Q2 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the scripts second quarter earnings call. At this point all the participant lines are in a listen only mode. There will be an opportunity for your questions and instructions will be given at that time. If you should require any assistance during the call. Please press star zero and operator will assist you offline as a reminder, today's call is being recorded I'll turn the call now over to Ms. Carolyn Micheli head of Investor Relations. Please go ahead.
Thank you John Good morning, everyone and thank you for joining us for a discussion of the E.W. Scripps company's second quarter 2019 result.
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 you can visit scripts dot com for more information you also can sign up to receive E. Mails anytime we disclose financial information and you can listen to an audio replay of this call. There the link to the replay will be up this afternoon and available for a week.
Well here this morning from President and CEO , Adam Symson, Chief Financial Officer, Lisa can you listen local media President, Brian Lawlor and National Media Media Senior Vice President Laura Tomlin also in the room today as assistant controller, Dan Persky here is Adam.
Good morning, everybody.
Im pleased to be with you. This morning on a day when scripts is reporting second quarter financial results that beat consensus as well as solid third quarter guidance that is very much in line with estimates.
Lisa will review our strong results in a moment I'll start with a look back and then a look ahead at what's ahead for scripts.
Nearly two years ago, the scripts management team laid out an aggressive plan to improve the company's operating performance, while simultaneously better positioning ourselves for the long term.
That plan included a reorganization and restructuring with expense cuts divesting of radio a disciplined approach to growing our national media segment and the pursuit of a better performing collection of television stations.
Since then we have steadily executed our strategy to hand craft, a more powerful and financially durable portfolio of television stations.
Once we closed on our acquisition of the Nexstar Tribune divestitures scripts will be the fourth largest independent local broadcaster, reaching more than 30% of us households.
We will have quadrupled our number one and number two stations and more than doubled the markets, where we operate two stations.
We will have further expanded our already attractive political footprint and added more large markets.
With the Nexstar Tribune stations, we will own 26 stations in the top 50 dnase.
And we will have diversified our affiliation mix.
Now over the last year, you've heard me say that we would be comfortable flexing our balance sheet to support this important realignment. So long as we had a clear path to delever.
That's exactly what we've done.
The urgency of our action has been driven by three main factors first the number of local broadcasters that could have been acquired was limited. So we are pleased to have benefited from last year is more active M&A market.
Second for scripts. This was a moment in time to best position ourselves to capitalize on our upcoming MVP renewals.
Even after we moved through the Comcast reset on December 30, Onest, we will still have another 50% of our households, renewing in the first half of 2020.
90% of our subs, including Comcast step up in the next 12 months.
And finally of course, we're very pleased with the markets, we are adding to our political footprint and the way our now bigger company is positioned for the presidential election year.
Brian will give more color in a moment about our political advertising opportunities and the advantages we have with our national sales office.
The impact of all of this work on scripts is profound including the contribution of the Nexstar Tribune stations, we will have significantly increased free cash flow generation and for 2020, we expect company free cash flow to be in the range of 225 million to $250 million.
Our company will emerge from this period of realignment bigger stronger and more durable.
And so this is what I mean, when I say, we see a clear path to delever and pay down debt.
While we are capitalizing on the strength and resilience of our local broadcast business. We are simultaneously growing the national media brands on new and emerging platforms, where consumers spend more and more of their time.
The National Media Division turned in an impressive performance in the second quarter exceeding expectations, we neared $100 million in quarterly division revenue for the first time another step on our path to the important waypoint, we've shared with you.
We are fully on track for this segment to deliver more than $500 million of revenue in 2021 and to be clear that's all on the back of organic growth.
That growth comes as a result of our disciplined approach to developing these businesses to maximize their ultimate contribution and shareholder value.
Now five networks strong with the launch of court TV cases, leading a renaissance in over the air Broadcasting and reaping the rewards of a new generation of broadcast television viewers.
Likewise Newsy is riding a wave of growth in over the top television as it remains dedicated to younger news consumers, who seek out quality objective journalism.
