The E.W. Scripps Company (SSP) Q1 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Scripps First Quarter Earnings Conference 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, this conference is being recorded. I would now like to turn the conference over to our host, VP of Investor Relations, Carolyn Micheli. Please go ahead.

Thanks, Katie. Good morning, everyone, and thanks for joining us for a discussion of the E.W. Scripps Company's first quarter 2019 results. 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 scripps.com for more information. You can sign up for emails and can listen to an audio replay of this call. We'll hear this morning from President and CEO, Adam Symson; Chief Financial Officer, Lisa Knutson; Local Media President, Brian Lawlor, and National Media SVP, Laura Tomlin. Also in the room is Controller and Treasurer, Doug Lyons. Now, here's Adam.

Good morning, everybody, and thanks for joining us for the super important earnings call. The year seems to be flying by as we sit here well into the month of May with the first quarter behind us and the promise of 2020 drawing quickly closer. Of course, with 2020 come significant upside for the E.W. Scripps Company when we begin capturing our full value in retransmission revenue from Comcast and will capitalize on our new larger local media footprint in the presidential election year as well. We were pleased to start 2019 the way we ended 2018, meeting and exceeding expectations in both operating divisions. As we integrate the Raycom, Cordillera, and soon we expect the Nexstar-Tribune television stations, we are committed to delivering those same strong financial results. Today, I'd like to talk about our company's repositioning, our integration and performance improvement work and the near-term promise of our industry. But first, I would like to take a moment to recognize some of the important and impactful journalism produced by Scripps' Local and National Media divisions. Journalism is among this company's most important products. It's the most salient connection we make with our audiences. And so, our commitment to journalism is directly tied to the strength of this company. During last year's, especially, intense midterm elections, Scripps stations delivered the kind of high quality objective journalism that our community members rely upon to make informed voting decisions. Our journalists produced a body of work that brought context to the most important election issues such as immigration, the gun control debate, jobs in the economy and healthcare, and our work was recognized last month with the prestigious Walter Cronkite Award for Excellence in Political Journalism. WKBW, our station in Buffalo, has been honored by the Investigative Reporters and Editors for a series of investigations uncovering efforts by the local Catholic Archdiocese to hide cases of sexual abuse by its priests. And News Channel 5 in Nashville was recognized with the National Headliner Award for environmental reporting on a cover up of toxic water in the Tennessee School District. In our national division, Newsy was honored by the Society for Professional Journalists for its partnership to produce Case Cleared, an examination into how law enforcement agencies across the country clear rate cases without solving them. And Stitcher received the Gracie Award for its podcast series about human trafficking sold in America. These are just a few of the many national and regional awards Scripps has received so far this year. And while it is impact, not awards, that motivates us to pursue enterprise and investigative journalism, these honors are certainly welcome recognition of the role our news brands play in creating a better-informed world. I'd like to turn now to our company's successful repositioning, the remaking of our TV station portfolio and the continued work we see ahead. Over the past year, we have rapidly executed on our initiatives to reposition the company. Our recent decisions to acquire stations from three different TV groups were part of a plan we unveiled early last year to grow the company and build value. Now, just as important as the acquisitions, will be our continued focus on operational excellence as we absorb these assets. We will be working over the next year or so to smoothly integrate our recently acquired stations and those we expect to acquire later this year. As we have done successfully in the past, we expect a seamless employee transition and the full realization of our financial synergies. At the very same time, we expect to keep up the pace of impressive growth we are seeing in our National Media division. We'll continue to focus on supporting these businesses through their formative, fast growth stages to maximize the ultimate goal of free cash flow contribution from this division. A good example of this is, this week's launch of Court TV. While we are investing in the brand today, we expect the network to grow quickly and become an important contributor to the company's bottom line. We're also focused on reducing our debt leverage, which will be greatly aided by the strong cash flow we see ahead in 2020. We've long said we will employ the prudent use of our balance sheet when we see the opportunity for growth and sustainability, but always with a clear path to delever quickly, because this company remains committed to maximizing shareholder value and maintaining financial flexibility. Those of you have been around Scripps for a while know that financial flexibility is a part of our ethos. We like to have plenty of dry powder to be opportunistic in the M&A marketplace. We see a lot of opportunity in the emerging market places such as digital, audio and OTT and there's plenty of shareholder value ahead in television. It won't be too long before we're positioned again to pursue accretive M&A, including smart TV station acquisitions that increased our portfolio depth, durability and national reach as we continue to remake the company's financial portfolio. I'd like to conclude this morning by welcoming our new employees at Court TV and the Cordillera television stations. We're thrilled about both of these additions to the Scripps portfolio and the ability of the strong media brands to create significant shareholder value. Now, here's Lisa.

