EW Scripps [SSP] Conference call transcript for 2022 q3
2022-11-08 14:38:07
Fiscal: 2022 q3
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Scripps Quarter Three Earnings Conference Call. At this time your telephone lines are in a listen-only mode. As a reminder, your call today is being recorded. Iâll now turn the conference call over to your host, Head of Investor Relations, Carolyn Micheli. Please go ahead.
Carolyn Micheli: Thank you, Alan. Good morning, everyone, and thank you for joining us for a discussion of The E.W. Scripps Companyâs financial results and business strategies. You can visit scripps.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 a supplement 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 companiesâ uses or formulations. Included in our earnings release are the reconciliations of non-GAAP financial measures to the GAAP measures reported in our financial statements. Weâll hear this morning from Scrippsâ President and CEO Adam Symson; and Chief Financial Officer, Jason Combs; Local Media President, Brian Lawlor; and Scripps Networks President, Lisa Knutson. Also on the call is Controller, Dan Perschke. Hereâs Adam.
Adam Symson: Thanks, Carolyn. Good morning, everybody. Thanks for joining us on this midterm election day. If you havenât already, please make sure to take the time to vote. I want to start with the obvious. Political revenue did not meet our very high expectations this year. Early on, things were lining up in a way that led us to believe our portfolio for the midterm would attract spending that would beat our record revenue in 2020âs presidential election. But despite a very strong start to the year with record spending for the first half, dynamics suddenly changed. Brian will be along shortly with the detail youâre looking for. But let me make one thing clear. Scrippsâ performance this year breaks our last record level midterm election revenue in Local Media, raising the bar for midterm election spending. It wasnât as much as we expected, but in no way should investors have existential questions about political on broadcast. The Scripps Networks division delivered a solid beat to our revenue expectation, at 4% above last year. This comes from a stronger performance in general market advertising and directly as a result of our execution on connected TV. Lisa will share details on the quarter. Given the comparative results of our peers in the national advertising marketplace and despite the very obvious macroeconomic factors, our performance is a testament to our profit building growth strategies and the strength of our portfolio with both audiences and advertisers. Let me say more. Much is being written and said about linear television. But Iâm afraid that the term linear is being thrown about without enough definition. Itâs certainly true that consumers are taking full advantage of on-demand platforms for media and entertainment, spending less time on the traditional platforms. But all linear is not created equal. Programmers, like most of our peers in the national networks marketplace depend on cable and satellite distribution and as subs decline, so does their reach. Not true for the Scripps Networks, which now engage with 70 million viewers a month in rising. Our networks reach Americans through the same pay TV and virtual MVPD platforms as other networks, but we also have the benefit of the expanding platforms of over-the-air and connected TV FAST networks. This has led us to growing distribution and reach in growing market places, growing audience shares, growing CPMs and growing revenue. Earlier this year, I told you we had obtained the rights to deliver our network streams into connected TV. Since then, weâve secured distribution for nearly all of our Scripps Networks on more FAST platforms, creating new distribution points for our premium programming on the most popular CTV destinations, Samsung TV Plus, Vizio's Watch Free, the Roku Channel in and Amazon's Freevee just to name a few. Our premium networks stand out in the fast marketplace and are performing very well, benefiting Scripps and our platform partners. Thatâs driven nearly 60% growth in the networks of CTV revenue and helped drive our industry-leading Q3 ad revenue growth. We are now on track for a CTV revenue run rate of more than a $100 million next year and we are just getting started. While the CTV marketplace is growing, so is free over the year. Last year, 32% of American TV households were watching free TV over-the-air. That was up from 26% and Nielsen says the percentage will grow to 45% or 53 million U.S. households by 2025. Scrippsâ advantage here is that we capture about 30% of that viewing with our local and national brands. Our outsized share is a differentiator that positions us well for future growth in that marketplace. And itâs for that reason, as weâve told you that weâre giving OTAs growth a push through our free TV project education and awareness campaigns. The free TV project is gaining measurable traction. During the early stages of our marketing campaign launched in July in 13 Scripps markets antenna manufacturers were working with reported a 30% increase in sales. Iâm not surprised free TV is resonating with Americans right now. Consumers are bearing the burden of broader inflation and interest rate hikes, while streamers continue to increase prices. This has created a period of even greater opportunities for free TV, both over-the-air and on connected TV, right in our sweet spot. So while we carefully navigate the current negative economic impact on the ad marketplace and weâll keep a tight rein on operating expenses, we will also take advantage