The E.W. Scripps Company (SSP) Q3 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Scripps Third Quarter Earnings Call. AT this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Instructions will be given at that time. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Carolyn Micheli. Please go ahead.

Thanks, Greg. Good morning, everyone. Thanks for joining us for a discussion of The E.W. Scripps Company’s 2016 Third Quarter Results. A reminder that our conference call and webcast includes forward-looking statements and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. You can visit scripps.com for more information, such as today's release and financial tables. 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. The link to the replay will be up there this afternoon and available for a week. We’ll hear first this morning from Chief Financial Officer, Tim Wesolowski, and then Brian Lawlor who heads our Broadcast Operations, followed by Adam Symson, our Chief Digital Officer and then, Scripp’s Chairman, President and CEO Rich Boehne. Also in the room, our Radio division Head, Steve Wexler Controller and Treasurer, Doug Lyons. Now, here is Tim.

Good morning and thanks for joining us today. The press release contains the details of our third quarter performance and we will be filing our 10-Q later today, so you can get even more details there. Right now, I would like to spend a couple of minutes going through the highlights of the quarter. Our balance sheet and cash position, capital allocation and fourth quarter guidance. Our Television division’s total revenue for the third quarter was up 25%, compared to the prior year. That includes growth in our core business on a same-station basis. Our guidance of up between 35% and 45% was based on political revenue of about twice what we realized. Expenses were up 11%, better than our guidance and driven by increases in the programming fees we paid to our network partners. Third quarter political advertising for the Television division was $27 million, which is to a few days left until Election Day, we expect full year political advertising to be about $100 million. Clearly, that’s well below our expectations, in the third quarter the two Presidential candidates spent about a third of what their predecessors spent on our stations in the third quarter of 2012 and the expected revenue from key senate races in Ohio, Florida, Colorado and Wisconsin dried up as those races became much less competitive during the third quarter. As we often remind you, political advertising revenue was all about geography and how the state races actually play out. Brian will give more color in a moment on our political advertising revenue in this most unusual year. Retransmission revenue was up 46% in the third quarter. We are currently negotiating two renewals covering about 3 million households that will drive a nice increase in our fourth quarter retransmission revenue and an estimated 20% increase in full year 2017 revenue. Radio revenue was down 5% in the third quarter, which was in line with our guidance. Expenses were up about 3% beating guidance and that includes $500,000 of expenses related to flood clean-up at our operations in Wichita, Kansas. Turning now to our Digital business’s third quarter results of course include Cracked which was acquired during the second quarter of this year. On a reported basis revenue was up 45% excluding the impact of Cracked and Midroll, which was acquired in mid-July of last year, total revenue increased 20%. Total Digital expenses were up 48%, a little better than our guidance, excluding the impact of Cracked and Midroll, expenses increased 16%. Expenses in our shared services and Corporate segment were $8.5 million or about $1 million better than our guidance. Touching on the balance sheet, we ended the quarter with $88 million in cash, which was up from our second quarter balance of $66 million and with net debt of $300 million; we continue to have the best balance sheet in the broadcast industry. From the beginning of the year, through the end of October, we purchased about 2 million shares of stock for about $35 million. About $49 million remains under the share repurchase authorization that expires at the end of this year. We provided detailed revenue and expense guidance for the fourth quarter in our earnings release. I think it’s pretty straightforward and we will provide 2017 guidance on our next call in February. And I am going to turn it over to Brian to talk about the Broadcast business and Brian is battling a pretty good case of bronchitis unfortunately this morning.