Thanks, Adam, and good morning, everyone. Today we're reporting financial results where we met or beat expectations for the first quarter in those areas. In addition, I think you'll find some noise in the consensus estimates due to the timing of the Cordillera TV station portfolio close. So we'll walk through those numbers. I'm happy to report we did close on the Cordillera acquisition on May 1st. So we'll report two full months of Cordillera results for the second quarter. We will get back to our Q2 guidance and the Cordillera impact in just a moment. But first, let's talk about those Q1 meets and beats. In our Local Media division, first quarter revenue was up 6% over the first quarter of 2018. Retransmission revenue was a big driver of the increase, up 21% compared to the 19% we expected. Expenses for Local Media increased 5.5%, as expected. The National Media division also saw a revenue beat. First quarter revenue was $87 million, exceeding our expected revenue in the low to mid-$80 million range. Division expenses came in a bit higher than expected, tied to higher revenue. The National Media division delivered $5 million in segment profit for the quarter. For our shared services in corporate line, we were about $2 million over our expectations. That was driven by higher health benefit claims and higher performance incentive compensation. For the first quarter, the loss from continuing operations was $6.8 million or $0.08 per share. Pre-tax costs for the quarter included $3.5 million attributed to recently announced acquisitions and $900,000 of restructuring work related to our $30 million cost savings plan. We expect these restructuring charges to continue to trend downward. Excluding the impact of these non-core items, the loss from continuing operations would have been $0.04 per share. Our capital expenditures for the first quarter totaled about $14 million, including about $6 million from the FCC repack. We expect to be fully reimbursed by the federal government for our repack cost. Turning to capital allocation, the company made about $4 million in dividend payments for the quarter. On March 31, our net debt was $682 million. On May 1, in conjunction with the closing of the Cordillera acquisition, we obtained financing for an incremental Term Loan B of $765 million. We were extremely pleased with the terms of this financing. The loan was issued at 99.5 and bears interest at LIBOR plus 275 basis points. We took advantage of strong demand and favorable pricing to upsize the loan by $240 million. The proceeds will be used toward our Nexstar-Tribune station acquisition. At the time Scripps closes our Nexstar-Tribune transaction, we expect our debt-to-EBITDA ratio to be a little bit more than 5 times. And just a reminder, that we've said we'd use our balance sheet to take advantage of the opportunity to add reach and durability to improve the financial profile to the company. We have demonstrated prudent use of leverage along with the ability to source capital at attractive rates. And all of this activity supports our strategies for growing the company and enhancing shareholder value. And while we're concentrating on bringing our debt ratio back down, we're suspending our share repurchase plan for the time being. Now I'd like to cover a few items in our guidance for Q2 and the full year. First for the full year, we expect retransmission revenue to be about $370 million including the impact of owning Cordillera for eight months. We'll update our retrans outlook again once the Nexstar-Tribune stations close. And for second quarter, we provided Local Media revenue and segment profit guidance on an adjusted combined basis as though we own the Raycom stations and Cordillera for all periods. That includes a range of revenue for Local Media of $245 million to $250 million, which is down in the low-single-digit range compared to the adjusted combined results for Q2 of 2018. A reminder, that the 2018 quarter had $22 million of political ad revenue on an adjusted combined basis. Next week we will be releasing adjusted combined results with Cordillera for the four quarters of 2018 and first quarter of 2019. As Adam noted over the last 18 months Scripps has steadily and methodically worked through our plans to increase shareholder value. The Station acquisitions, National Media division growth, cost cutting and our new dividend were key components to this work. And from the beginning of 2018 through first quarter, our total shareholder return was 36% compared to just 6% by the S&P 500. Now here's Brian to discuss our Local Media results.