of this moment in a way that will benefit Scripps and our shareholders. And yes, you can have your cake and eat it too, because while investors and Scripps will profit from the disruptions, we will continue to maximize the significant opportunity we have in pay TV, especially given that we will renew 75% of our local broadcast subscriber households next year. Looking out a bit further, Iâm growing even more enthusiastic about the business opportunities weâre developing as a result of ATSC 3.0, both for NextGen TV and the new ways for us to monetize our spectrum. As you know, Scripps is the largest holder of broadcast spectrum in the country, and we are actively developing near-term opportunities with real dollars attached. BIA/Kelsey consulting services says the technology could add more than $10 billion in broadcast industry data casting revenue by 2030. While weâre not ready to affirm any numbers yet, we do believe the amount will be significantly meaningful to us and to our industry. Iâd like to close by discussing an important announcement we made during the third quarter, the creation of a new national news organization called Scripps News. Scripps News combines the team at Newsy with our venerable Scripps Washington Bureau and our local divisionâs national news resources to form one powerful national news outlets, operating more efficiently and more effectively across every platform we own. Beginning in January, the name Newsy will be replaced by Scripps News. The Head of the Division Veteran broadcast journalist and executive, Kate O'Brian, joined the Scripps Networks division in April 2021 to oversee Newsy and Court TV. She will now report to me. Scripps News is the first consumer facing news organization to carry the Scripps name, well respected in the American journalism and by generations of Americas. We made that decision as a sign of our commitment to serve our audiences with objective, fact-based and nonpartisan news and information that they can trust, just as our company has done for 144 years, a commitment that sorely needed in this country now more than ever. Hereâs Jason.
Jason Combs: Thanks, Adam, and good morning. The E.W. Scripps Company delivered $612 million in revenue and $145 million in segment profit for the third quarter. Those were year-over-year increases of 10% and 13%, respectively. We saw growth in local media, political advertising and retransmission revenues as well as in Scripps Networks revenue. Local Media revenue was up 14%, driven by political advertising as well as retransmission revenue. Core advertising revenue was down 12%, in line with our guidance as we compare it against revenue last Q3 for the NBA finals, the Summer Olympics and sports betting launch campaigns. We were the only local broadcaster at that time to outperform our 2019 third quarter number. Local Media political ad revenue in the quarter was $63 million. That compares to $56 million in Q3 of 2018. For the year we expect to report, $200 million of political advertising revenue a record midterm election performance. Retransmission revenue was up to 7% to $165 million. Local Media expenses increased less than 5% from the year ago quarter. Excluding programming costs, expenses were actually down about 0.5%. Local Media segment profit was about $100 million. Turning to the Scripps Networks division. Revenue for the third quarter of 2022 was $235 million, up 4% from the prior year quarter due to connected TV and general market advertising performance. Networks segment expenses rose only 14% over Q3 2021. As of fourth quarter, we have cycled through the investments we made to launch Newsy, Defy TV and TrueReal over-the-air. Segment profit for the networks was $72 million. In other segment results, we reported a loss of $7 million, which includes the spend for our national marketing campaign from a consumer digital TV antenna use. Shared services and corporate expenses came in at $19.6 million. The company realized Q3 income from operations of $0.38 per share. As of September 30, cash and cash equivalents, totaled $38 million. Our net debt at quarter end was $3 billion, and our net leverage was 4.6 times per the calculations in our credit agreements. Now, Iâd like to give guidance for the fourth quarter of 2022. We expect total Local Media revenue to increase in the mid-20% range. We expect Local Media expenses to be up mid single-digits. In the Scripps Networks division, we expect revenue to be down mid- to high single-digits against an exceptionally strong fourth quarter results in 2021. Networks expenses are expected to be about flat. Fourth quarter shared services costs are expected to be about $21 million. We expect about a $9 million operating loss in other segment results in Q4, inclusive of the cost for the digital antenna marketing campaign. Iâll conclude with updated guidance on a few full year items. We now expect to pay cash taxes for the year of about $70 million. We now expect capital expenditures of $45 million to $55 million. Thatâs down from our expectations of $70 million to $80 million at the beginning of the year. We now expect free cash flow for the full year of about $320 million due to lighter-than-expected political advertising revenue and the macroeconomic impact on the national advertising markets. We now expect leverage to be in the mid-4s by year-end. We plan to reduce debt by another $100 million to $125 million in the fourth quarter, bringing our total debt pay-down since the ION Media acquisition to more than $800 million, and we remain committed to debt pay-down as our top capital allocation priority. And now hereâs Brian to talk about Local Media.
