Ladies and gentlemen, thank you for standing by. And welcome to The Scripps First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Carolyn Micheli, Head of Investor Relations. Please go ahead.

Thank you, Tony. Good morning, everyone. And thank you for joining us for a discussion of The E.W. Scripps Company’s financial results and business strategies. You can visit scripps.com for more information and a link to the replay of this call. A reminder that our conference call and webcast include forward-looking statements and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. We do not intend to update any forward-looking statements we make today. Included on this call will be a discussion of certain non-GAAP financial measures that are provided as supplements to assist management and the public in their analysis and valuation of the company. These metrics are not formulated in accordance with GAAP and are not meant to replace GAAP financial measures and may differ from other companies' uses or formulations. Included in our earnings release are the reconciliations of non-GAAP financial measures to the GAAP measures reported in our financial statements. We'll hear this morning from Scripps President and CEO, Adam Symson; Chief Financial Officer, Jason Combs; Local Media President, Brian Lawlor; and Scripps Networks President, Lisa Knutson. Also on the call is Controller, Dan Perschke. Now, here's Adam.

Thanks Carolyn. Good morning, everybody. Thanks for joining us. Once again, in the first quarter Scripps delivered a terrific financial performance, outstanding results in Local Media coming as a result of Scripps’ commitment to new business development and better than expected retransmission revenue. And at Scripps Networks, ad revenue that outpaced its marketplace supported by both growth in ratings share and advertising share. None of this is by chance, it's a reflection of our company's evolution over the past several years. We have crafted and continued to craft a durable and high performing company that delivers a steady stream of free cash flow. One that comes despite fluctuations in advertising marketplaces and across political spending cycles. Through investments that have grown our top line, ongoing sales execution and careful expense management. We have built an economic engine that is not just stable but designed to grow meaningfully every year. To illustrate this point, in first quarter 2022, our free cash flow was three times higher than the comparable quarter in 2020. Our growth strategy is fairly straightforward. It relies on American TV consumers desire for easy-to-use technology, efficient delivery of the shows they love and the most cost effective ways to watch television. Whether that be over-the-air on a connected TV service or through cable or satellite. Americans are watching more television than ever before. Of course, how and where they're watching is changing. At Scripps, we have put ourselves in the best position to profit from the evolving TV marketplace. Our brands, local and national can be found across every linear TV viewing platform, pay TV, over-the-air and connected TV. So for Scripps, it continues to be in all of the above approach, meeting the media consumer, wherever they may be. We execute our strategy with the best of…

Thanks, Adam, and good morning. Our earnings tables in today's press release include our as-reported results for the first quarter of 2022. We also given illustrative comparison to first quarter of 2021, as though we had owned ION beginning January 1, rather than January 7 last year. My network's division comparison today will be on that adjusted combined basis. Let's begin with the Local Media results for the first quarter, which are all same station. Local Media core advertising revenue was up 3.4% driven by our strong sales execution in attracting new advertising business. Total revenue was up 4.5% aided by solid core ad performance and retransmission revenue growth. Political ad revenue in the quarter was about $6 million that's about 70% higher than the first quarter of 2018 the last midterm cycle. Retransmission revenue was up 2.5% to $160 million. Local Media expenses increased 6% from a year ago quarter and segment profit was $54 million. Turning to the Scripps Networks division, revenue for the first quarter of 2022 was $239 million, up 8.5% from the prior year on an adjusted combined basis. Networks segment expenses rose 23% over the first quarter 2021 adjusted combined results. We continue to cycle through the cost of launching Newsy, Defy TV, TrueReal over-the-air as well as continued investment in programming and higher cost tied to revenue growth. Segment profit for the networks was $85 million. Shared services and corporate expenses were $23 million. The company realized Q1 income from operations of $0.10 per share. The quarter included $1.6 million of acquisition and related integration costs as well as a $1.2 million gain on extinguishment of debt from the redemption of senior notes. During the quarter, we redeemed a total of $123 million on the outstanding principle of our senior notes. As of…