Triton and stitcher, our leaders in the digital audio marketplace focused on expanding their share of the market to capture even more of this significant opportunity.
It's been a busy two years, but everybody keeps asking us what's next for scripts.
Our immediate priorities are to smoothly integrate these assets and realize the financial synergies.
To capture full value for the distribution of our local brands and their high quality content with pay TV providers.
And to use our higher free cash flow yield to pay down debt.
Let me close with this thought.
As we move towards the critical year of 2020.
This management team is fully committed to executing our strategies.
We remain steadfast in our mission to provide the quality objective journalism, our local and national audiences crave and need.
And we're focused on our financial performance in a way that demonstrates the equal energy, we're giving to near term results and long term value creation.
Now here's Lisa good morning, everyone. We are pleased to be reporting financial results that met or beat expectations for the second quarter, including a strong beat of consensus Cps and company segment profit that came in significantly higher and we had indicated in our guidance.
Before I go through the highlights for the quarter I'd like to start with a reminder of the acquisitions, we have closed on so far.
Since January one we've closed or announced the acquisition of 27 local television station.
We acquired three stations from the grain Radcom divestitures that closed January Onest, we acquired a small independent station in West Palm Beach that will complement our powerful NBC affiliate there that station closed in April .
We acquired 15 stations from the quarterly our communications that closed on May 1st.
And soon we expect to close on the eight stations were acquiring in the Nexstar Tribune divestiture.
I will discuss the local media results on an adjusted combined basis, presenting then as though we had owned the rate com West Palm and Cordillera station since January Onest of 2018.
In today's press release, you can find the result on both.
Ed as reported basis and on an adjusted combined basis. We hope this presentation give you a clear apples to apples growth picture.
Now, let's talk about our strong second quarter performance.
In the local media Division second quarter revenue was down 4% from the second quarter 2018 keep in mind that on an adjusted combined basis, we had nearly $22 million in political revenue during the 2018 quarter retransmission revenue was up 10% nearly $95 million.
Expenses for local media were about flat.
Core advertising was flat on the adjusted combined basis and second quarter of last year, we had the benefit of the Cleveland Cavaliers plane for games in the MB a final backing out that benefit in 2018, we were up a bit.
Now I'll talk about the rest of our Q2 results on an as reported basis.
The National Media Division also delivered a strong quarter. Despite the fact that the second quarter often shows seasonal weakness that division exceeded our revenue guidance of low to mid $90 million coming in close to $100 million for the first time.
Expenses were a bit more than expected because of the cost tied to higher revenue performance.
The revenue performance drove the National media segment profit of $6.6 million.
Shared services and corporate <unk> came in a bit better than expected at about $13 million.
For the second quarter, the Companys loss from continuing operations was $400000 or one cents per share. However, we moved to earnings of three cents per share when you exclude the impact of non core item.
These pre tax cost include $2.8 million of acquisition and integration costs and $1 million of restructuring charges related to our 30 million dollar cost savings plan. We expect these restructuring charges to continue to wind down.
Our capital expenditures for the second quarter totaled about $17 million, including about $4 million for the FCC repack, we expect to be fully reimbursed by the federal government for our repack costs.
Turning to capital allocation the company made about $4 million in dividend payments in the second quarter and $8 million year to date.
No shares were repurchased during the second quarter as we told you last quarter, we expect to stay out of the market, while we focus on paying down debt.
On June Thirtyth cash totaled $57 million, while total debt was $1.6 billion.
On July 26, our wholly owned subsidiary scripts escrow Inc. issued $500 million of senior unsecured notes that mature in 2027.
We were pleased with the terms we received in this offering because of the strong demand we were able to receive an interest rate of five and seven eight. We also increased the amount financed from $400 million to $500 million. Most of the proceeds will go toward paying for the acquisition of the Nexstar Tribune stations and the additional $100 million will be used to pay down our revolving credit facility.