Brian Lawlor: Thanks, Jason. Good morning, everybody. As the 2022 election season winds down today, we are pleased to report Local Media has taken in a record amount of midterm political advertising at $200 million. That compares to our last record of $194 million in the 2018 midterm elections. We did not reach the 2020 presidential election level as we had hoped for reasons mostly related to our political market footprint and where money was spent on competitive races across the country. Back on our August earnings call, all signs still pointed to meeting our 2020 revenue number, but then we began to see signs of shifting spending patterns, especially in three key states. The first was Florida, where we have projected a close race for Senator Marco Rubio, but the polls began to show his lead was widening. And then Montana, which has been a significant political player for us in recent elections, redistricting resulted less competitive races in a couple of those markets. To scale these Florida and Montana alone accounted for a decline of about $40 million and weâve seen about $10 million less spent in Nashville as Republicans have gained a solid hold on that state. In addition, $20 million less was spent on valid issues in our footprint. More broadly across the industry, election ad spending was dampened by lower-than-projected fundraising. Early estimates were for $9 billion to be spent in the 2022 cycle. But now it looks like spending will be closer to $8 billion. Within that $8 billion, we do believe weâll see that local broadcasters grew their share because campaigns continue to turn to us as their primary way to reach likely voters. Turning to core advertising revenue. We landed right where we had expected for the quarter. Keep in mind, our Q3 guidance had a bit lighter forecast than our peers due to our comps against several high-profile sporting events and several events that were unique to our portfolio in the third quarter of 2021. In the prior year quarter, our 11 NBC stations broadcasted the Summer Olympics. Also in the 2021 third quarter with the NBA finals, which are out of their normal broadcast cycle due to the pandemic schedule. The six game NBA finals included the Phoenix Suns, which provided a huge upside to our Phoenix ABC station. At the same time, we saw a significant sports betting activity with a number of Scripps markets launching last fall. Aside from those year-over-year comparisons, we did see some displacement from political advertising in our most competitive markets. Driving the core decline was our services category, which accounts for a third of our core advertising. Services was down 12% in the quarter. Our next two largest categories were actually up auto and home improvement. Auto was up 5% due primarily to spending by domestic dealer groups and domestic factories as they begin to recover from chip shortage issues. Home improvement, which has maintained its pandemic level strength and has been a bright spot in U.S. consumer spending, was up 12%. Gambling was down more than 50% as state cycling through different stages in the legalization of sports betting. We expect those dollars to continue to be driven by launches in our markets. Ohio and Maryland are our next states to roll out sports betting beginning in January. Iâd like to close with a note about our mission. We recently received another reminder of the importance of local broadcasters in keeping our communities safe and informed during crisis. As Hurricane Ian was heading towards Florida, our local station FOX 4 and Fort Myers began to broadcast from a backup location so it continue to provide life-saving information to the local residents. Our station employees suffered their own personal hardships, but they persevered to serve their community and now theyâre playing a major role in the recovery of Southwest Florida. At Scripps, we are proud to serve our communities, especially when they need us the most. Now hereâs Lisa.