Thanks, Jason. Good morning, everybody. Our Local Media team was very pleased to exceed expectations for core advertising revenue and total division revenue in the first quarter. We had guided to low single digits for both and then achieved 4.5% growth in total revenue and 3.4% growth in core advertising. Q1 was our fifth consecutive quarter of year-to-year growth in core. The growth in core was driven by two categories in particular, services, which was up 11% and home improvement which was up 12%. Five of our top seven categories showed year-to-year growth in the first quarter. The two categories showing declines were auto, which continues to be challenged with supply chain and inventory issues and our new category gambling, where we now report sports betting. Without gambling and auto, core was up 11%. Within gambling, sports betting continues to be an emerging and material segment. We now have two years of experience with this segment and are better understanding the cadence of the business. As state’s legal life sports betting, we see an aggressive push for new customer acquisition by state authorized companies. After a defined period of time, these companies take their spend to more moderate levels as they focus on customer engagement and move dollars into new states where they seek to replicate this playbook. We look forward to Ohio and Kansas coming online this fall and other states in the near future. Overall in core advertising, we were pleased that our local sales teams, once again, developed business from more than 1,000 new to TV advertisers. That sales execution has continued to be a driver in Scripps core advertising performance. Now I am proud our teams have not taken their foot off the gas in their focus to help local businesses grow beyond the pandemic. For…

Thanks, Brian and good morning, everyone. At Scripps Networks, we are now well into the new advertising upfront season, and we are armed with a number of great stories to share. Our new upfront presentation is themed free to be, and it focuses on our nationwide audience reach across nine networks, as well as our leadership and free ad supported television of all kinds, over-the-air and on connected TV. During the first quarter, we outperformed our national networks peer group in advertising growth. And we’re also leading viewership performance. During the first three months of the year, we achieved a 5% year-over-year increase in total primetime viewers across our entertainment networks according to Nielsen. That growth came despite total nationwide linear usage, declining 9%. Our industry leading viewership trends position us well to continue delivering better revenue performance than our peer set. In fact, our Q1 revenue growth of 8.5% outpaced total national TV spending, which was up only 6% according to SMI. We are also compared well against our network portfolio peers whose ad revenue was down. Our success is due in part to our cross-selling of portfolio inventory, as well as our strategy of optimizing our advertising mix, moving our ad inventory between general market and direct response to yield the best market rates. We saw particular success in Q1 at our second largest revenue network Bounce. As you know, Bounce produces programming primarily for black audiences. And we have recently been working to refine their programming and further build its brand with black communities. This effort paid off in Q1 with a 54% increase in ad revenue. And that growth came across categories and platforms, general market, direct response, broadcast and connected TV. Our newest entertainment networks Defy and TrueReal also exceeded our revenue expectations in the…

[Operator Instructions] Our first question will come from the line of Craig Huber with Huber Research Partners. Please go ahead.

Yes. Hi. Good morning. Thank you. Maybe we start on the TV station side. Brian, maybe can you give a little more specific on your outlook for 2Q core ad revenue for your TV station? So why don’t we start there please?

Craig, good to hear from you. Right now, still early in the quarter, we got about seven weeks of business to write. But right now we’re looking to be about flattish compared to a year ago.

And then auto. How did that do year-over-over – obviously a tough environment for auto, but how did that do in the first quarter? And what are you hearing from your dealers, your advertisers out there when you think it might start to at least start to flatten out? The hope it used to be middle of the year, second half of the year. What do you think in there?

Yes. I think that’s still what we’re hoping in talking to dealers. They are – some dealers are starting to get more inventory made available to them. I don’t think we’ll be back to a normal inventory lows in 2022. But we do see or do expect improvement in the back half. In the first quarter it was still down double digits over 20%. And I think I would probably expect the same again in the second quarter.

Okay. And then sports betting, I guess with gambling in total, I think you said it was one of the two categories that was down. Maybe could you just flush out a little bit? Is that because sports betting sort of hit a wall here after an additional flood of advertising when they roll into the various states and then it slows down afterwards?