Thanks, Lisa. Good morning, everybody. Two days ago, we launched the new Court TV, it’s a great excitement nationwide. We took to the airwaves with coverage of our high-profile Atlanta area trial where two parents are charged in their baby's death. We'll be the only network on TV to provide live gavel-to-gavel coverage of this and many other trials to come. By year end, Court TV will reach more than 80% of U.S. television households over the year alone a remarkable start to a new multicast network. In addition the Scripps stations, our distribution partners include; Nexstar, TEGNA and Meredith and we also have distribution with well over a dozen cable operators around the country as well as numerous over-the-air platforms. We know audiences are ready to embrace the newly reborn Court TV. When we acquired The Katz 18 months ago, we did not intend to launch a 5th network this soon. Our growth path was focused on expanding audiences and rating points and attracting new general market advertisers for Bounce, Grit, Escape & Laff. But we were fortunate to be given the opportunity to purchase the Court TV assets including archival tapes of their iconic courtroom coverage and then to assemble a group of talented lawyers and journalists to provide meaningful commentary and reporting. And the media coverage and feedback from eager viewers has been overwhelming. We see great things ahead for this network. As a company committed to quality journalism and transparency in our legal system, we think Scripps is the perfect partner to shepherd Court TV's rebirth. Turning to our Local Media operations, we're very pleased to welcome the employees of Cordillera into the Scripps fold when that deal closed on May 1st. I spent time at each of these stations in the recent months and I'm truly impressed with how well they operate and how well-positioned they are in their communities. They are a terrific addition to our company culture and our nationwide station footprint. We also acquired a small station in the West Palm Beach Florida DMA, WHDT. It did not have a network affiliation. And so for now it's broadcasting as a Court TV network. We look forward to adding the Nexstar and Tribune stations later this year. With the close of that transaction Scripps will grow to 60 television stations in 42 markets with 30% U.S. TV household reach. We'll operate our local brands in powerful markets such as New York City, Phoenix, Detroit, Tampa and Miami as well as operating two stations in 10 different markets nationwide. We will enhance our political advertising footprint including reaching more than two-thirds of Florida households and entering Virginia and Texas, and we greatly increased the number of first and second-ranked stations we own. All of these new stations advance our strategies to improve our margin profile, cash flow and operating performance of our broadcast television portfolio. Turning now to our core advertising performance for the first quarter, we were very pleased to see the volume of automated advertising dollars come in at about twice the level we had expected to start the year. Just a reminder that automated advertising as a buying and selling platform increasingly being used by major advertising agencies to handle the aggregation of broadcast inventory and as a tool for placing buys. We believe it has the potential to change the trajectory of national ad buying with local broadcast groups in the very near future. We also saw return of core advertising after the big fourth quarter election spend caused displacements. If you back out the impact of the Super Bowl and the 2018 Winter Olympics on Scripps stations, we saw core advertising, up about 1% year-over-year and I expect to see our core advertising build throughout this year. And now here is Laura.

Thanks, Brian. Good morning, everyone. The National Media division has delivered strong results to start this year, really by high levels of sales execution across our businesses. The continued momentum in revenue growth at our four key national businesses underscores the opportunity we see in the respective marketplaces and the need for us to stay focused on capturing their upside. Let's take a look at how each of these businesses grew in the first quarter. Our podcast industry leader, Stitcher grew revenue nearly 40%, compared to the first quarter of 2018 as our strong industry position and sales execution allowed us to benefit from the growth in the broader marketplace. The annual Infinite Dial report on digital audio usage was released recently and had found that 90 million people in the U.S. now listen to podcasts monthly. That's a 23% increase from the year before. A slate of new shows drove significant audience growth for Stitcher in the first quarter. Among them was a popular new show, Conan O'Brien Needs a Friend. This show is now reaching one million listeners and commanding high ad rate. Dr. Phil's new show Phil in the Blanks also receiving strong audience success and is bringing new podcast listeners into the media. Turning to Triton, we are seeing our new digital audio infrastructure and measurement leader make meaningful strides to expand its global footprint. Triton has recently closed a number of new deals and renewals with a wide array of international media company. Its revenue grew 13% from Q1 of 2018 prior to our ownership. The Infinite Dial Study showed an increase in weekly digital audio listening over the last 10 years of more than 40%, which is great news for Triton's growth path. As digital audio consumption increases, Triton is in a unique position to capture value to the technology services it offers publishers. Newsy also saw a strong start to the year, growing first quarter revenue by nearly 130%. The bulk of Newsy's revenue still comes from its broad over the top distribution. We believe Newsy is well-positioned to take viewer and advertising share in both the OTT and cable news ecosystems in 2019. Newsy's journalistic work continues to be bolstered by smart collaborations with like-minded news organizations. Chief among these collaborations was the release of We are Witnesses: Becoming an American in partnership with The Marshall Project. This 12-part series took a deeper look at immigration. This kind of impactful journalism is not only important for our country but also important in establishing Newsy's brand awareness and business value. And now, Operator, we are ready for questions.