Lisa Knutson: Thanks, Brian and good morning everyone. Scripps Networks delivered Q3 revenue results today that beat our guidance coming in at 4% above last yearâs third quarter, despite the macroeconomic challenges to the national ad marketplace. Weâve been launching nearly all of our networks across the largest connected TV platform, and those drove our total revenue with nearly 60% increase in connected TV revenue. I want to reiterate Adamâs comments that weâre expecting to exit this year with an annual connected TV revenue run rate of more than a $100 million. Iâll discuss more in a moment about our connected TV distribution. But first, Iâd like to continue with another bright spot in the quarter, general market advertising revenue. We grew our general market ad revenue by 7%, commanding higher ad rates as a result of growing or maintaining viewership levels across our network. The Scripps Networks audience, as measured by Nielsen grew 5% among total viewers this quarter. Both our 4% year-over-year growth in Q3 revenue and our viewership performance outpaced our peer group. Most of the other national networks were below or barely above last yearâs Q3 ad revenue. Meanwhile, linear TV viewing is down 11%. So, weâre proud to have turned in best-in-class performance again this quarter. Because of our growth against the linear trends, the Scripps Networks now account for more than 4% of all linear viewing and 26% of over-the-air households. As you know, OTA households is an area weâre working to grow, and our steady and loyal viewership positions us to rebound quickly along with the national economy. Last quarter, I told you about our experiment to create the technical capacity to test local political advertising on our ION stations. We were pleased to have fully launched our sales effort in the third quarter. And as of today, weâve taken in about $8 million of political advertising revenue for the full year. This is a bit short of what we said we expected in August, and that is due to the same shift in spending that Brian referenced earlier. Also, we knew this would be a building year for networks, and we look forward to growing our political advertising category even more during the 2024 presidential election. During the third quarter, we successfully completed our second upfront season as the networkâs portfolio, meaningfully increasing both rates and new business. This year, we built on the momentum of our first year and retained nearly 90% of our new advertisers from last year, and we grew our list of new premium advertisers by nearly 10%. In addition, we significantly outperformed the market in terms of rate growth, both at ION, which was up mid single-digits, and it balanced, which was up in the high-teens range. Our upfront dollars will again lay in a solid foundation as we move into next year. As I mentioned previously, weâve launched nearly all of our networks across the spectrum of some connected TV platforms in recent months with a big slate of those beginning in the third quarter. All of our streaming channels are now on Roku, Samsung TV Plus, the Amazon service Freevee, Vizio's Watch Free, Fox's own Tubi and Comcast own XUMO, itâs still early, but our programming is finding audiences on these services and that is resulting in our meaningful CTV revenue growth. Bounce and Grit fully launched on DirecTV satellite streaming and AT&T U-verse platforms in third quarter. And Iâm happy to announce, weâve reached an agreement with YouTube TV to launch ION and Bounce for the 5 million to 6 million subscribers on their basic tier. YouTube TV will also relaunch Newsy, soon to be Scripps news and will continue to carry Court TV. Now Iâd like to spend a few minutes sharing our successes at Bounce, which has been serving African-American audiences for more than a decade. Over the past year and a half, we have recommitted to building this brand to serving black communities. Iâm excited to share that weâre delivering on our promise. Bounce is already making strides in elevating its content with strong storytelling thatâs relatable and authentic. Johnson is an original series written four, five and about Blackman. This show completed its second season with great reviews and strong performance. Now weâre also airing the original series Finding Happy, which gives voice to the black female perspective because itâs written for implied black women. This show, along with our renewed social media strategy around cultural connections has created significant engagement, while driving younger viewers to the network. Weâre seeing double-digit increases not just in our social media impressions and audience growth, but also in Bounce revenue. We are pleased to achieve the vision results this quarter that exceeded our strong performance last year with growth that was better than the national ad marketplace overall, as the economy rebounds, we are poised to capture â given greater growth as we expand our margins. And now, operator, weâre ready for questions.
Operator: Weâll first go to the line of Dan Kurnos with Benchmark Company. Go ahead please.
Dan Kurnos: I appreciate all the color you guys gave us. Pretty actually solid national results, everything considered â maybe just first, Brian, if we just double click on political for a second, you guys have sort of a unique perspective. I know it was early and initial, but just any thoughts on how sort of the consortium with Magnite performs because I know you guys did a sort of a good job explaining the shift and what you thought was sort of more of a fundraising challenge. It would be helpful to hear, what youâre seeing on sort of a cross-platform.