Thanks for the medical report, Tim. Thank you. Good morning everyone. This year’s Presidential race has played out very different that we had modeled entering the year, while the Scripp’s geographic footprint was perfectly aligned with some of the most competitive and best financed races in the country during the 2012 election that has turned out not to be the case this year. As we told you in the first quarter, we entered the year expecting Florida, Ohio, Nevada, Colorado and Wisconsin, so all received very active Presidential race spending. On our second quarter call in August, we updated you that both Colorado and Wisconsin had fallen off the list of battleground states. At that time, we were still optimistic that we would see aggressive spending in our three remaining swings dates once the candidates clear the conventions. Unfortunately, the level of Presidential spending affected how much we received in those three states. Donald Trump and Hillary Clinton together have spent about half with their predecessors spent nationally in 2012 and as Tim said, that impact has been felt even more at Scripps with the loss of several key swings dates resulted in the Presidential candidates during the third quarter spending roughly a third of what the two Presidential candidates spent on our stations in the third quarter of 2012. Donald Trump in particular, spent a fraction of what past Republican candidates have spent on television ads and because Scripps have projected Presidential campaigns TV spending to account for about 30% of our total political ad revenue share, we were disportionately hit by the low amount of Presidential advertising. We face challenges on the Senate side as well. We entered the year with competitive senate races in Florida, Ohio, Nevada, Wisconsin and Colorado. By late August, Republican’s Marco Rubio in Florida and Rob Portman in Ohio and Michael Bennet in Colorado and all pooled significantly ahead in their Senate races and Wisconsin’s race also grew wider. As a result, most of our outside money moved to competitive races outside of our footprint. As we said earlier, geography is the key. If your weather races are competitive, you stand to perform very well in political spending. That has been our case for our station in Las Vegas. Nevada has remained competitive for both the Senate and the Presidential races and we have written 50% more political ad revenue there so far the station did in all of 2012. Another way of looking at the math, 85% of the revenue difference from our 2012’s political performance can be attributed to lower spending in just five markets, Cleveland, Cincinnati, Detroit, Denver and Milwaukee. On the core advertising front, despite some political displacement core was able to finish up to the prior year on a same-station basis. Given that we were able to add more than $22 million in political dollars to our stations versus last year, we believe that our core growth speaks to the health of the local TV ad space. Among our top five advertising categories, all five showed year-to-year growth. Automotive grew 2.5%, services grew 2%, retail had impressive 9% growth, travel and leisure was up double-digits and food services was also up more than 2%. During the third quarter, we took in more than $10 million in Summer Olympic ad revenue at our five NBC stations. This was a double-digit increase over the last Summer Olympics. We are also proud that our NBC Powerhouse in West Palm Beach was among the highest rated Olympic stations finishing as the top-rated station in the country in the opening ceremony. On the original programming front, we are seeing strong ratings performance from our infotainment show, The List. This show is a 100% owned and produced by Scripps and as of September, is being seen in 44 markets across the US covering nearly 30% of all US households. And our viral video show, RightThisMinute, on which we partner with Cox and Raycom, is showing significant national growth. Now in its sixth season, RightThisMinute has distributed in 94% of the US including running on the all the NBC-owned stations. This season RightThisMinute is being sold and distributed by Disney Syndication Group, which has brought multiple blue chip advertisers to the program. And finally, Scripps is proud of an investigative reporting work of our team at KNXV in Phoenix, which was awarded a National Emmy for its series Arizona’s Dental Dangers. The multi-part series uncovered serious problems with a way that state overseas licensing of dentists providing a very important service to its community and resulting in some pretty significant law changes. And now, I’d like to spend a moment on Radio before turn it over to Adam. We continue to see challenging conditions in several key markets for our Radio group including Milwaukee, Omaha and Tulsa. As has been the case all year, our smaller markets performed in line with expectations, but our largest markets were challenged. The Brewers Baseball Season in particular continued to dampen results in our big Milwaukee market in the third quarter. As we have shared in the past, a big part of our Radio strategy is to develop new cross-platform initiatives in our combined TV and Radio markets. In the third quarter, our team in Omaha created a new TV Radio digital business, called Omaha Sports Insider, which enhances Scripps’ sports footprint in Omaha and combines the resources of our TV and radio stations to create new revenue generating opportunities around Nebraska’s big sports passion. We also were honored in our Springfield Missourian market where KTTS-FM earlier this week received the Small Market Station of The Year Award from The Country Music Association. And now, here is Adam.

Thanks, Brian and good morning. Tim already hit the key elements of our digital performance for the third quarter. Our reported revenue increase of 45% was just a few $100,000 away from our guidance and we saw strong organic revenue growth from the businesses that we owned in both periods of almost 30% on the local side of our Digital business, which accounts for a little over half of the revenue in the segment, revenue grew by 20% year-over-year, that was in line with our expectations and driven by strong performance with programmatic advertising. Our local digital platforms are broad-scale to national advertisers. So we continue to see strong demand for advertising across our local markets in the national and regional programmatic marketplaces with higher cost per thousand than many in the industry. Moving to the national side, which accounts for about 45% of the segment revenue, let’s start with Midroll, our industry-leading podcast company. Midroll continues to grow nicely meeting our expectations. We promoted our Head of Business Development, Erik Diehn to CEO and Lex Friedman to Chief Revenue Officer. Many of you met Lex at our Digital Investor Day in June. In the third quarter, Midroll had record sales, the number of podcast ad impressions in the shows that we create and manage also hit another high, 900 million compared to 750 million ad impressions in the second quarter of 2016 and despite even that continued growth in supply, rates for advertising grew as more advertisers are turning to podcasts to reach desirable young audiences. At Cracked, which we just acquired in April, we are leveraging our existing relationships with over-the-top TV platforms to extend this popular humor and satire brand on to new services such as connected TVs XUMO and set-top box ROKU with more deals signed but yet to be announced. Meanwhile, we are making progress integrating Cracked on to our programmatic advertising platforms, but that transition and expected rise in rates is taking a little longer than we have anticipated. We feel good about Cracked’s strategy and the important role humor plays in the way Millennials dissect the world. Finally, turning to our over-the-top new service Newsy, we delivered 330 million video views last quarter, up 75% over the same period last year and on track to exceed our goal of 1 billion video views for the year, which by the way doesn’t include social network views. Our focus on over-the-top platforms such as dishes, Sling TV, ROKU and Pluto TV are driving this growth. During the quarter, we also went live with HULU and we signed our first cable system, Cincinnati Bell’s Fioptics, which is running Newsy live, our linear programming product. This new cable carriage is testament to Newsy’s engaging content and opens the door to another distribution channel for us. Demand for over-the-top video advertising continues to be strong and CPMs at Newsy are holding steady at $20 to $40. We are particularly proud of Newsy’s National Emmy nomination for its Presidential primary fact checking series Check 2016. Newsy has done a great job of covering this story that matter to its discerning younger audiences during the campaign. It’s nice to see that work recognized. As we head into 2017, Newsy is in good position with the attention of the important video distribution platforms, audiences and the advertisers that want to reach them. Now, here is Rich.