[Operator Instructions] Our first question comes from the line of Michael Kupinski with Noble Capital Markets. Please go ahead.

Thank you. And I have a couple of questions here. So first I was wondering, can you provide some color on how Triton performed according to your expectations? Any issues or changes in your thoughts now that you've had the company for a few months?

Hi, Mike. It's Laura. They performed right in line with expectations. I think we shared last year that we expect their growth to be in the low to mid-teens and they are performing exactly how we expected.

Okay. And then Brian your thoughts on core and trends going into the second quarter, maybe talk about a few of the key categories including auto and of course new would you kind of think that as you bet go through the balance of this year that core should start to improve given the influx of political and how that influence is core, but just can you kind of give us your thoughts on how things are kind of moving along on certain categories including auto?

Yeah. Good morning Mike. As we reported, if you back out the effect of the Olympics in first quarter where we had five NBCs and then just kind of right-sizing the Super Bowl, we saw core up about 1%. I think as we've guided previously and you just said we expect core to continue to grow each quarter this year. We've got $22 million of political in the second quarter of last year that we expect to make up a bit of that with core. Overall we think core is healthy and you touched on auto. Auto was down right around 10% in the first quarter. Much of that had to do with auto was obviously a big sponsor in the Olympics and Super Bowl. So not surprising that that category was down there, but it continues to struggle. It's been five or six quarters, but fortunately we have a bunch of other categories that are making up a lot of that we've been talking for a couple of years now about the strength of services. Services is almost like 50% larger than automotive now. So due to autos declined and share growth, it's really by far our most powerful category. And inside of that insurance was really strong, finance banks, real estate very strong big double-digit growth inside of those sub-categories. We see home improvement up nearly 10%, communications has been a very strong category now for a couple of quarters still. So I think as we get inside of other categories, they're making up for the shortfall in automotive.

Got you. And then a number of other broadcasters seem to be investing in multicast networks including TEGNA and Gray. I know that Katz was aggressive and gaining distribution for networks last year and I believe have multi-year contracts. Do you believe that there is some risk in the distribution longer term the other broadcasters investment changed the trajectory of revenue growth for Katz at all.

No I don't. Nice to see that the other guys have figured out what we know. It's a great marketplace with good margins and a lot of growth potential with over-the-air continuing to grow. Look, each of our networks that are established Bounce, Escape, Grit and Laff have all reached more than 91% of U.S. distribution. You heard us talk about the fact that Court by the end of the year will be up over 80% which is remarkable in its first six months of launch. The reality is that due to compression technology, we're able to do a lot more with our spectrum. And so when we started this business a couple years ago Mike, I think most over-the-air broadcast stations might have DOP2 and maybe a DOP3. The reality is with compression technology many stations are now launching their DOP5s. And so there is a bigger marketplace and a lot of room for other broadcasters who were launching these channels, but there's already 30 or 40 channels in the space, nine that are large enough and have enough distribution to be Nielsen-rated. We own the four biggest of those nine and we think Court TV is quickly going to move into. We'll have the five largest in the sector. So we don't see any risks to our distribution. We see a lot of expansion in the space.

Got you. Last question for Laura. Laura, Newsy seems to have outperformed my expectation in the quarter. Can you update -- give us an update on the distribution for the channel? Are advertisers really kind of blocking now to Newsy? And just give us an update on the trends and the trajectory there.

Sure. So Newsy did have another great quarter of revenue growth, really driven off of the back of OTT revenue. We do have dual revenue streams that Newsy laying a nice carriage fees now for the year as well as cable ad revenue were nearly 40 million homes from a distribution perspective. We are nearly fully distributed on every OTT platform out there. So the consumers are finding Newsy more and more whether it's the cord-cutters or folks that still have cable. And so we expect audience growth to continue and really continuing to capitalize on the audience growth through monetization. So our expectations continue to be high. I think you should expect to see continued high revenue growth rates. And I think this is a clear indication that the kind of journalism we're doing at Newsy that consumers want and need a product like this.