As of June Thirtyth, we had $120 million outstanding on the revolving credit facility with an interest rate of 4.4%.
And just a reminder that in may in conjunction with the closing of the quarter Lira acquisition, we obtained financing for an incremental term loan b a $765 million. We were extremely pleased with the terms of this financing as well along with issued at 99.5 and bears an interest rate of LIBOR, plus 275 basis points.
Oftentimes scripts closes our Nexstar TVN transaction.
We expect our debt to EBITDA ratio to be 5.3 times on an adjusted pro forma basis.
That leveraging of course is higher than script to traditional levels and as you heard Adam tell you. We don't plan to leave it there for long we know we've created value with 27 local television stations that give us economic and network diversity financial durability, and defensible position as the nations fourth largest independent local broadcaster.
We embarked on this growth knowing a significant increase in cash flow was on the immediate horizon as Adam mentioned earlier, we anticipate company free cash flow to be in the range of 225 million to $250 million in 2020.
So while our company leverage today is higher than normal in the context of executing the plan, we laid out to reposition the company and because we have a reliable path to grow EBITDA and pay down debt.
Now, let's look ahead to third quarter guidance in today's press release, we provided local media revenue and expense and retransmission revenue guidance on an adjusted combined basis as though we owned Raycom west Palm and Cordillera stations for all periods.
The Nexstar Tribune stations are not included in this quarterly guidance.
For the third quarter, we expect local media revenue of down low to mid teens in comparison to Q3 of 2018.
And a reminder, that during third quarter last year, we took and $55 million of political revenue on an adjusted combined basis.
We expect national media revenue of mid $90 million range and expenses in the low to mid $90 million were expecting the shared services and corporate line to come in at about $13 million and now here's Brian to discuss the local media results.
Thanks, Lisa good morning, everybody I'd like to start with a few comments about our successful core performance in the second quarter on the back of some strong categories and record new business development. We are pleased to be able to deliver a year to year growth backing out the benefits of the Cleveland Cavaliers 2018, MBJ finals appearance.
Among our strongest categories were services, which accounts for 30% of our total core AD revenue and home improvement a top five category, which was up 17% in the corner.
In addition, the automotive category improved in the second quarter the year to year decline was smaller than it's been in recent quarters now in the single digits inside the auto category, we're seeing areas of growth, including the domestic dealer group segment, which showed mid single digit percent growth over the second quarter of 2018.
Overall I do expect to see core advertising continue to build as we move through the back half of the year.
While we are busy executing our 2019 initiatives we are preparing for the 2020 political advertising opportunity that's just around the corner.
With the presidential presidential election race, just getting started we believe scripts is one of the best position local broadcasters to benefit from the wave of political AD spending to come.
With the close of Nexstar Tribune.
We will have 60 stations in 42 markets, reaching across the country.
Our acquisitions have given us additional opportunity in our already strong political advertising footprint.
It's very clear that the path to the White House will go right through the Scripps markets.
Conventional wisdom right now is that three of the most important presidential swing States, our Wisconsin, Michigan and Arizona.
Scripps is well positioned in these critical states, we own two important NBC affiliates in Milwaukee in Green Bay.
In Michigan will soon own four stations in Detroit Grand Rapids in Lansing, and combined mill reached nearly 80% of that states households, and in Arizona. We will have two stations in Phoenix and two in Tucson that reached nearly all of the households there.
Florida will also be an important state in next year's election.
With the acquisitions of Miami in Tallahassee to complement our three stations in Tampa West Palm Beach, and Fort Myers scripts will reach nearly 70% of all TV households in Florida.
In addition, weve expanded our footprint in Colorado.
And in 2020 will be the first presidential cycle that scripts will own stations in Texas, and Virginia, and Utah as well as a news producing TV station in New York City.
And of course, we have two strong NBC stations and the important state of Ohio.
It is still very early but we expect to benefit from the 14 use Senate elections, including tossup races in Arizona, and Colorado, as well as elections, and Michigan, New Jersey, Virginia and Montana.