Thanks, Adam. Thanks everybody for joining us this morning. This morning we are five days away from electing the next President of the United States. One thing we know for sure, TV and political messages continue to create great impact together. TV is the strongest media platform for candidates and causes to educate viewers and create a better informed electorate. Even in this unusual, really unusual election year, that message came through loud and clear. Some Washington pundits will say earned media has an increasingly impactful role in the election year dialogues and based on what we’ve seen in 2016, they would be absolutely right. We are big believers in the value of objective news coverage that is after all our business. At the same time, Hillary Clinton has been strong in key states where she spent significantly on television advertising and as Donald Trump has increased his local TV spending recently, state polls have grown much closer. So we will see how things play out on Tuesday, but we know that broadcast TV, political advertising remains the clear, the most far reaching vehicle for political candidates and issue groups to share their paid campaign messages. Speaking of earned media, no one knows better than Scripps that media coverage can take many forms and cover many consumer platforms from podcasting to over-the-top video and radio. Our journalists across these platforms and in our many local and national brands worked hard this election year to cover the issues and candidates who mattered most to their audiences. At Midroll, we’ve produced the podcast of David Gregory, who has interviewed a host of political analysts and insiders on his popular podcast, the David Gregory Show. At Newsy, as Adam mentioned, we secured a National Emmy nomination for our Presidential primary fact finding and that our local television stations we provided at least 100 minutes a week of political news coverage in each of our markets in order to serve those great communities. A key strategy of ours was to use the heightened attention of the election year to build the value of our new digital brands to satisfy the unmet needs of their rapidly growing target audiences. Now those audiences happen to be younger and more upscale than general audiences and they are great audiences on which to build organically growing businesses for the future. I don’t know yet whether Hillary Clinton or Donald Trump will prevail on Tuesday, but I can tell you that we at Scripps have already won by successfully using this election to establish these new brands. Finally, a reminder in the midst of this political season, speaking of impact, it looks like, we will take in about $100 million of high margin political ad dollars this year. That revenue combined with strong growth in our retransmission revenue and solid performance in our local TV core gives us an excellent cash position heading into 2017. As has been the case for some time, Scripps’s financial flexibility puts us in an enviable position to take advantage of growth opportunities where we see attractive returns on investments. And now, operator, we are ready for questions.

[Operator Instructions] Your first question comes from the line of Michael Kupinski from Noble Financial. Please go ahead.

Thank you and thanks for taking the questions. It seemed that the campaign spend advertising dollars on other platforms including cable networks, did you noticed any shift in the way the campaign spend money at this - on the cycle?

Hey, Mike. It’s Brian. We certainly didn’t see that on the local level, and in fact we’ve been in regular communication with the top political shots in Washington in both the Republic and then the Democratic side. They’ve confirmed to us that there was no additional shift of digital dollars and it’s – the broadcast dollars held up pretty well. I think it just moved around obviously for market-to-market really as we said in the prepared remarks, it’s really about where the races were and I think in this case they down ballot stuff was very lucrative, especially in some of the big senates races that remain competitive. So, I think when it all shakes out, you are not going to see much of a shift, it’s certainly not what we are hearing.

What is interesting is that, you guys were out in front in the expectation that political advertising would not be in line with the most recent past election cycle growth. Unfortunately, it was below even your expectation, but directionally, you were right. So, with that as a backdrop, can you talk about your thoughts on the next cycle? The mid-terms, which is in sight for some investors in terms of their time horizon? Why would you think that the mid-terms might actually see a better opportunity and whether or not, this returns back to the normal growth cycle for political?