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

And our next question then comes from the line of Kyle Evans with Stephens. Please go ahead.

Hey. Brian you intro-ed the Court TV but I just want to make sure that does go in the national group sitting next to the Katz properties right?

That's correct. They run the business but it reports international because of its distribution.

Got it. Okay. I just wanted to make sure on that front. Laura, you mentioned a couple of times on Newsy strong OTT revenue. I know your full distribution in the streaming platforms, are you seeing particular strength in any one of those platforms?

Yeah. Most of the OTT performance is coming directly from Roku. We do have some great relationships with Amazon and others and were obviously deployed on almost all of them. Roku really owns the marketplace today. You'll see Amazon continuing to increase our penetration rates. So while a lot of our revenue comes from the Roku platform. We are consciously looking at diversifying that with our partnership with Amazon. And we expect given Amazon's just sort of trajectory on this that we'll start to capture a lot more revenue from that platform in the near future.

Hey, Kyle; it's Adam. Let me bridge also your two questions and reiterate that Court TV is also launching as a multi-platform network on all of the major OTT platforms, and hopefully soon we're in works with the virtual MVPDs as well. And so while as Brian described, we'll be reaching 80% of U.S. households over the year we will be reaching the global audience. We already are reaching the global audience with Court TV right away and we've leveraged a lot of our expertise and what we've learned about the development of Newsy's OTT business as we bring Court TV to over-the-top as well to reach that large audience nationwide as well as globally.

Okay. One more Newsy and then I'll move on. I watch it, I see blank spots where some of the ad should be could you talk a little bit about sell-through rates and how you sell-through directly versus third-parties et cetera?

You mean you see – when you're watching Newsy OTT?

Yes, ma'am.

Yeah. We – our sell-through rates are great at Newsy. So high demand almost all of the time we're nearly sold out. Roku is allowed to sell a little bit of our inventory. So it's possible that that could be the goods that you're seeing. We sell most of it, but we do give a portion of our inventory to Roku to sell. So that could be the black spots that you're seeing.

Okay. And a few high-level questions, I'm not – if we talk about retrans as this highly predictable annuity-type business. How do you get higher-than-expected retrans in the quarter?

So Kyle, this is Lisa. We actually received a make good so to speak from a MVPD that was out of period. So that's how that happens.

There's a lot of truing up that happens back and forth. And we do auditing, we have audit rights and so from time-to-time money flows back and forth outside of a quarter.

Right. Lisa without any further M&A where do you think leverage could be by the end of year calendar 2020?

Kyle with political expected to be pretty strong next year and our step up of Comcast, we see a clear path to somewhere in the low-fours by the end of next year.

Great. And one more for Adam. Any updated thoughts on the DOJ and the FCC as it relates to the cap and the DOJ market definition?

Actually, Kyle, I'm going to let Brian answer that.

Hey, Kyle. It's Brian. As you know, the DOJ last week hosted a hearing to evaluate the definition of a local video market – marketplace. And for us we've long said that, we think that the current evaluation rules are archaic. I think that certainly was brought to light by the four people who testified a local marketplace is not just four or five local television stations. It's the Hispanic stations, it's Amazon and YouTube and all these other players and Facebook in the space and that's where many of our advertising dollars have moved in markets and that's really important that the DOJ understands that and brings new clarification to video marketplace. So we're hopeful that this hearing is the beginning of that admission and move to perhaps change the rules to open up what a local marketplace actually looks like. And we're hoping that happens sooner than later. Related to the national ownership cap, we think that there's still dialogue going on. We would expect that there will be changes to the ownership cap and we expect an improved ownership opportunity for local broadcasters. I don't know the timing of that. I don't know if it will happen this year, but we believe it remains an active conversation and evaluation with economists and others at the FCC.

Great. Thanks for your comments.

Next question comes from the line of Marci Ryvicker with Wolfe Research. Please go ahead.

Thank you. Looking at the stock right now, I think there's confusion on few parts. And the first thing is your Q2 guide -- because I think people had the closing at different parts of the quarter. Is there any ways for you to give us what Cordillera is expected to contribute to revenue and EBITDA for the second quarter embedded in your guide? And then, the second question is Adam, I'm getting asked if your initial comments meant that even at five times leverage, you're looking for more station acquisitions above and beyond what you've already announced.