No, it really is – yes, Craig, it really is about timing. When the sports betting is legalized in states is really aggressive spending. First quarter, a year ago, we had heavy spending in Michigan, heavy spending in Virginia, in Indiana and big important – Colorado, some big important markets. They do, after a period of time, as I said, in my prepared remarks, peel back to a maintenance level and then move some money to new launch states. So we did see Lafayette in Louisiana come online this quarter. We had Arizona, which launched at the end of last year, but still in its first four quarters with active spending. We saw New York come online in the first quarter. So it really is just timing. Again, I think we expect it to be a very healthy category for us this year. Ohio will come online around the fall, in time for the football season. We think Kansas, same thing a great opportunity for Chiefs and Browns and Bengals sports betting. So we just – I think it’s the cycle now. And so it will depend on the cadence and the timing of when state’s launch and how long they stay with the aggressive spending. But we are definitely not reading into anything that this category is going to pull back.

What percent of your advertising, if I could ask is gambling and sports betting in the first quarter, say?

Under 10%.

Okay. And my last question, guys. I think I asked you this last quarter as well. Are you hearing or sensing a recession, Brian, in any of your markets? And I have the same question on the Scripps network side. I mean, given all the macro issues out there, are you picking up – moving into a recession here in the new markets?

So I can start and then anyone else can weigh in? I don’t think we’re feeling the effects of moving into a recession. I think we are feeling the effects of the challenges of supply chain and employment. And so I think businesses are a challenge to get product in some categories and in other categories they’re having a hard time getting employees. And so I think that is the bigger factor that is influencing our local business. I don’t see much of a pullback at this point that would indicate that it’s a recession that is driving any slowdown.

Yes. Craig, I agree with Brian’s comments. One thing I will add on the national ad marketplace is really the Ukraine crisis. Many advertisers who were doing business and Russia pulled out. So that is a little different nuance in our business, which created some pressure at the end of first quarter and looking into second quarter. But really I agree with Brian’s comments about supply chain, labor shortages are really the driving factors at this point.

Great. Thank you, guys.

Thank you. Our next question will come from the line of Steven Cahall with Wells Fargo. Please go ahead.

Thank you. Maybe first Lisa, just to follow-up on that last line of questioning. I think your comments were that once the market comes back, you expect some strong growth in your Networks division. Are we to imply though that at the moment, and especially with the Q2 guide, it does feel like things have softened a little bit? We’ve heard things from companies like radio that they’re starting to see a pickup in pacings as they get into May, June after a slowdown in April. Could you maybe just give us a little more granularity? Are you seeing signs of things are recovering? Are you seeing stability? Are you seeing instability? We’d kind of love to know what the trend line looks like right now.

Yep. Actually, early days of May, we are seeing some – a little bit of a pickup in May versus what we saw at the end of first quarter and early days of second quarter. So I would echo some of that. For us, it’s about executing our strategy of optimizing our inventory and continuing to find the best rate out there. With our CTV launches, I think we’re really bullish that marketplace is really strong and with launching ION on CTV, we’re now able to capture dollars in that really lucrative marketplace. So, we’re – I would say, looking ahead, we’re really focused on third quarter with hopefully lot – coming back on lots and paired with some outlook of improvement that we’re seeing in the early days of May that we’re really optimistic and confident in our growth trajectory.

Yes. Steven, it’s Adam. I think I’d want to just sort of add. The Scripps networks’ was up 8.5% in Q1. We expected to continue to demonstrate really superior revenue growth when compared to any benchmark, local peers, national networks peers. While the networks generates its revenue and the national ad marketplace, like the other cable network portfolios, we’re sort of uniquely positioned to take advantage of the growth of over the year, which they, for the most part don’t have access to. So we’re really a growth story in the national advertising marketplace on both ratings and advertising share metrics. It’s sort of the best of both worlds. And I say this just because I want to jump in and focus on this sort of notion of the question of Scripps compared to pure-play this or pure-play that I think that’s really a red herring. When you think about our company, you have to think about the benefits of a company made stronger over the last several years through the development of the Scripps networks. We continue to have terrific scale and local broadcast that takes advantage of the growing dual revenue streams, of course, including the upside with retrans, but the networks is something we laid on top of our local broadcast business, and it’s a growth story and it’s a strong growth story in the national ad marketplace. And we expect it to get back to that after we move through a cycle of some macroeconomic conditions.