Mike, that’s a fair question. I think we spend a lot of time kind of assessing that ourselves. So, let me just tell you what I do know. I do know that the Presidential election, the fact that Colorado, Wisconsin dropped off early and even in the states that remained competitive, the level of spending from where it was previously was dramatically below for that range. So the candidate money was dramatically below. We said in the third quarter it was a third of what it has been previously and then of course, Donald Trump didn’t even have his own super pack. So the pack money, it was way off. What I also know is that, the candidate spending on all the down ballot stuff, the Senate, the House and the Gubernatorial is all up for us significantly over 2012. So the down ballot stuff was very healthy. And I think, as we saw, and I referenced, if we were – in one of those things Senate competitive races, like we were in Nevada, the money was robust. We saw healthy outside spending in Florida and Ohio early and then also in the poll started to drift to 7, 8, 9 point difference, and also that money got pulled out here and moved to other states. So, as I just kind of start to look out to two years from now, I think the candidate spending for Senate House and Gubernatorial was all up. So, nothing replaced that and I think if you are aware, the true competitive races on the Senate were I think you saw a ton of money. Our issue really was, and we saw, we had record spending in 2012 as a result of our Presidential footprint. A lot of our models were built on that Presidential footprint being across really five competitive states, Florida, Ohio, Nevada, Colorado, Wisconsin. Colorado and Wisconsin dropped out early and the others were much softer. So we will continue to analyze that in the next couple of months like you will, but at the end of the day, I think there is a lot of signals in this that, if you were where the races were, that was a benefit and the candidate money was really robust at the down ballot which is the next big race.

Michael, one thing that gives me a lot of confidence about the future is like what Brian said earlier, is just to look at Las Vegas. So that was a situation where there was both a competitive Presidential and a competitive Senate, and we did 50% more political revenue there again we did in 2012. That gives me a lot of confidence.

Gotcha. And do you believe that the disappointing political advertising, because this has been fueled across the board, it's not just you - increases the prospects of some of the other broadcasters that might want to join larger groups, I mean, especially for some of those that might be have cut out of spectrum auctions? Has this increased the level of M&A discussion in your view and is it possible that you might be able to acquire companies at better prices than before? I mean, can you talk a little bit about, maybe the prospects – the multiples if you happen to see - hear or what might be going on out there?

Hey Michael, it’s Rich. There is not a ton going on out there at the moment. I think the auction has still kind of frozen the market and then, what’s been going on with the election has people sort of – it’s been hand-to-hand combat in the last few weeks and I don’t think anybody is terribly focused at the moment on the M&A market. We’ll see what happens after everything. Let’s so quiet down next week or so and then the auction works its way through. But there is not a whole lot in the pipeline at the moment, which maybe would say that there will be a real explosion of supply, once we get through all this.

Gotcha. I'll let others ask questions. Thank you.

Thanks.

Your next question comes from John Janedis from Jefferies. Please go ahead.

Thanks. Hey, Brian, I wanted to dig in a little bit more on your Senate race commentary. I think the market has had this kind of base case assumption that all races in these key states are going to be competitive, but in the past few cycles, when it became clear that races that were – I guess, less competitive, did all of that money get pulled or was there spend to try to change that competitive dynamic? I just ask because, I just don't recall this dynamic to this extent in the past?

Yes, hey, John. It did get spent. So, let me be clear, the candidates had each – on their own very significant funds, the candidate spending remained consistent all the way through. But the outside pack money which is really significant as we saw in Nevada, as we saw a number of years ago, it came in early with supporting those races, as soon as Portman and Rubio especially started to really pull away, and then they dramatically pulled away almost all of that money left our states and went to other places where the Senate races were more competitive.

Okay, okay, and then, just on the category color, that was a pretty solid reach and I remember given some of the headlines out there. So, was there anything to call out there? And how does the retail auto other key categories look post-election?