And we will have four governors races, and Scripps stations in script States next year, a toss up in Montana and open seat in an open seat, Utah and races in Indiana and Missouri.
In the past, we've often discussed scripts competitive advantage related to political sales for nearly a decade scripts is manage political advertising through our own national sales office in Washington, DC working directly with campaigns to maximize their advertising buys on our local stations quickly and efficiently without a third party.
As we expand our footprint, we look forward to providing this service and our scripts proprietary data tool to more campaigns across the U.S.
It's way too early to size up our expectations for 2020 scripts political AD revenue, but I can tell you that our revenue from the 2018 mid term elections pro forma for all of our announced closed transactions was about $200 million.
And as Adam referenced political isn't our only opportunity to grow revenue in 2020 in the next 12 months, 90% of all scripts retransmission subs will step up into new agreements.
Now I would like to discuss our Capes multicast business, which reports to me and appears in the National Media segment financials.
During the second quarter Kate's brought back one of TV is most iconic brands.
Trial coverage and true crime network core TV has been received by enthusiastic audiences across the country since its may eightth lunch.
In addition of fresh talent in perspective, a hallmark of the new core TV is its broad distribution.
Lovers of courtroom drama to find the network on over the air broadcast channels on Internet delivered TV, including Roku, Amazon fire, TV and Apple TV.
It's on its mobile apps and its web site and in 25% of cable homes.
In its first two months core TV is over the top livestream was viewed for more than 400000 hours.
By the end of this year core TV will reach 91% of use TV households, mostly through multicast channels that is by far the fastest that any advocates networks have reached 90% us distribution.
The five kids networks had a good quarter overall with strong sales and a number of key new advertisers.
The networks are converting more direct response advertisers to higher CPM buys, creating new value with existing advertisers.
Also in the recent.
Advertising Upfronts, Kate sales rose, 30% and in Cpms rose by mid single digits.
And now here is Laura.
Thanks, Brian Good morning, everyone and National Media segment delivered a terrific performance during the second quarter and marked continued progress in our strategy for building value by establishing scale and growing consumer marketplaces.
Consumers are spending more of their time today on platforms, such as over the top and over the AD television as well as digital audio and podcasting.
Scripps has strategically positioned itself to run leading businesses on each of these fast growing platform.
And now we see ourselves beginning to reap the rewards of that effort in the second quarter. We earned a record revenue and several international businesses, Our division revenue in year $100 million and caves Navy indicator all surpassed our expectation.
That strong revenue fueled the nice beat in our segment profit.
While we expect our growth rate to moderate a bit in the third quarter. We are looking ahead to the very strong finish to the year for the National Media segment.
Let's start with our digital audience.
Early on splits on opportunity in the digital audio industry streaming music and podcasting began to gain popularity.
Today 90 million Americans listen to podcasts every month and those who listened weekly tend to listen to line. They average about seven podcasts and weak.
Brand name advertisers our filings listeners into the pipe cafe.
A recent IB report projected podcast advertising with quarter $1 million in 2021.
And that's more quickly than previously expected.
Stitcher is our podcast content network sales and distribution business.
In the quarter Stitcher saw continued demand for podcasting from an ever expanding roster of brand name advertisers.
Including state farm, Pepsico and JC Penney.
These advertisers and many others now realize the effectiveness and the podcast medium for sharing their message and straight already well positioned to grow along with that market.
Mhm centers they get hit shows during the second quarter with Conan O'brien, which included a rare interview with Howard Stern that was down in the mid 1.4 million times.
Triton is a digital audio infrastructure and measurement reader Triton continued global expansion in the second quarter, signing new clients in Brazil, and Australia as well as expanding in the U.S., adding monovalent honors.
Also during the quarter Triton and Edison Research published their annual incident down report the audio industry's definitive survey as consumer listening habits.
And announcing that sand incident, our franchise in South Africa. This car.