Adam Symson: Hey Dan, itâs Adam. Iâll take the question on our connected TV efforts for political. We definitely think that connected TV increased its share. I donât think it increased its share nearly as much as I think folks thought it would. But we use this year primarily as sort of a test and learn opportunity for us. And I think, first and foremost, the technical and sales execution that we learn this year will really benefit us in 2024. So, I think thereâs some things that weâre going to change about the way we approach this moving forward, I think weâre going to continue to see more dollars flow into CTV. And I think our sales apparatus will be certainly more fine-tuned in the coming cycles to be able to take advantage of that shift.
Brian Lawlor: Hey Dan, itâs Brian. Iâll just add that weâve been doing a lot of reconnaissance talking to a lot of the leads at the political shops. And from what weâre learning, CTV obviously did pick up a couple of share points in the cycle. We believe broadcast â local broadcast picked up a couple of share points in the cycle. I think the area that probably saw the biggest decline was in digital, it looks like it lost a few points and radio declined as well. So, I think, as I said in the prepared remarks, we feel good that local more than held its share of the ad dollars.
Dan Kurnos: Got it. Thatâs really helpful. And interesting to see how it develops Adam, I guess your CTV portfolio expands. The other sort of top of mind question, Iâll ask Adam, so Iâm sure Brian will answer this one. On retrans, itâs a little bit light, obviously, with some incremental sub-declines. You guys clearly have strong footprint coming up. I think itâs about evenly split on 1Q, 2Q next year. Any updated thoughts on net given just kind of the broader conversation thatâs being had in the case right now?
Jason Combs: Weâre going to really throw off. This is Jason. So, Iâm going to answer this one. So from a net retrans perspective, I think the messaging is pretty much in line with what weâve said the last couple of calls that when you look at this year, based on the cadence of pay TV renewals and affiliate renewals, weâre going to see net retrans from a margin perspective, a little bit of a headwind, but dollars that are pretty flat. But when you look to that 75% renewing that Adam referenced earlier next year that we expect some really nice margin and dollar expansion in 2023.
Dan Kurnos: Okay. So no impact from any other economic scenario. And then Iâll try Lisa, and Iâm sure Iâll get Adam. Lisa, just on the network sort of evolution here, I think itâs â you guys really have expanded distribution quite nicely. I guess Iâm just trying to get a sense of how youâre cross-selling your thoughts on sort of evolving your go-to-market strategy here and into Q4, I think we had said that we referred pretty consistently that pro forma been very strong. I donât know if thatâs receded some and has typically driven DR. But just how that might be sort of a leading or a contributing factor to what you guys are seeing?
Lisa Knutson: Yes. Itâs definitely, Dan. I think of all the categories in fourth quarter and our guide the latest is probably in DR and in particular, DR is hit, I think from a recession perspective because, again, itâs a call to action, the 1800 number dial. I also think third quarter DR was light for the quarter, made up for it with political dollars as well as general market advertising and CTV revenue â and so our approach to selling our portfolio is not changing. Weâre cross-platform and cross portfolio, which we think is really compelling. Our story is all about reach. As Adam said in his comments, we reached $70 million viewerâs a month across our portfolio, which is really, really compelling to advertisers.
Dan Kurnos: All right, great. Thanks very much. Appreciate the color everyone.
Adam Symson: Thanks, Dan.
Operator: Weâll move next to the line of Steven Cahall with Wells Fargo. Go ahead please.
Steven Cahall: Maybe first for Adam or for Lisa, just on Scripps Network. I think weâre seeing margins now that are kind of well below where they were when you acquired ION pro forma for the other bits in there. I know youâve invested a lot between the content and the marketing and the distribution. So, I was just wondering if thereâs any good way for us to think about kind of where those segment margins head from here. And Lisa, with YouTube TV, I think there may 7% or 8% of Pay TV subs. Do you expect an immediate revenue pickup from the launch on those services? Or do you have any sense of kind of what the demo that subscribes to YouTube TV? Does that cross-sell pretty well against your demo for those networks? Thank you.
Adam Symson: Hey Steven, Iâll take the first question. I continue to see the business as a 35% to 40% margin business. I think weâve now cycled past the increased expense that we put in as investment with the launch of three networks last year, as Jason referenced. I also think that when you account for the dislocation, which we think is sort of natural as part of whatâs going on, on the macroeconomic level, weâre back at a 35% to 40% margin business. So, I would expect us to continue to drive towards that zone. Look, I think we have to wait and see based on what happens to the national ad marketplace, but our thoughts are exactly in the same place as theyâve been.