Yes, so, we had a really good year, obviously on our key categories and in the second quarter four of our five sub-categories were up in the third quarter, all five of our key categories have been up, auto was up, again, retail has been up in the last two quarters. So, actually, we feel really good about our core. It’s – fourth quarter is really difficult in a Presidential year. It will be $55 million roughly, in political spending in six weeks. That’s going to displace a ton. Just as a point of note, our eight days of November, of political advertising will be bigger than all of September was for us. So that just goes to show you how much it’s scattered out. So as a result of that, obviously, there is going to be a significant amount of displacement, plus a lot of people just stood on the sidelines waiting to get this kind of cleared up. So, in 2014, we did $45 million in political and we had about 10% decline in core year-to-year. This year we will do $10 million more. So, I think you know core declined somewhere in that range maybe a little more is reasonable. I think it was more important, you can’t just look at it as, is it up or down. You got to look at what starts to happen after the election is over. And does the momentum continue to build. Our core was up in the second quarter. Our core was up again in third quarter. Our key categories were up in second quarter. Our key categories were up again in the third quarter. We’ve had a really healthy core year and I think we are really optimistic that once we get over the clutter of the political that we can start to kind of rebound the impact stuff in. We get back to flat on all of the categories you just can’t after losing six weeks, but more importantly, the return of the health and we’ve had a really healthy last six months on core.

All right, thanks. Maybe one quickie for Rich. I know you can't say much, but, do you think the auction wraps up before end of the year?

We think, Brian.

Yes, I think there is a chance.

Fourth round, fifth round, sixth round, somewhere, if it could end in the fourth, I think it gets down the shoe.

Okay, all right. Thanks a lot.

Okay.

Your next question comes from the line of Marci Rvyvicker from Wells Fargo. Please go ahead.

Thanks, I just kind of want to follow-up on the last question. Do you have any visibility at this point on traditional or core advertising post-election? Is there anything you can say about December at this point?

Hey, Marci, it’s Brian. We’ve got a nice base laid in, but as in any quarter, even taking out the political, you build and you write a lot of points inside of the quarter. We still have a lot of business to write. I think, because of the political, people just sit out and wait, maybe some are even waiting to see who wins the election to see what that’s going to mean to their business and so that, it’s just a discourse of the country. But I think, even in a normal quarter, we would still have a lot of business to write for December. We’ve got a real nice base laid in and if things go as expected, I think, December will move toward where the last six months has been, which has been a really – as I just said, a healthy core environment for our stations over six months.

Okay. And I know that you said auto has been up, I think, investors are concerned about comments coming out of Ford. They are concerned about SAR. Do you have any comments for us on what you think auto advertising might be able to do after we get through the elections into next year?

We’ve had a good – it’s Brian again, Marci. We’ve had a really good year in auto, in the third quarter – second quarter we were plus six, third we are up 2.5. So auto will – auto has been a really nice category for us. We talked a little bit over the last year about some of the regional dealer groups just mantling and all that and that’s kind all lapped itself. Ford, honestly has been a little bit of a challenge of all years. They’ve booked money and canceled it, booked money and canceled it and so, what they are doing now is no different than what they’ve done all year. A little fluctuation at SAR still means they got to sell a lot of cars, when I am talking about a dramatic decline and so, as a result of that, I expect auto and every level of visibility I have right now is, I expect auto as we wind to the end of the year to continue to build, finish a really good year and at this point, based on the annuals we are negotiating, the discussions have our visibility into the first half of next year for auto remains positive.

All right. And then Brian, I have the last question for you also, just want to make sure that you are still looking at $220 million of retrans revenue for the year and that your sub base is relatively stable?

Yes, and yes. We’ve seen no variation in our sub base at all Marci and your numbers are right on.

Great. Thank you.

Your next question comes from the line of Kyle Evans from Stephens. Please go ahead.

Hi, my questions have been answered. Thank you.

Greg, do you want to move on to the next questioner.

Next we will go to the line of Dan Kurnos from Benchmark. Please go ahead.

Yes, good morning. Brian, let me just start with one last follow-up just on political. Just to your thoughts on, if your guide now includes what we've seen has been a pretty big step-up in this last week on the Presidential side?

Yes, it does. You are right, Dan. The last ten days have been terrific. After all year, the two candidates really focused on Nevada, Ohio, and Florida. Suddenly, in the last two weeks, they are in Colorado, they are in Nebraska, Omaha, for us which touches Iowa, they are back into Wisconsin. Hillary Clinton is also in Arizona and Michigan for the first time. So our environment in the last ten days has changed dramatically from what we’ve seen a year. In the fourth quarter, I shared with you that, we’ll be in that $55 million range. In 2012 in the fourth quarter we did $63 million. This is exactly now the environment we expect us to be in for the last six or eight weeks. Unfortunately, it only happened in the last two.

Got it, and then, Adam, I don't want you to get bored over there. So I'll ask you a couple questions. Just on the Digital, I know it was maybe a little bit less than you’re expecting, but it's probably mostly a rounding error. I'm just curious, I know you guys are making a pretty aggressive push into video, but we have heard of some pretty significant publisher problems with Google lately, I’m just wondering if any of your Digital properties are experiencing some of that pushback, we've seen some other guys get penalized? And then, on the OTT side of the equation, we've seen some new launches in the marketplace, I assume you guys are going to try to continue your aggressive distribution strategy. Nice to hear on the cable carriage opportunity, but just wondering how you're sort of viewing the OTT landscape as it also starts to get a little bit saturated? Thanks.