Triton also introduced Australia's first podcast rancor, which will help the company began to establish the podcast measurement currency in that country.
In South Africa, and Australia efforts are important steps as tightened down to international reputation and business opportunity on top of that strong USA.
Turning to our National News networks community continue to exceed our expectations in the second quarter and nearly doubled its revenue performance from second quarter of 2018.
Moving has employed a multi platform distribution strategy to be everywhere, you can find a TV watching audience that means cable as well as over the top and other internet delivered services that attract younger viewers.
From our research we know these viewers seek out our objective journalism as our motto state we inform not influence.
Amendment among these recent journalism highlights since receiving a national Edward R. Murrow Award for a story about the nationwide movement at peak or protest of vertical funding level.
And also received the National Emmy nominations for our joint investigation with the scripts, Washington Bureau, and to the way police agencies across the country prematurely close unsolved rate cases.
Impactful stories, such as these are not only a part of our mission that attract large audiences and brand awareness that helped build this burgeoning news organizations.
And now operator, we are ready for questions.
Certainly ladies and gentlemen, if you would like to ask a question. Please press star one.
You'll hear a tone, indicating when placed in the queue. If your question gets answered you wish to remove yourself from the queue. Please press the pound key once again star one follow up question.
And first line of and Dan Kurnos with benchmark. Please go ahead.
Great. Thanks, nice quarter guys.
Adam just kind of high level, obviously theres been a lot of attention on what's going on in the Retrans market, particularly.
With some of the blackouts, what's really interesting for you guys. Those you've already negotiated the Comcast rate going into 20 so.
Given sort of where you expect to finish the year from a scale perspective, and given that you have sort of the Comcast or a in hand, just how do you think about sort of your future negotiations and sort of the trajectory for net retrans.
Good morning, Dan.
Yes, so look broadcast companies and now I think scripts in particular are really well positioned for continued growth in distribution fees, given the strength of our position and most importantly, the popularity of the product we deliver to our local consumers.
I think we have a ways to go until we reach an equilibrium where distribution fees are appropriate for the level of viewing and that I think is the driving force behind our strategy.
If any to any change to your outlook on sort of you know I know you haven't really provided a net retrans outlook, but just sort of your assumptions.
Also factoring in the reverse part of the equation.
No no no change at all.
Okay and then.
More maybe just one for you I just.
National was incredibly strong in the quarter nice subsided Stitcher end Newsy I'm just curious obviously you have some nice tailwinds there.
How much do you think is because some of your competitors, obviously are facing a lot of struggles in the marketplace versus.
You know just simply intrinsic gains and on and on the profit side.
So even with the incremental expenses due to the revenue upside it looks like you're sort of moving faster towards.
That inflection point, so I mean is there any thought to.
Reinvesting now this year, maybe to accelerate that growth are you kind of happy with the balance you are seeing.
I'd say, we're really happy with the balance we're seeing and we're pleased with just the execution, we're seeing at both state you're ending the capitalizing on both growth marketplaces in NTT uncertainly in podcasting.
I expect we'll have a strong finish to.
For the year, a little bit of seasonality in Q3, but obviously, we had an exceptional Q2 and IB. These teams really surpassed our expectation.
Alright, thanks, guys.
Thanks, Dan.
Next we'll go to Kyle Evans with Stephens. Please go ahead.
Hi, great. Thanks, I think I might have one for every one of you.
Turning to Hog the line Lisa.
Do you have a leverage target.
Post Nexstar Tribune.
By year end next year.
Yes, we expect to be in the low the low to mid fours by the end of next year.
Great and Brian could you give us.
Kind of.
As specific as you can get on sub count.
Yes.
Like others were not seeing a lot of movement there I think.
As we look at.
The last 12 months, we're seeing about a 1% decline.
Net which is better than we modeled so there is a little bit of fluctuation that still happening between the traditional users and the virtual products, but its netting out again over 12 months about 1% decline.