Yes. Thanks for those. And maybe Adam, just to give you a little bit more of the floor on that, could you talk about the marketing campaigns that are forecasted in the year ahead? And where you are in terms of achieving those? And what sort of goals we can expect to see whether that’s customer activation or growth in OTT or CTV?

Yes, yes and yes. I mean, we expect our marketing campaign to kick off in earnest probably sometime in Q3 focused on several events that we know are coming that are going to be catalysts for consumer adoption of over-the-air. We really expect to take advantage of this moment when consumers are frustrated with the increases they’re seeing by the subscription video on-demand services, they’re frustrated by the content glut and they’re experiencing a level of plus fatigue. I know you all know that because I think you can see the impact on the other networks and the SVOD services stock prices. According to Nielsen, we have about a 25 to 30 share of OTA viewing at any one time. It’s a really formidable share of in that marketplace. And that marketplace continues to grow. Nielsen just recently released some information, demonstrating again, another year of growth in the OTA marketplace. Our focus on growing the OTA marketplace goes well beyond just a marketing campaign. We’re developing now customer activation opportunities with retail partnerships that we’re going to share more about in the coming months. We think there’s a lot of opportunity to solve the problems that consumers have had on the install side and the user experience. In any way we can, we expect to introduce Americans to the opportunity for them to add free over-the-air television to their bundles. Not in a way that’s going to cannibalize the paid TV ecosystem, but in a way that’s going to be additive. That’s going to show people who have already cut the cord, that if their subscription video on-demand consumers, they should right now plug in a digital antenna so that they can get access to the entire buffet of premium content in the over-the-air marketplace, including for example, all of the live sports that’s on the big four broadcast networks.

Thank you.

Thank you. Our next question will come from Dan Kurnos with The Benchmark Company. Please go ahead.

Thanks. Let me pursue the networks side just a little bit more. I guess I’ll start Adam, obviously it’s more than just a play on viewing trends, it’s also quality. It seems like you’re winning, not just because of the mix shift, but you’re winning eyeball share across the broader portfolio in a landscape that has increasing proliferation of AVOD content. So just maybe some incremental thoughts on that to start there and then I’ve got some questions for Lisa and Brian.

Yes, I mean, absolutely. I think one has to be reminded of the fact that the top streaming shows in the SVOD marketplace are actually today available for free on our premium networks. And while they’re not on demand, and while they’re served up with advertising, free is an incredibly compelling consumer proposition at this moment of high inflation and SVOD fatigue. And we’re taking advantage of that. You can see it in the share of audience that we’re growing compared to our peers whose portfolio shares and ratings have been down. Our portfolio’s rating share has actually been up. And that is I think a testament to a good programming strategy, premium quality programming and a growth marketplace over-the-air. Lisa, do you want to add anything to that?

Yes. I would also say our portfolio – taking the portfolio approach and having really a genre that appeals to really a mosaic of America. It certainly is also a competitive advantage for us. So as each network is in its own life stage of growth, there are some that are growing significantly, like we talked about with Bounce this year, in the first quarter of growing 54% and Court TV growing over 20%. So I think it’s also that having that portfolio that appeals to a genre – a different genre of audience is also certainly something that we see as a competitive advantage.

Lisa, just you made some comments just around optimization of inventory. Obviously DR was strong now it’s probably not as strong. Just a, how are you thinking about further inventory optimization as you head into new fronts, upfronts, and then into kind of the next TV season? And b, do you think all of your networks will be rated by the end of the year?

I’ll start with the last question. So probably not all of our networks will be rated by the end of the year with really three in startup mode, we are watching that very, very carefully. So, we turn on those ratings when we see the opportunity to monetize in the upfront and general marketplace. So that’s the one question. In terms of, we really do continue daily to optimize and it’s all about taking the highest rate. As I said in my comments a few moments ago, May – the scatter market in May is up compared to April. And so we’re seeing that as signs of – so those are the dollars we’re writing when we’re seeing our scatter rates 30% to 40% higher than our upfront rates. And when we’re seeing the opportunity to shift that inventory into DR, we are absolutely doing it. And we saw that really pay off for us in first quarter up 8.5%, a lot of that it was really that inventory optimization between general market and DR. I do think with the launch of ION and the rest of our fast networks, that’s going to be even a better story for us. Certainly in the upfronts we’re selling both linear and CTV inventory. And so that’s really helped I think our story in the upfront, along with our strong viewing and share numbers.