So, Marci, it's Lisa. Full Q2 revenue expectation for Cordillera is in the mid-$30 million range with margins about 30%. That's for the full quarter.

Hey, Marci. It's Adam. Good morning. I guess I would say for the near-term, we're very focused on integrating the stations from the deals that we announced, and in reducing our leverage. As Lisa described, I think we'll be down after 20, 22, a more reasonable level perhaps in the low-fours and would intend to continue to be opportunistic in the TV station M&A marketplace.

Great. And then, I have two more questions. Lisa, what are you assuming first in your full-year retrans guide of $370 million flat to trend, down to trends, and then any comment on corporate for the year, because I think both Q1 came in a little bit higher and the Q2 guide is a little bit higher?

Hey Marci. It's Brian. I'll take the question on the retrans subs. That's been a fairly stable trend for us now. I think if we go back and look at the last year and a half, we've only seen about a 1.5% decline in our total paid subs. So there is some movement between the MVPDs and the virtuals, but at the end of the day, it's netting itself out pretty close to our starting point. So, we've modeled in that same kind of very moderate decline. We don't see it accelerating. Maybe a slight decline again in the 1% range, but we think it's for the most part going to remain stable.

Hey, Marci. It's Lisa. So I think in my prepared remarks, you understood or heard what's happening in first quarter. And in the second quarter...

Yeah.

Yeah. So for second quarter, we're really in line with last year. At the same time, we're also -- we're starting to see some effect of adding some of the stations to our corporate line. So that's probably -- and we can get into more detail if you'd like, but year-over-year 2Q to 2Q is flat, and that's with absorbing some additional headcount related to the Cordillera acquisition.

Okay. So should we look at last like going forward for the second half should we use the same numbers from last year or should we use Q2 as a run rate?

Yeah. That's in the ballpark if you use last year.

Great. Thank you so much.

And our next question comes from the line of Dan Kurnos. Just one moment, I'm having technical difficulties. One moment please. [Technical Difficulty]

I feel like I should fill the space.

Operator? Katie, fill it in?

Yes. One moment please.

Thank you.

Yeah. Katie, do you want to go on to the next question and we'll bring Dan in later?

Yes. One moment please for our next question. [Operator Instructions] We do have a question from the line of Dan Kurnos from The Benchmark Company. Please go ahead.

Can you guys hear me?

We can hear you.

Hey.

Hey. I broke the conference call. Awesome. And I was all queued up, Adam, to give you this witty rejoinder by giving us a lift with your opening comments.

I was wondering if anybody is going to say anything. It was like it just has but anyway.

Yeah. Well, I just -- you know what that was, that was commuted timing, Adam. I had to wait for about five minutes for them to figure how to unmute me before I can get out. So anyway on to more important things. I guess can you just give us any insight into the Nexstar divestiture approval process? It sounds like you guys have been, I don't know, reached out to for more information. Obviously, you guys are under a little bit more scrutiny since you're trying to buy two in-market stations. I know you guys have confidence that that's going to go through, but just any color you could give on that front? And then, Adam, just following up on the M&A question. Obviously, I think, it makes sense to continue to scale. You did talk about both emerging areas in addition to kind of Court TV assets. So can you just -- once you get leverage back to a level that you think is reasonable to reflex the balance sheet, if you will, how do you think about the balance of spend in those two buckets?

Let me answer the first question -- or the second question first and then Brian's going to update you on the divestitures. Obviously, we see a lot of opportunity in the emerging media areas of digital audio and OTT. Those businesses are both -- or all of those businesses are performing exactly in line. And we've said that we are looking for businesses that would be accretive to the national segment's margins that would enhance our margin expansion that would continue to promise an outsized return in the future. And those two ecosystems continue to grow, I think, secularly really nicely. I mean, if you follow consumer trends. It's clear to us that -- it's clear to us that more and more consumers are listening to audio via digital platforms. And, clearly, we are a believer that, over-the-air, over-the-top, all coming together along with Pay-TV to represent the future distribution platforms for television. I think we'd be opportunistic with our balance sheet in those marketplaces to enhance what we already have. We know those businesses and I think if we saw something that we felt like would accelerate the plans we already have or put us in an even better position as we see those businesses expand globally. We'd be willing to do that. But I'd also say that we remain committed from a highest and best use of capital priority to adding national reach and in-market depth in the local television station group. I think we see a lot of opportunity with the economies of scale there. We see the opportunity for us to enhance the durability of our cash flow generation through additional television station M&A. All of that has to come, though, after we get to a place where the balance sheet is a little tidier. And so, right now, we're much more focused on, again, integrating and digesting these acquisitions. Brian, you want to talk about the process?