Great Lori could you dive down a little bit into the news the unit volume pricing sell through effective CPM, just just tell us what you're seeing there and maybe give us a distribution household update and traditional cable satellite.
Yes, and pay TV households, where nearly in 40 million homes, we continue to broaden that that Fran.
As much as possible on the LTE side, I mean, we see cpms.
Many orphan 15 to $50 or sell through rates are very high and low rarely if at all ever not sold out on easy LTT.
Great and then one for Adam.
Lot of podcast M&A out there.
Some of it is hard to understand.
Does that change your outlook.
For Stitcher positive negative or are you still kind of same.
Thanks Scott.
Look I mean, I think it validates the thesis we've had for a long time podcasting is going to be one of the most important platforms for the future of.
Entertainment's storytelling and journalism.
The company was early into the business.
But we take a very disciplined approach and we're seeing a lot of.
Companies invest with a lack of discipline I would say that's not our approach you can even see in the way we've grown newsy.
That.
And what's happened in the marketplace. There were other competitors on the newsy side that were.
Getting massive valuations, but havent made at a penny and probably didn't have a path there and thats not the way we operate we're disciplined operators. So we look at.
What we are doing with stature in just the same way.
I expect that scale will continue to be important in that marketplace.
And we continue to push in that exact same direction, but.
The recent events the recent M&A I think validates scripts his position.
Great. Thanks for taking my questions.
Our next question from Marci Ryvicker with Wolfe Research. Please go ahead.
Thanks, I have a couple.
The first can you just clarify your 2020 free cash flow guide does that include Nexstar Tribune stations and then can you also talk about what you're seeing for political in the guide.
Marci. It does include on Nexstar and Tribune that we Havent we havent.
Really given any insight into the components of that.
Okay, and then can you just be a little more clear as to Wayne now.
This.
Up for renewal in Q4 of this year, beginning our engines and sort of the cadence for next year, because I think that there was a timing issue that we may have had because we know that you give us the percentage, but I don't know that you give us exactly in each quarter banking thats, creating some confusion.
Hey, Marci its Brian .
I think most importantly, we're on track to hit our full year guidance on Retrans.
And then as we look at.
Just.
As I mentioned, 90% of subs come into new contracts within the next 12 months. So obviously we have the.
The big opportunity with Comcast at the end of the year, but then all the rest of it will happen by the middle of next year So figure.
All of those.
I shouldn't say all but the most significant contracts will all be negotiated and renew by June thirtyth of next year.
Okay. So for Q4, the only thing you have is Comcast at the end.
Correct, Yes, we have no more renewals before the end of this year.
Okay perfect. Thank you that was it.
Next we'll go to Michael Kupinski with Noble capital markets. Please go ahead.
Thank you good quarter.
I want to go back to Kyle Evans.
Question for a minute a number of broadcasters have.
Plans to expand their podcast content and I was just wondering how does this affect you or are some of these broadcasters working with you for distribution and sales are you seeing that with their increased content necessarily increased competition in the space.
Hey, Mike It's Laura.
You know I think to reiterate some of what Adam said more of these broadcasters radio broadcasters are getting into the space and investing in content, we've been in the business.
For a long period of time, and we have one of the strongest content catalogs out there.
We have some of the top performing shows.
Obviously stitcher is listening platform, where most people distribute their podcast so having both an AD rep business and a listing platform, we're really able to take advantage of any content. That's in the marketplace and is being distributed.
I would also add on top of that there is additional.
Upside for us as the marketplace expands in podcasting for Triton as trading continues to service all of those radio broadcasters on the streaming side. They also are the platform often that the companies are turning to four podcasting.
Great and the number of broadcasters have stated that they've already booked presidential political are you seeing presidential political at this time being booked and any thoughts on political for the full year 2019.
Hey, Mike, It's Brian we have booked a little bit out Las Vegas, We've got some early spending for the early primary out there.
For 2019.
Obviously, we reported our quarter, we cited a slightly more revenue than we were expecting due to an energy bill in the Ohio State legislature.
