net leverage below three times.
And with that I'll now turn to Q&A to take your questions.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
Draw. Your question. Please press star one again please.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Dan Carnose with the benchmark company.
Yes.
Great. Thanks, good morning.
Victoria, Thanks for all of the numbers.
Around the guide, but I'm still just trying to sort of reconcile I think sequentially I understand a year on year basis with political.
But you said in Q3 AD trends were relatively flat year on year ex the premium national laws and I know you called out a little bit more sequential impact due to seasonality in Q4 Thats fair.
We've heard that national for the local.
Broadcast group has gotten a little better and you guys talked about trends improving into Q4, plus you have.
Easier comp with crowd out and political should step up sequentially I know, we're still early for next year. So just trying to sort of understand is.
There is some conservatism in that guide is it just based on trends or bookings, you're seeing now and just lack of visibility for subsequent should also be maybe a little bit less sequentially in Q4 than Q3.
So just trying to get a sense of how you guys are are thinking about sort of the trends going into next quarter.
Hey, John It's Dave I'll, just take the last one first Rob you mentioned the category until about political we're not expecting any frankly, we have a tremendous footprint for the year, but we don't have necessarily.
<unk>.
You know because our footprint is for a full year, we've never had a real big primary footprint for early presidential primary. So we don't see maybe some of those dollars otherwise. So we will do fine, but that's not where we have the most enthusiasm about political but I'll, let julie.
Speak to the rest around the underlying advertising.
Certainly.
So I will reiterate that the sequential trends are improving and continuing into fourth quarter and year right. Tien that you heard in third quarter normalizing underlying trends would have been flat year over year, so that will be better in Q4, and it's included in our total revenue guide.
The one impact also.
For your purposes is the premium on national business, which we've talked about all year long.
Being a headwind to us it is a bigger.
Adjustment in fourth quarter impact what it had been about two points.
All year long for second and third quarter is going to be more for points as Victoria said in the fourth quarter. So if you just do that math alone right roughly flat in Q3, you would be up mid single digits in Q4.
Okay.
We can talk through a little bit more of the pieces offline, but I get it and it's good to hear that sort of I guess the continuation of trends on the expense side. I think this is a little bit of a surprise just out there.
And maybe not maybe it's just me.
But just wanted to get a sense Q4 guide is good in terms of underlying Opex you just did <unk>. So I don't know David.
I know you won't comment specifically on how the deal played out but just how to think about the growth there ABC and NBC, which you have still coming up NBC of course.
Coming up have been historically variable deal. So I don't know, how we should be thinking about the growth in reverse but underlying is there more opex efficiencies to be driven both in Q4, and then into 'twenty four.
Excluding those programming costs. So just maybe you take those two pieces would be super helpful. Thanks.
Well I'll just speak to overall.
You also mentioned that we do have some expense others might not have that are.
That which you referred to relative to the strategic issues are coming out of a failed acquisition. So we have been spending some dollars there won't be a permanent run rate relative to some outside work some advisory work and the types of things that Victoria outlined. So there are a couple of their a point or two relative to that number.
We will have a little bit of that in fourth as well, but most of that should burn off roll into next year and I would just say, we're not guiding on expenses per say next year and I'm not going to given that we've got our largest reverse comp deals still to go Dan as you know not going to comment on numbers relative to reverse comp in programming expense, but other than to say on that.
Topic.
Yes.
Relative to the network the network deals as I signaled on our two calls ago. After we came out of the of the merger the merger process that it was going to be a new dynamic relative to the realities of the business and I, just which standby those comments.
Okay got it thank you and good to see you guys keep buying back stock I appreciate the color.
Our next question comes from the line of Steven Cahall with Wells Fargo.
Thanks, Dave maybe first just a follow on Dan's question, a little bit so.
I know you and a lot of your peers have been consistent that the growth rate of reverse comp is lower than what it used to be that new paradigm that you talked about.
I think when a lot of us are trying to figure out is what the key discussion points are when you are talking to a network partner like ABC, who you just renewed or NBC, Jeff coming up in relation to how their streaming plans affect your business Disney has been pretty clear that they intend to take sports direct to consumer that had some impact.
<unk> on on your ABC stations and same with NBC. So I'm wondering if you could just help us frame, how you think about the future and how you're kind of defending against more especially sports content going on to streaming and then Victoria you all had some discretionary Q3 share repurchases.