Lisa Knutson: Steven, to answer your question about YouTube, weâre really excited about YouTube TV, because I think the demographics skew younger on YouTube. So, weâre excited about that our ION, Bounce and also reintroducing Scripps News into YouTube. So, we do know that it takes time to build revenue and people to find you that weâre applying some advertising dollars against that to make sure that audiences find us on YouTube as they have found us quite nicely on the rest of the connected TV devices.
Steven Cahall: Thank you. And then, Jason, I know youâre not guiding to free cash flow or EBITDA for next year, yet thereâs a lot going on. Youâve got the higher cash interest, some weaker ad trends. Itâs a big year for retrans. So, I think what weâre trying to figure out is between free cash flow dynamics and EBITDA dynamics. Do you feel youâll be able to delever next year from that mid-4s where expect to end that the end of this year? I think thatâs a big one where we think the stock is going to be sensitive to kind of to the up and down based on that. So would love any color there. Thank you.
Jason Combs: Yes. So, I guess Iâll start by saying the 4.6% weâre at right now, and weâre really pleased thatâs actually ahead of where we thought weâd be. At this point in time when we did the ION Media acquisition. And by the end of this year, weâll pay down $800 million in debt since we closed on the ION acquisition. So again pleased with that progress. To your point, weâre not giving guidance right now. Weâre still finalizing up our budgets for 2023. But I would say we remain committed to debt pay down as in pushing towards deleveraging as our number one capital allocation priority.
Adam Symson: Thanks, Steven.
Operator: Weâll go next to the line of Nick Zangler with Stephens. Go ahead please.
Nick Zangler: Yes. Hey guys. Iâm curious about core revenues. They were in line in the quarter, but Iâm curious for the expectation for 4Q because itâs obviously falls within that Local Media guide of mid-20% growth. I think if I kind of take your political revenues that you mentioned as of today and trended out some retrans coming to a core growth of down 12% year-over-year in 4Q, which would obviously be similar to what you just did in 3Q. So curious if that kind of sounds right. Obviously, if so, it would imply an uptick from 3Q to 4Q as we typically see and actually similar to last year, so that obviously wouldnât be implying too much caution in 4Q. But given some of the more weaker sauce weâve heard going into 4Q from others. But maybe you can just kind of unpack core expectations as we move into the holiday season.
Brian Lawlor: Hey Nick, itâs Brian. I think youâre your math is good. Thatâs the right range for â to be thinking about us. Look, I think the biggest factor in a down, Iâd call it, low double-digit analysis would be the heavy political that we had obviously, for the first five weeks. There are some markets where we, I donât feel like Iâve seen too many regular advertisers on the air, certainly limit in Ohio thatâs been the case. But we have other markets that have been very saturated. And so thereâs been significant core displacement. That will open up starting at 7 oâclock tonight or so. But I think weâll remain open for business. Thereâs a lot of in November and December still a business to be booked. Many of the markets that weâre not saturating by political have been having good core performance. And so we think that will continue. But I think when you crowd out so much over five weeks, you canât get much more momentum than what we have.
Nick Zangler: Thatâs fair. And then â can you the Florida and Montana commentary, were you saying that the softness in those states from the political aspect impacted revenues in the quarter by $40 million? Or was it $40 million across both 3Q and 4Q?
Brian Lawlor: Yes, it really was over the whole cycle. So, when we had done our early modeling Montana, which has been a very significant political state for us. We had expected two very competitive house districts, redistricting, reset Montana and really softened. I would tell you though that doesnât change how we look at Montana in the next two cycles with Senate and Governor up, but it will be very competitive there. And then Florida, as I mentioned in my prepared remarks, we thought Rubio would be a little bit more competitive. I think one of the things that we started to recognize in kind of talking with pollsters and others there, that while it might have only looked like he was running three or four points ahead, there have been several million Republicans that have moved to Florida in the last two years and once you factor them into the modeling, the belief was that the lead was much greater since they werenât in that sample. So in addition to that, we had hoped and expected that Florida will put sports betting on its ballot for this year that didnât happen. And so all those things rolled up to why Florida and Montana would be two of the places that are fairly significant and kept us from getting to our early optimistic targets.