But really I think for the rest of the year, our opportunity is going to be out of.
Lafayette, and Lexington, which that both have gubernatorial and down ballot.
Elections, so Lexington in Q2 at 40% more political than it did.
And the 18 as a result of a tossup Governor race right now. So we also got some local mayor races in Nashville, and Denver that are tracking.
We've got some strong local races at San Diego Indianapolis, So I think.
We're expecting a good year, we do see momentum probably not so much for the presidential but because were in Kentucky in Louisiana, where they have the gubernatorial races.
I think bill.
Continue to track well through this year.
Thank you and I know that in.
National Media segment, actually where I was kind of impressed with is the performance of Kate's.
It looks like it continues to perform very well and I know you have expanded distribution for several of your networks. There can you talk a little bit about.
The growth of Capex and.
And then also talk a little bit about the margins of Capes, because I know when you gave us some.
I'd in terms of when you purchased case that you thought it was going to be a $180 million in revenue 30 million cash flow and it looks like you overachieved that 2018 on a pro forma basis, but I was wondering if you can just give us some thoughts about revenue growth and margins for for that for Kate.
Hey, Mike It's Brian again.
We're not going to break out the margins on Kate's, but I think you're dead on they had an unbelievable quarter, they're having a really a terrific year and you can see there revenues grew by over 20%.
Last quarter.
Distribution as you touched on as part of the equation.
Bounce escape laffer, all at higher than 93% of the country grids and 91% of the country.
Core which launched in May started at 63% in the country, but as I said in my remarks that will be up over 90% by the end of the year, which.
Quite frankly.
We've never seen a network launch like that with that kind of distribution. So the interest in CT TV is amazing, but I think there is a lot of momentum here.
I think it's a combination of.
Really good programming that are acquiring as well as what they're creating on bouncing some centers.
<unk> is really a top 20 television show with its original programs. We had a couple of other originals original that we created in partnership with Kevin hard, which has done very well and then you may have seen that with some announcements were going to be launching a 37 part series on the OJ Simpson trial associated with court. So we own that library OJ Simpson trial was 37 weeks and each week, we're going to do a one hour synopsis of that week in the trial, so thats coming up on.
The anniversary of that and then we were creating them and then does brothers podcast.
In conjunction with the Thirtyth anniversary of that event. So I think it's really we've got this great library of content for court as well as these great shows in original programming across the other networks and it's the combination of distribution its combination of.
Strong audiences and the fact that we are able to convert more advertisers and so.
And we're getting big buys we did really well in the scatter market. This year I talked about how well we did in the upfront space. So they are really hitting on all cylinders. We have a great management team there and we're really excited about the long term growth in that company.
Great. Thanks for the color I appreciate that Thats all I have.
And next we'll go to Craig Huber with Huber partners. Please go ahead.
Yes, hi, good morning.
Brian is a typically like to ask you can you just talk about the pro forma.
Advertising revenue pieces for your TV stations for the third quarter is sort of the core number there excluding political sort of truck and flat year over year up a little bit down a little bit.
Hey, Craig its Brian revenue.
Very good third quarter.
July started very strong.
In fact of our top six categories five of them are up in July .
And August looks equally strong so I don't want to give you a number but I will tell you third quarter is tracking to be a good quarter for us at this point.
We should for Brian I mean, it's better than what you posted in the second quarter, which is roughly flat pro forma it sounds like.
I think that opportunity exists yes.
Okay, and then can you just talk a little further about those numbers you're seeing for the third quarter for the auto category the truck and similar to what you saw in the second quarter little bit federal that worse, yet they are tracking better July which vendors was our best month of the year August looks really good obviously, we still got some points to write in September but auto has been sequentially approved improving for us and the third quarter continues that trend.
Okay, and just just to be clear on.
My question has been asked but re trends.
Contracts up for renewal here.
Just can you go through that for the full year.