Good morning, Dan. Thanks for the question. That’s nice to talk. On the question about CPMs and Google, actually, we haven’t really experienced any of that pushback. Google is an important partner of ours, but we are also well diversified. We work with a lot of partners in the problematic marketplace, particularly as it relates to video, the back half of the year has gotten very strong with Newsy, not only have we continued to expand distribution and the audience has grown and the loyalty continues to grow. But monetization continues to grow nicely. CPMs are a strong $20 to $40, sell out is very strong, particularly on OTT platform is where we are routinely sold out. The Newsy’s linear product continues to see a really nice view times at this point where we are looking above an hour which provides us a lot of opportunity to serve targeted advertising on OTT platforms through that linear product. And frankly, same thing with the local side, local advertising as it relates to video CPMs, very strong both direct sales hovering around $28 CPMs and on programmatic advertising with local advertising on video just around $14. Relative to the continued expansion with OTT, we always figure this was going to be a very fragmented marketplace with OTT. The thing to keep in mind is of course that these are real carriage deals that Newsy is getting. It’s not a web business dependent on traffic flow from social or even link-offs from our local websites. Newsy’s audience is growing organically on an OTT – on OTT platforms like Swing TV, Dish, Dish and Swing TV, Pluto TV ROKU and Apple TV and that’s really where we are seeing all of the growth. So we real pleased with the way we have moved that business. I expect fourth quarter is going to be very good at Newsy and things are moving in the right direction with the marketplace as is.

Great. Thanks for the color. And then just shifting over to - I guess the combination of Tim and/or Rich here. Just high level look at, given what's happened with the stock, you've got a buyback in place. You've talked about your balance sheet being clean. Rich, you mentioned that you were very well positioned to go after - maybe more growth opportunities. Just want to get a sense of how you guys are thinking about either aggressively buying back shares like some of your peers have done? Or given that we've also seen some of your peers avoid some of the crowd out issue due to scale benefits, just how your balancing those two issues?

Actually, Dan, we’ll talk about it in terms of balancing the three. Let me speak to stock repurchase first. We don’t disclose our plans on going forward, but there is somewhat of a pattern that established looking back we did. We bought about $10 million in first quarter – about $10 million in the second quarter, about $10 million in the third quarter and about $5 million in October, to give you a sense of what the pattern has been. When it comes to allocating capital generally, we sort of think about all of the above, that’s buying back stock, returning capital, at the same time looking for station opportunities where we think they have a really good fit with what we do and where we think there is a very good return on investments. Although, we are not one of those companies that feels compelled either for reasons of defense or offense to try to run toward the cap. We’re much more strategic or surgical acquirers than maybe some of the roll up folks. And then finally, we have devoted capital to our Digital strategy, those new brands, that’s going really well and I think, so we will continue to put money to work there. So I think, we are still in a somewhat of an all the above strategy when it comes to allocating capital with the absolute strongest focus on long-term returns on investments. Cash on cash returns.

If I could just follow-up on that last question – on your last comment then, just on Digital, obviously, you're not getting any value for it in the marketplace right now. So the question is, obviously, do investors not that it's going to necessarily move the needle, but is there any update you could give us on thought process on when it gets back to breakeven?

We could make it breakeven today if we wanted to. We are creating value and I think, you just heard Adam talk about strong sales at Midroll, incredible carriage and audience momentum at Newsy. So the focus right now is on building out really valuable long-term brands and less focus on how we can pull that number into the Blackberry quickly. I got to tell you, if we suddenly cut expenses or trimmed expenses and pull the Digital segment into profitability, it would be a really bad sign. It would say that we’ve lost space in what we are building. So, we are not eager to do that. I am certainly not eager to do that. What we are eager to do is continue to build out really strong valuable businesses. And at some point, investors will recognize that, because everybody will. And we will enjoy the fruits of it.

All right, fair enough. Thanks. Appreciate it.

Your next question comes from the line of Craig Huber from Huber Research. Please go ahead.

Yes, good morning, thank you. My first question I guess, on the Digital segment. How did the local TV station websites do year-over-year? Obviously, it's much slower than the national side, but what was the collective number there? How much was it up? Thank you.

Good morning, Craig. Local Digital advertising was up 20% which was pretty much in line with our expectations. I think, through the whole year and last year, that’s really the pace that we’ve seen.