Nick Zangler: Got it. Got it. Very helpful. Last one for me. You mentioned that the digital space loss political ad dollars. Specifically, when you refer to digital, do you mean maybe more like the social media players just because I would still expect like CTV as a digital platform to gain share, but just a clarification, like maybe where specifically within digital you think political ad spend shifted out of?
Brian Lawlor: Yes, Nick. Look, I agree â CTV, I think we look at separately and weâve broken that out and as we said, that did pick up a couple of share points. I think as when we think about digital specifically, what weâre seeing is Google and Facebook. And to some people weâve talked to, it looks like they may have been down as much as 50% in the money that was allocated to those platforms.
Nick Zangler: Wow. Okay. Great. All right. Thanks so much guys. Appreciate it. Good luck.
Adam Symson: Thanks Nick.
Operator: Weâll go next to the line of Pat McCann with NOBLE Capital Markets. Go ahead please.
Pat McCann: Good morning. I just had a question or two on behalf of Mike Kupinski. Could you guys, just given the shift in political spending and kind of what you mentioned earlier, does that have any implications, I guess, for what will be the battleground markets in 2024 and kind of how we should look at that going forward?
Adam Symson: Look, I think weâre â itâs Adam, Pat. I think weâre obviously going to do the same kind of analysis we do ahead of every cycle to determine where the races are tight, where the issues will be on and what the opportunity will be for us first for 2023 and then for 2024. I donât think weâve seen any secular change to political spending that give us any pause relative to broadcasters takes. In fact, as weâve said a couple of times, we actually think the broadcast space will have gained share during the cycle. But we will, as we always do, assess our footprint for the opportunity as we move into the next year.
Brian Lawlor: Hey Pat, itâs Brian. I would just add, weâre sitting here on election morning, but now that weâre already looking ahead and 2024, 33 senate races, weâll have 17 of them, a couple of them we would expect at this time to be pretty competitive. Cruz in Texas, Tester in Montana, we think weâll be very aggressive. Sinema in Arizona, Ohio, with Brown and then a couple of big governorâs races. We think are Gianforte in Montana will be another big race. So, we know where the races will be. As we get closer, weâll see how competitive they are and where the money shifts? I mean, I think thatâs certainly what we dealt with here. The money is in the system, you just got to be where the races are close and tight and then a lot of money moves there. And thatâs certainly what we have seen now in the last couple of weeks. And unfortunately, that last run of spending here over the last couple of weeks. Heavy money when itâs a Pennsylvania, New Hampshire, Washington, New Mexico, Georgia, North Carolina, we donât have stations in any of those places. So, I mean, there are other places that money kept going, and we benefited from that, but a lot of money moved to those that maybe would have been earmarked to our markets, but our markets werenât as competitive as we would have hoped down the stretch.
Pat McCann: Got you. Thank you. And then one other just kind of you mentioned some Q4 pacing guidance. But just kind of on an ex-political basis, sort of thinking ahead to say December, is there kind of a â how should we look at revenues sort of ex-political in Q4?
Adam Symson: Look, I think, as I said, thereâs still a lot of business to be written December, we expect a lot of points still to be written there. So, I wouldnât move beyond our guidance other than to say that we do have some momentum in a couple of categories. Iâll speak to Iâm sure somebody is going to ask about automotive anyway. But we spoke about the fact that automotive was up 5%, thatâs the first quarter in years that weâve seen quarter-to-quarter growth. And it built through the quarter in third quarter. Automotive was down 12% in July, up 4% in August, up 25% in September. And Iâll tell you that in October and November, we continue to see more than 20% growth in automotive. So thatâs one key category thatâs now coming back fairly strongly. And I would guess I would just also add that I think weâre starting to feel like the biggest pressure from supply chain is behind us because not only do we see automotive now gaining momentum, but other categories or subcategories that last year were held back by supply chain issues, like appliances, hot tubs, all of the categories are up. Theyâre up double digits. So, we feel like finally the supply is catching up and providing an opportunity.
Pat McCann: Excellent. Thank you so much.