What's your appetite to continue down that path are you allowed to during the upcoming $225 million ASR.
Or is that just something that you kind of wait and see after the ASR.
With the stock prices. Thank you.
I'll take the first one first one first.
As you can imagine we have as you know as we're public about we have one large negotiation between now and years and so I don't think I'm going to get into commenting on what the discussion points, sorry, because I would really really sort of.
Just simply don't want its comments during a negotiation period, but as I indicated on our last call. Obviously the exclusivity issues are Frank in the case of ABC ESPN and ABC, obviously ESPN has been.
That exclusivity went away some time ago relative to ABC Disney yet it remains a valued partner of ours and so I think what I'd say is it's all part of the value equation. When you say when Theyre moving sports to streaming it's not exclusive streaming right Theyre simulcast sports sports broadcast will be the big Barker for a very long time.
And when you just look at the ratings that broadcast games doing the NFL. So I would just simply say.
So the the lack of exclusivity.
Sports debt, some of which existed before but the newer versions of that all become part of the value equation.
So.
I know that probably is not helpful round numbers, but from our standpoint, how we think of it it's just putting a value to what that reality is and then having a conversation that's realistic based on.
An ecosystem that once was all about exclusivity and one that's the one that's not then that has a different value.
And to address the second portion of your question Steven.
We use the opportunity we had a window in time in which the ASR program. The first phase for our program finished a few weeks early given some of the compression in the marketplace that we have as you know.
Existing $300 million approval program to use Opportunistically said, we drove into the market and use that window of time.
And execute on $28 million a share buyback then.
My expectation is that the board will likely renew that going forward and we use it sort of opportunistically when we can and see those moments in time.
Our program to which.
Set of buybacks during the quarter and then what happened subsequent to that obviously, we will we will then announce but I just want to make sure. We're clear on that we have that opportunistic program. We use it when we are.
So unclear days when there are windows and time that we can actually get into the market and use them and the prices right.
Great. Thank you.
Sure.
Thanks, David.
Yeah.
Our next question comes from the line of James Goss with Barrington Research.
Okay.
Okay.
James Your line is now open.
Okay.
If you move on operator, and see if Jim comes back on after the next.
Our next question will come from the line of Craig Huber with Huber Research partners.
Yes, hi, Thank you my first question on premium I think you guys said last quarter.
It was down modestly, which I assume that means mid single digits, maybe just comment how it did in the quarter, obviously have to hit for the loss national account, but just sort of frame that for us. Please.
Yes, Craig it's Julie I'll take that.
The commentary would be exactly the same while total premium revenues are down modestly.
The focus is on the local side of the business. So we know that national is down year over year, but local is up year to date double digits.
Okay, great. Thanks.
In the past you guys have said Retrans subs down mid single digits year over year is it the similar trend we have had in the third quarter.
Yes, yes.
Okay. Thank you.
And then.
In your mind, you guys have obviously been very aggressive here.
Repurchasing stock.
Went through several times today.
Is there anything that you think you differently for next year, obviously, you have a windfall nature of political AD revenue next year.
We're obviously, arguing that your stock price is quite low on investors would agree with that is there anything.
Anything in your mind that Youre seeing out there on the macro side of things that would maybe.
<unk> from buying back a ton of stock next year is to continue these like it's rolling <unk>. However, you want to think about it.
Hi, Craig It's Dave I'll, just point to what Victoria said in our script is that we have the.
Our board is in management is laser focused on capital return, but we cause of our balance sheet. We have the optionality as I said to do what we need to do that it's in the best the best use of return for shareholders with the ability of not foreclosing any avenue, right and but but as we indicated we are very focused on shareholder return and this <unk>.
<unk> and we obviously like our balance sheet to be.
Pretty strong given some uncertainty that's out there and just to expand on that a little bit as I mentioned in my script, we don't have any maturities through 2026, our first call option on that occurs later in the fall of 'twenty four.
Given current interest rates likely not financially.
<unk> for us.
The advantage of that opportunity, but there is no reason we can't do.
Do all of that so looking at a potential recap on future maturities, we've got the cash and the ability the strength of the balance sheet to both manage those debt maturities recap as is is useful in the interest rate environment, plus buy back shares and continue to do our dividend and invest organically. So all of it.