2020, you talked about the first half through what the second half of the year.
I think most of it almost all of our subs that are up in 2020 will come up in the first half of the year. There is a small percentage that's in the back half of the year, but most meaningful contracts come up in the first half of 2020.
I assume that's a comment on a pro forma for everything or just through quarterly or not including next store tribute that's pro forma for everything okay.
What percent is up for renewal.
Pro forma for 2021, just so we can think about that too.
Yes angle digits.
Okay, and then maybe could jump over to Triton, if we could.
What was the pro forma revenue growth there year over year and also I think last time, you guys are willing to give us the pro forma costs for employee compensation and the other expenses separating those two out excluding.
Tradable plus percent changes were please.
So hey, Craig its Lisa on Triton, we announced the acquisition late last year, and it's really performing on.
Median expectations based on their performance year to date.
So from.
That does metrics that we gave back last fall.
Does that sort of mid mid teens, Lisa I think you said last time was up 13% when we announce that we indicated triton would be growing in the low teens.
And and.
So it continues to perform year to date.
Based on our expectation.
Okay.
What about the cost without Triton compensation and other line out of that truck year over year are you talking in the national segments, Yeah, just sorry, just to national yes.
Thank you.
I have two other expenses international event that.
Yes, exactly excluding Triton and also within national the employee compensation line, excluding Troy was that percent change as well, yes, I don't think we're going that we wouldn't break it out by business on the expense side as it relates to the upside not for Triton, but just in total excluding the Triton acquisition do you have that.
Hey, Craig I will will get it to you.
I think I know, what you're asking but I want to make sure that I'm clear.
So youre, saying, excluding employee compensation, excluding Triton what was the percent change for employee compensation in National and then same question other expenses within national Okay. Yeah, we'll have to get well have to get that for you.
Okay. That's all I do one more question Brian .
You guys are willing to give the 2018 political pro forma number what was the 2016.
Number do you have that.
Yes, I don't have that in front of me Craig we can look that up for it okay. Great. Thanks. Thank you.
And ladies and gentlemen, just a quick reminder, if you do have a question. Please press star one and then next from the line of an Davis Hebert with Wells Fargo. Please go ahead.
Hi, good morning, everyone. Thanks for taking the questions.
First question on the free cash flow guidance.
I Wonder if you could give us a little bit more color. There is it after dividends and then how should we think about cash taxes and capex as part of that.
That.
Guidance range, yes, so it.
It is after dividends and.
We don't really expect to be much of a cash taxpayer on.
Going forward, so very little and taxes and on the on the Capex side on a pro forma basis for all acquisitions, we would be somewhere in the $40 million to $50 million range.
Okay. That's helpful. Thank you.
And then just a housekeeping.
You mentioned being at 5.3 times pro forma for the Nexstar station acquisition.
Just wanted to confirm that.
Includes the Comcast step up correct correct and then Okay and then what would be your late Q leverage as of June Thirtyth with the acquisitions, you've completed a pre nexstar, yes sure.
It would be about a little over four point out one.
Okay, and that's with Cordillera and and Gray and others.
Yes.
And sorry.
Is that with the Comcast step up.
Yes, okay.
Got it and then you mentioned being low to mid fours by the end of 2020.
Are you comfortable there would you like to see that leverage move into the threes as we move beyond there.
How do you think about that Hi, Davis, it's Adam we we typically would like to be in the mid to low threes I think as a steady state we intend to continue to move in that direction. Even after 2020, you said mid to low.
Correct.
Correct.
Great. Thank you.
And with no further questions in queue I will turn it back to the company for any closing comments. Thanks John .
So to summarize this is Adam again, we're on the verge of doubling our free cash flow from 2018 to 2020, when we expect a range of $225 million to $250 million will be paying down debt. While also capitalizing on our more durable television station portfolio and our fast growing national media businesses.
I'm confident in the plan that we're executing and we are on the right path to continue to create value for shareholders. Thanks, everybody have a great weekend.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.