Okay and then, also, Brian, everybody has got a thought on this, but - curious to hear yours. I know you don't have a lot of FOX or CBS TV stations, but what's your thoughts on why the NFL ratings are down 10% plus here, I mean, what in your mind has changed versus twelve months ago and that do you account for that?

Hey, Craig, it’s Brian. We’ve been tracking this figure at Scripps as well to a point really have two smaller FOX stations, two smaller CBS stations, but we do have a decent NBC footprint and so, we have been tracking this very closely on the Sunday night football game, football season and it’s interesting. Last year was a record year to the NFL with some big games. And that was certainly the case with us and then in the first half of last season, we had a Packer Seahawks game in Green Bay that did a 53 rating, which spiked our ratings’ performance. But, when you look at our ratings this year through the first half of the season, and you compare it to 2014, we are basically up a rating point. So up, 5% or 6% and if you then go back and track it all the way back to 2013, we are dead even with our ratings performance in 2013. So, flat to 2013, up over 2014, down a bit over 2015, but like with anything it’s – you get some big, a couple of marquee games and it can skew everything. That was certainly the case on us. And if we extract that one Packers game, you see four years now of very consistent dominant rating performance on Sunday night football.

So what is number then, Brian, versus last year if you feel the ratings are comparable to what you mentioned…

So across our platform, we’ve got about 14.2 household rating. Last year, it was a 16.3, but against completely spiked by that one game. If I take out the other game, it’s a 13.5. In 2014, our average rating was a 13.1 in – I am sorry, 2014, it was a 13.1, in 2013, it was a 14.2 exactly flat to where we are now.

Okay, and then let's just – this came up a little bit earlier, but just - can you talk a little bit further, Brian, about your December TV advertising pacing? I mean, given we are about a month away from there you should have a decent sense of December. It sounds like maybe you're thinking it could be up, your core advertising there, for December?

I got a lot of points, left or right. I mean, as I said, we got a good base laid in. I think fourth quarter in a political Presidential year is – it doesn’t react the same as every other quarter. Every quarter builds, this one more build, what’s different is you do have some regular consistent advertisers who sat out the first half of the quarter just fully recognizing that their schedules would be disruptive. So we expect them to be coming back in although probably a couple of them made some other quarterly plans. But, I went back and looked at 2014 and 2012, since the election year ends, we write a lot of points and we are expecting the same thing. Again, we don’t see a crisis. We’ve had a great core year. All of our key categories have been up all year. The last six weeks, they’ve been really crowded out, where people sat on the sidelines, but we are a week away from all of that changing and I expect it will light a ton more business between now and fourth quarter and I think it’s going to be a positive story in consistent with what we’ve seen all year.

Looking - you mentioned the last six weeks, Brian, what is your take given that political obviously, hindsight came in much lower than almost anybody thought out there? Why the core advertisers many of them didn’t come back in when the political wasn't heating up as much as people thought coming to? Was it just - they decided just to wait it out? And they did not changed their mind at all even though political came in much lower than people expected, so there was more inventory out there?

Yes, I think, there is a fair amount of advertisers that, when – we work very closely with them. We are sensitive to – we want to respect them. They are our advertisers, 52 weeks a year, every year, and it’s important that we maintain a really good relationship with them. And so, we are honest with them through tracking and early in the year, we make plans with them to accommodate different dayparts or even move schedules around, so that, they are not left with a bunch of products on the floor that they can’t move because we can’t run their spots. So, I think that dialogue has been consistent. Some places, some people book money in other places, in other places we’ve been able to go back in Wisconsin, Colorado, and say, hey, this is not been what we thought, we’ve been we’ve moved some dollars back, but some others still said, I think, it’s coming, let me just wait and I think that’s a really normal dialogue that happens in our local markets in every election cycle. And we take a lot of – we respect our local advertisers and that’s why we take that responsibility having the conversations early and often with them to manage their expectations.

And Brian, can you just update us on the percent of your retrans subs that are up for renewal here in 2016? What percentage is still left to go - remaining weeks here the fourth quarter? And also for 2017, 2018, that was all three years here, update there please?

So, in 2016, as we mentioned, we still got a couple of million subs that we are negotiating on right now. So that’s about 17% of our total footprint. Next, and we’ll get that benefit obviously in rates settles, we will show in revenue all of next year throughout the back half of next year, we got another 8% come up and then in 2018 is a really big year for us. We got more than a third of our subs come up in 2018.

So, say those numbers again, for full year 2016, 2017, 2018, what are the percents up for renewal?

2016, right now, we still got 17% left to write and…

And what was for the whole year, Brian, for 2016.

Maybe 19%, something like that, the only way to look at this year.

Very close, okay.

And then 8% in 2017 and over 35% in 2018.

Okay. That's very helpful. Thank you.