And then my final question net Retrans for this year, how would you sort of thinking about that for sure.
Shape up more all sudden done here.
Slightly modestly for the year.
Net retrans.
Yeah, Craig we have not got it correct and every Jan again, we've got negotiations coming up here in the fourth quarter that that may impact that so we're not in a position to answer that at this time.
Obviously, Craig we got we got a we got a lot of subs up and a large reverse comp deals. So.
We were.
We're not going to in the middle of negotiations comment on anything on that.
Thank you.
Thanks, Greg.
As a reminder, that is star one one to ask a question.
Our next question comes from the line of James Goss with Barrington Research.
Okay. Thank you sorry about that last thing.
I wanted to ask about a couple of things one about the streaming apps. Obviously this is a great.
Way to try to offset the the risk too.
Some of the economics with the traditional.
Cable and satellite platform.
Wondering in terms of the various outlets for us between a roku or Youtube.
There'll be a.
Different types of economic implications I Wonder if you could talk a little bit more about how youre viewing that and how things are developing along those lines.
Let's say, Jim it varies right because we one of our major usage comes off of our own apps on our own without any going through any third party platform. So it really varies on the platform what if it's our own. It's obviously zero share and then those deals look very different based on them. Some of them. We feel good about some of them, we don't love to the long term.
But we.
We.
We've gone for distribution in the short term to get it out there some of them we've not done for baked into the question you've asked but I think that over time, it will become a scale play.
And we will be.
I think.
We are big and then I think we will look for opportunities to get even bigger over time.
I'm not not I'm not signaling anything relative to anything big until 2024, but as you point out it's a good opportunity for us and frankly the programming cost is all pretty much.
Incremental marginal cost of our existing operations. So it's a win win.
Okay, a couple of other things one with the D B L.
<unk> increased traction you're at 55% of the country.
Is there any <unk>.
Consistency of the time slots are applying and Ken can you talk about the economic level that youre able to get with.
That particular effort Im sorry, Jim you broke up but just to say that last part again.
With <unk> gaining.
Increased traction to 55% of the country.
Can you talk about the consistency of.
The time slots typically typically it gets put into and what's the economics. There in terms of your value as you deal with other broadcasters and distributing that.
I mean, it's mostly what we value was FIC take the last part of that first Jim as we value their distribution does that distribution gets us audience and eyeballs, which then we can monetize over time.
But as it relates to time slots are almost exclusively right now in the afternoon time slot they vary across markets.
It varies a lot based on the.
The makeup of that market the strength of that station. So I wouldn't say any one time period. We have we have success stories in every time period and theirs and in every time period.
Places, where we don't do as well, but bottom line is it's a great model for us because like as I think you know we produce that in Denver at a much lower cost model dramatically lowered if we did that in Hollywood.
And it's all it's all all additional distribution as gravy for us off of a pretty much a fixed expense run rate. So it's a good play for us and we haven't talked a lot about it in recent years, but it's just been a great thing for US Thats continued to keep on giving.
Okay, one last thing that hasn't been talked about.
<unk>.
No.
Even though the broadcasters seem pretty enthused about it I think a lot of the TV sellers do not seem so enthused because they might have competing products and they may not want to have incur the additional costs and maybe the FCC could mandate inclusion and I'm just wondering how you're you are looking at.
Hum.
What your expectations are in terms of.
How it might fit in with you in particular with Turner.
Yes, I can't speak to water why other people say other people say what they say.
But I would simply speak for yourself and consistent what I said in the past Jim is that we very much believe it's opportunistically important for that new standard to be made accessible to the American people and that we're believers in that but from a pure business model standpoint, I think we would be we would be a bit from our perspective a bit.
Sure.
Not true to our word if we were to enthusiastic into any near term business models, because we have stay close to it we've been very much frankly.
One of the founding fathers, if you will of Pearl.
The consortium that has looked at that and we continue to do good work for us and the industry, but from a tech perspective, we're not we're not.
Talking about putting up points on the board near term relative to.
Economics, and frankly, I think in terms of strategic options as I said before.
<unk>.
We look at it like the iPhone as a platform. So we think of <unk> as a platform just like the iPhone. It was other third parties, who wrote the programs and the applications that made money off the iPhone and I'm still bullish that over time that can happen with <unk> three point out as well, but I just can't we don't any seating any on the near term horizon that we as <unk>.