Yeah. Hey, Dan, it's Brian. We continue to be in active conversations with the DOJ. We did get early termination of our HSR filing, so that was certainly good. But, I think, all divestitures are going to be reviewed in context of the larger Nexstar-Tribune merger. And I think that the DOJ and the FCC are both working through that. Look our portion of that -- of this entire big deal is pretty clean. We're not combining any big force. The only overlap we have is in Phoenix where we're adding a CW to our current ABC, but there's plenty of voices in that market. So we think that certainly our portion of this shouldn't hang up anything from moving along expeditiously.

Got it. Helpful. And then, look, to maybe I'll ask Kyle's question a little bit differently Brian just on the sub trends. I mean we've heard everything from some vMVPDs having a nine-month lag in reporting to even some traditional distributors carrying signal and not reporting it. There have been a ton of true-ups both for and against for you guys. It sounds like the audit is kind of swinging in your favor or the broadcast favor this year. So, what kind of gives you the confidence in your sub outlook for the year? Do you have kind of year end visibility on where subs are and kind of how that's been trending? Is that sort of the way that you guys get kind of high-level data on this?

Look we get reported numbers on a quarterly basis. And so we don't just look at an individual quarter and reach a conclusion on what we think the thesis is going to be. We've looked back honestly about six quarters. My comment earlier about a 1.5% decline is not -- last quarter it's a six-quarter view. I think the things that we have talked about others have talked about that it's the satellite companies that are declining more than the cable companies it's true. The top 10 cable companies hold up fairly well. We do see some small operators and small communities ceasing distribution of video products but again we're literally talking about like hundreds of households in those situations. But we continue to see a fairly intact relationship between MVPD decline and virtual MVPD registration. So, unless something significant starts to pivot in the last couple -- next couple of quarters our view is based on a year-and-a-half of history and it remains fairly stable.

Super helpful. And then just on Katz just to be clear I know you guys are launching multi-network in May. Was there any benefit in this quarter?

No, keep in mind that this is a big investment. We're looking at it in the long-term. For the year, this year, we have previously said we'll spend about $10 million $15 million and start-up and operation costs. But we will expect it to move into profitability quickly as the other networks have. We launched at about 62% of U.S. coverage will pick up the Tribune stations many of them in November that will take us to about 80% of the country. We haven't yet turned on the Nielsen ratings. We will obviously perfect the product get our distribution in line. And when we think based on the reaction also we can get a feel from the direct response. When their phones are really ringing, we know we've got a good audience and that's the time to turn on the Nielsen and usually that's the catalyst for moving into general market. We think all of that's going to happen in the next six months. So, I wouldn't expect much this year, but we certainly have really big expectations. We think this is going to be a very successful channel for us.

Yes, the reason I ask Brian is because it looks like underlying Katz then actually had a pretty strong quarter which I know you guys have been talking about for a while even though people don't seem to want to believe it. I don't know if you want to comment on that front and obviously it's still too early. And I know Court TV is not necessarily a massive needle mover, but it certainly would seem to -- in conjunction with the strength in underlying Katz imply that there could be maybe some modest upside to your national longer term outlook book.

I'll say it again. I think Court TV is going to be a mega brand for us. I think there's going to lot of upside in the multi-cap space with that. That's not reflected in our first quarter or isn't going to be reflected in our second quarter, but I think your analysis is right on. Katz had a really good first quarter one of its best performing quarter since we've owned it.

All right, great. Thanks for all the color guys.

And our next question comes from the line of Craig Huber with Huber Research Partners. Please go ahead.

Thank you. Brian, start with you if I could. Just so I'm clear in the first quarter, your core advertising number excluding the Super Bowl, the Olympics adjusting for that small acquisition, you're seeing core advertising was up 1% is that correct?

That's correct Craig.

Okay. And then for the second quarter, you're saying pacing right now is up about 1% as well?

I think the number but we are expecting growth -- year-to-year growth in core in the second quarter.