Operator: Weâll go next to the line of Craig Huber with Huber Research Partners. Go ahead please.
Craig Huber: Great. Thank you. Brian, I guess my first question is, your retrans subs, what was the year-over-year percent change in those that affected your retrans revenues in the third quarter?
Jason Combs: Hey Craig, itâs Jason. So, we were down on a trailing 12-months, mid-single digits after talking the last couple of quarters being down in the low single-digits. So this slight change in subscriber churn really from our perspective just brings that trailing 12-month trend back in line with our modeling assumption that weâve had for a while now of down mid-single digits.
Craig Huber: How are you thinking about that number as you think about next year in your budgets? Do you think thatâs reasonable range to be in for next year? Or do you think itâs going to be worse, better? What do you think of?
Jason Combs: I think weâve thought that was a reasonable range for a while now, and weâll continue to think that mid-single digits is a reasonable range.
Craig Huber: Okay. My next question, please. Net retrans for this year, where are you expecting that to be as a percent change versus last year?
Jason Combs: So net retrans this year based on timing of pay TV and affiliate renewals is down a bit for us this year, but the net dollars are flat. But when you look at head to next year, with 75% renewing, we expect some nice margin and dollar expansion.
Craig Huber: Okay. And then, Brian is there anything else you can tell us about the core advertising? I know youâve talked about this a bit here post the election, some of the other categories. I mean, I guess my bottom line is Iâm asking is, from the macro perspective, are you seeing a significant change from the headwinds on macro side in your core advertisers? Itâs just too hard to break that out in your mind right now.
Brian Lawlor: Look, I donât think itâs too hard to break down. You always have the inconsistency of a fourth quarter where you have political that dominates five or six weeks. And so you have the markets that are just completely consumed by it. You also have markets that you expected to be fully consumed by it and then suddenly want it a little bit lighter. But I do expect a lot of momentum now in the next couple of weeks. I mean I spoke to auto there, Craig. A lot of momentum there. We talked about the travel and leisure being up, home improvement up. So, we do have some categories that are up, but we are also seeing the effects of the economy and some of the prices, implications that are having an impact on some services or grocery and other subcategories. But look, overall, I think we feel good about some of the build thatâs happening, especially in categories that were dominated by supply chain challenges over the last two years.
Craig Huber: And then back on your political comments, and I appreciate what youâve given us so far. I mean every one of your TV pure-play peers out there, seemly theyâve reported disappointing political numbers for the third quarter and outlook for the fourth quarter here. I mean it sounds looks like youâre part of what youâre saying here is the overall fundraising that was meaningfully lower, not the $9 billion, but roughly about $8 billion in total. That sounds like that was a big part of it in your mind of the shortfall. You also talked about political dollars shifting to markets at Scripps is not in. You mentioned Washington, Georgia and North Carolina, but all of your other peers have just like you guys had a shortfall here in political. Where do those dollars go when you say that on a net basis? I mean whoâs really benefiting here at the end of the day? Was it just the top 20 markets that the pure-play guys are not in itâs all the network guys owning those stations?
Adam Symson: No. Look, I think hey â Craig, itâs Adam. A couple of things. First post primary, there were some candidates that won, that were very popular with the electric, but weâre not popular with the big donors. And those candidates probably led, those candidates winning the primaries probably led to some of the shortfall in fundraising. Second of all, the widening of the races in certain markets allowed dominant candidates to build war chests and hold on to their dollars and not necessarily spend them, okay? And then you have the effect of the portfolio or the footprint. So, I donât really believe that this resolved itself in any way, in any sort of negative way for broadcasters. I mean in reality, we broke our last record for the midterms. If anything, I think it just didnât meet our expectations of surpassing the presidential cycle, which has got a different dynamic working for it. The American people are very entrenched where they stand. And I think early in the summer, the spending didnât necessarily move people off their positions and races widened. So I donât think thereâs an existential question out there around political revenue in broadcasting.
Craig Huber: Okay. Great. Thanks guys.
Adam Symson: Thanks, Craig.
Operator: We have no further questions in queue at this time.
Carolyn Micheli: Great. Thank you so much, Alan. Thanks, everyone for joining us today. Take care.
Operator: Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T Event Teleconferencing. You may now disconnect.