<unk>.
Put a lot of financial stock in at this time.
Do you think the FCC will have to mandate it as.
As a way to get it done or do you think the.
Broadcasters will eventually or.
Rather the TV makers will eventually.
Agree I think worthwhile.
I think given the FCC and <unk> this year I'm not going to opine on the FCC I'll leave that be but I would simply say that the brook I would say broadcasters have done a pretty good job voluntarily of getting it done getting getting transitions done till date, we have more stations were transitioning but I think it remains to be seen how the fee.
Alright, Thank you very much.
Our next question comes from the line of Craig Huber with Huber Research partners.
Yeah, Hi, good.
Good morning.
A couple of follow ups guys you.
You mentioned <unk> ad trends improving.
Improving sequentially versus what you saw in the third quarter here I'm curious bike category is there any categories in the current quarter Theres significantly doing better this quarter then.
And what you saw in the third quarter, but maybe you could also touch on national in particular.
Yeah.
So did you just say national in particular, Craig Let me just double check on what you asked.
What categories are doing.
Materially better than that this quarter so far.
First of all yes fourth versus third yes.
Yes, I think the trends I think I think the trends are pretty similar Craig we looked at those yesterday I don't think the bottom line with those performers and third of the performance in fourth and necessarily see any major variances to speak of.
Okay, Great and my other question given the two strikes in Hollywood, one still ongoing here I'm just curious the lead in that you guys have your late night news is there any impact there on your AD revenues materially at all that you've seen so far.
No. Good question, Craig no because really that that the scripted drama as a good lead into the late news sort of one way a few years ago with time shifting so our economics have not been based on your network Prime is a very small piece of our total company revenue and for ALLETE in standpoint, Theres really two worlds.
On the east and West Coast, where the majority of our stations and revenue is not with the majority of other companies are probably that's an 11 o'clock news period and Thats been affected some time ago, where that 11 o'clock news might have been a big number 2030 years ago, that's been sort of eaten away gradually over the last 50 years, probably accelerate over the last five to 10, so thats not in our <unk>.
10 o'clock news cast in our central and Rocky time zones, Thank all of Texas.
In the Midwest in Minneapolis, and St. Louis in those markets and in the Rocky Mountains think of Phoenix, and Denver et cetera. Those are the 10 o'clock time period, and that's not affected by timing because basically people are up in a week. So even though a scripted show may or may not be watching our linear fashion, where our news is strong we still get good ratings. So no theres really no trend there.
To that so to your question about the strike even if scripted shows are in reruns in the call. It the nine o'clock time period and in the Central and 10 o'clock time period in the eastern West I don't think thats going to have much effect on us per se and I think it will also put the networks to getting more generally speaking I won't talk about any specific lender.
More innovative around more.
The type of programming that works better on linear like sports does but also event type programming think the voice over the years, our dancing with the stars.
Call It reality slash event programming that's.
Less susceptible to time shifting that people like to watch as an event, which is really a specific hallmark continues to be a broadcast.
And my final question network Primetime what percent of your AD revenue is that maybe coming into this year.
Sure.
Oh hold on to that.
Prime time revenue for the total company Craig it's about 4% if youre talking just advertising it would be in the low teens percent.
Okay, great. Thank you.
Thanks, Craig.
That concludes today's question and answer session I would like to turn the call back to Dave <unk> for closing remarks.
Thank you and one final note as we closer as we indicated last quarter, Victoria will be stepping down at year's end as CFO and Julie will be stepping into that seat after years of preparation, while Vittorio will be CFO through the end of the year and will be helping with the transition through spring of next year. This will be her last earnings call with us and I want to take this.
<unk> opportunity to thank her for all she has done here at Turner and for our shareholders over many many years. Thank you, Dave and it's been my pleasure to serve and support Gannett and Tech now for almost 12 years 70 earnings calls later over my career. This is a momentous occasion for me, but I am very very confident and proud of the team.
<unk> Julia in particular, but the rest of the finance team and I will be around clapping from this thing.
Thanks, Victoria with that thanks, everyone for taking the time to join US today and listening in if you have additional questions. Please reach out to Julie at 700 38736401, thanks, everyone.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.
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Okay.
Okay.