But can you help us a little bit as you seen a little bit of acceleration sort of in that 0% to 1%, 2% range or...

I think it's -- first of all we said, I think the color we gave is up low singles. But I think that based on what we see with half the quarter down as we look at the categories and the performance in our local markets. The fact that we don't have the displacements or we have clean flow through, I think that's the reason for our optimism.

Low single, okay, thank you. And then you talked a lot about your subs for retrans what percent now Brian is the OTT portion of that roughly?

We haven't disclosed that. I think in the past we've said, we've kind of giving you hard numbers are probably wasn't all that hard to figure out. I think in the past we had said that it was over 800,000 it's approaching a 1 million virtual subs now.

And you can still confirm, I assume that the payments you get from them or at least the same as the traditional retrans payments?

The net economics, the drop to the bottom line are inline, yes.

Okay. And then Brian in latest quarter, I just had a question for [indiscernible] what percent is news versus primetime versus sports and other? How is that breaking down right now?

Yeah, I don't have that in front of me broken out by quarter, Craig. As we've talked about in the past, usually across our portfolio 40%, 45% is news; 20%, 25% primetime; daytime 10%, 15% in that area. So I haven't broken it out for the latest quarter but that's in the general range of how the market flows.

Would you put sports out if you could somehow break that part?

10%, less than 10%.

And then when we switchover to digital, if I could can you just update us on your thoughts that you've done in the past about your expectations for long-term revenue growth in your various sub-sectors in the digital properties? Any change there what you've said in the past is my key question.

Okay, great. Hi, Craig. It's Laura. I don't expect really any change in what we've said in the past a lot of these businesses in the National Media division will continue to have significant growth rates. The high-growth businesses are really Stitcher and Newsy. So like Brian mentioned, we do continue to see great growth at Katz and much of that will be tied to sort of the Court TV overtime and try and will grow in the low to mid-teens. But overall you should expect that the division as a whole will continue to have nice growth great growth rates now and in the future.

Hey Craig, it's Lisa. I think we also indicated that by 2021 that we would have - that division would be contributing about -- over $500 million in revenue organically yeah.

Great, thank you very much.

Next question comes from the line of David Steinhardt with Litespeed Partners. Please go ahead.

Hey all. So we've seen your portfolio of assets continuously simplify itself as you've chosen to focus on the broadcast television groups. Can you give us a sense of as you create a much larger National Media division what the long-term vision is for that division? And so far as we know that it's going to grow organically to over $500 million but do the two businesses National Media and Local Media really blend together and if not what will Scripps look like in the future?

Hey there it's Adam. Good morning. No, we actually think there's a lot of industrial logic for these businesses together. We already see a lot of work, a lot of content sharing between the National Media businesses and the Local Media businesses. Just as an example, when we think about the launch of Court TV we're using all of our assets across our company both in the Local Media division as well as in the National Media division to support the launch of Court TV. We think that part of its strength that we think will lead to greater distribution, a larger audience for that brand as well as ultimately greater revenue and greater contribution. At this point, we think that the business is aligned properly. As we continue to grow and expand our Local Media business, we're certainly pleased that we're going to be creating a larger platform for cash flow generation. And we expect that larger platform for cash flow generation will enhance the durability and the operating profile of the company as a whole. But at the same time, from a long-term value creation perspective, we're very focused on ensuring that these National Media businesses are supported and invested in through their period of growth, so that as they continue to mature and as they contribute to the margin expansion we've talked about in the past in the National Media division that they will do so in a way that maximises their full potential. There are no plans to separate the division or to change the configuration.

Got it. And so Local Media revenues last year were still $13 million. I think I mean earlier on this call you thought that Cordillera would add about $30 million pro forma that would be like $240 million, $243 million and you're guiding $245 million to $255 million. So just help us understand like where -- I mean, I think that the growth?

So David $30 million that we talked about was unadjusted combined look as if we owned Cordillera for the full quarter -- of second quarter.

Okay. Got it. And so I mean going forward, I know that you are looking at the second quarter, but can you give us any insight into what retrans might look like for the full year?

Yeah. We have said that retrans owning Cordillera for eight months would be about $370 million for the year. And that doesn't include Nexstar-Tribune obviously that acquisition, because there's uncertainty of the timing at the close.

Got it. Thanks.

There are no further questions at this time.

Thanks, Katie. You can go ahead and get the replay now.

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