Your next question comes from the line of Barry Lucas from Gabelli & Company. Please go ahead.

Thanks and good morning. Brian.

Good morning, Barry.

Cash flow little more here and play devil's advocate looking out to 2020 and Presidential and you look at the political map and a lot of states that were reliably red are now purple or even moving into blue and you look at political spending at the Presidential level in places like New York, California, that are so solidly blue. There is there's very little money. So what would give you confidence that we could still see a reasonable level of political spending in the quadrennial years by Presidential candidates? Then I have a follow-up.

Well, hopefully first, I would expect it maybe the candidates would be able to raise more money. This has been certainly an unique cycle in that regard. Second of all, it’s really uncommon for both candidates did not have their own super pack that was unique this year. I think, this is going to be a fascinating case study, because, I find it so interesting that, they are really focused on four or five states, the entire time allowed other states to really have no messaging thinking that states we are going to a certain way and now here we are in the last month, something like the polls have tightened up and now they are reacting and throwing money back in states trying to scramble and pull things out. So I guess, if there is a message there, it’s – when it really came down to at the end, they were throwing more money at it and trying to bring more people back in and I think that analysis will be really interesting of was it their best strategy to stay out of things and now get their messaging consistent in places that have been consistently competitive, because at the end of the day, everything they’ve now brought back in, Arizona, Michigan, Wisconsin, Colorado, or all states they have traditionally been really meaningful for the Presidential race. Some of them are largely not at this time and as a result of that they became much more competitive. I think at the end of the day, they are finding out that you got to spend the money to influence the voters. We’ve seen that. Hillary Clinton spent some money early and took a lead. Now we see Donald Trump adding a lot of money. Things are tightening up and they go into places where they didn’t spend money and suddenly reacting at the end trying to pull some money out. So, I think I’d be a lot more concerned if I saw the opposite, where it was just kind of drifting away at the end and they didn’t feel they need to spend anymore. Now there seems to be an overreaction.

Okay. Could we switch gears and talk about margins? I am looking at a healthy - almost 10 point gain in Bcf profitability in the quarter, up five points or so year-to-date and yet that still feels light. And, we know about retrans, but maybe you could talk about some of the other initiatives you might be taking to improve profitability or if you have long-term targets or goals or even however you want to think about it, Brian?

Barry, look, I think we are really happy with the continued advance of our margins. Obviously we are expecting political to be again – a good bit more than it turned out and that would have resulted in record margins for us. We had a really good year and I think ever since the spot of the company. We have been very deliberate on an intentional plan to advance the margins of our television stations. We’ve been strategic relative to building out a political footprint and a political office that is very high margin for us. We’ve been very focused on growing our news audience in many of our key markets. At the end of the day, that’s the thing that probably can move the needle the most. We’ve been over the last five or six years, very focused on hubbing, on automation, on centralizing cost that we can. I think we’ve been the most proactive and the most successful in the industry relative to building our own programming which has returned very high margins to us in a place that for syndication had been fairly diluted. So, we continue to advance more of that not only are we continuing to move out our own programming across our own groups, but now, as we talked about earlier, we got two shows in the syndication and working on some other. So, now we are creating a long tail on that. Our Digital investments are bringing new revenue to our local television stations and many of our digital focuses and then short form content that we are creating on the programming side. If you look in a state where we have Gas Station TV, you probably see a lot of our snackables that we create for the list that, I think we had 70 something million views just in the last quarter on Gas Station TV. All of these are new ways for us to take existing content, with almost no overhead cost extend our content and create new margin-driving opportunities. So, we have a lot in the hopper that I think will continue to advance our margin growth over the next couple of years.

Hey, Barry.

Yes.

It’s Rich, in addition to what Brian just talked about, if you think about how we’ve acquired in recent years, we don’t tend to try to go out and acquire earnings. We are very focused on return on investment. So many of the stations we’ve acquired did not have industry standard margins, weren’t high margins when we bought them, because again, we were not trying to go out and buy earnings. But we got them at deals that showed incredibly good returns on investments and then as we moved the margins up from there, just dramatically increases that return on investment as we go. So you have to really also look at our investment strategy and our focus on return on investment. Brian is doing a great job of moving the margins over time. But again, a lot of it has to do with that, we don’t try to go out and buy earnings. We are focused on return on investment and we will give you a very good return on investment over time.

Okay, jump off for either one of you with you stations in West Palm and Tampa and Fort Myers and four days left. Who is going to win Florida.

The coin is going up in the air, Barry. We are just not going to tell you which side is it.

Okay, thank you. Have a great day.

We’ll ask Chad.

Thanks, Barry.

And at this time, there are no further questions.

Great, thanks, Greg. We can wrap up the call.