Got it. That’s helpful. And last one, Brian, I know you mentioned it in your prepared remarks, but I don’t know if this got enough coverage. The political consortium that you guys have, especially in the CTV side partner with Magnet and all of this, it feels like it’s TAM expansionary potentially. I think it’s super interesting, love what you guys are doing there. Just would love to hear some more granularity and just how we should be thinking about how that evolves over time?

Yes. Hey, Dan. Look, we saw an opportunity. Let me just step back, you know our history. The bold steps we started taking a decade ago to carve out our place and our leadership in political creating an infrastructure, Washington office, we've controlled our own political now for more than a decade. We've continued to advance that and offer new products and data driven products to the candidates and to the agencies, we've built great relationships with them. And so we continue to, I think be a leader and forward thinking in this space. And we saw an opportunity where like other categories, there was going to be a fair amount of money moved or available in the CTV space. And we saw an opportunity to not just put Scripps out there, but really to create a marketplace that would be interesting and easy to use for media buyers in the political space. And so with a couple of peers and others we've put together a consortium, just launched in April. So it's early and I don't have any numbers to share with you at this point. But I think we're seeing acceptance. We are booking orders. Those orders are getting placed in and out of our markets. And I think we're going to have an opportunity to play on dollars and roll that space up where these are not our linear channels. And so it's an all added revenue stream.

Got it. That's super helpful. Thanks for all the color guys. Appreciate it.

Thanks Dan.

Thanks Dan.

Thank you. Our next question comes from Michael Kupinski with Noble Capital Markets. Please go ahead.

Thank you. Congratulations on your quarter, by the way. First of all, I'm going to go back to the network questions. Particularly, my interest is in the direct response business on your networks. Obviously, during COVID that business seemed to do quite well. And I was just wondering in this environment, are you starting to see shifts in terms of national advertising versus direct response? Can you talk a little bit about the percentage of direct response to total advertising and how that might look versus where we were maybe during the pandemic?

Yes, so Mike, direct response in first quarter was a strong performer, despite the macroeconomic trends, certainly put pressure in some cases in the latter part of the quarter on rates, the strength, I mentioned this just a minute ago of our portfolio and our ability to optimize that in DR or general market is really sort of our secret sauce, so to speak. And the portfolio approach that I mentioned and remember each of our networks is sort of in a different mix, so to speak, some of our over-the-air networks like Grit, ION Mystery may have a revenue mix of DR. That's heavier versus ION, which is more general market focus but continually looking at the best rate possible. And that's why we've invested in Nielsen ratings to be able to share – to be able to sell each of our networks both in the upfront and also in the general market space. So hopefully that answers your question in terms of each network is in its different life stage in terms of a split. I think last year we were at 50 – about 50/50, 50% general market and 50% DR. Overall for the networks division, but obviously that's made up of lots of different – each network being in a different stage.

And Lisa, what is the percentage now?

It hasn't moved, it's about the same at this point in time.

But you're not seeing any increased interest from direct response then, like we did in the COVID period, like a heightened level of interest, just kind of like, I'm just trying to understand the tone of the marketplace for DR.

Yes. I would say as the scatter market, I mentioned this last quarter, the visibility and the buys that are coming in sort of later, they're placing buys closer to knowing whether or not they have inventory. And so we're able to then shift some of those dollars that aren't written and scattered to DR. But you're also starting to see, I think in DR, there is probably more inventory at this point in time out there because other national networks are certainly moving some of the – where they're not getting dollars written and scattered, they're moving them to DR. So there is a bit more demand from an advertising perspective, there is certainly more inventory available out there.

Got you. And in your earlier comments, you mentioned Newsy, so I think it's fair to ask a question about Newsy. It seems like the news and information category is very crowded and it would seem to be a hard to get a voice in the space, especially a lot of the other networks have reporters on the ground in Ukraine. And you mentioned Ukraine has usually hit your milestones in terms of delivering upon your expectations. And are you still in investment mode there or are you trying to mine your earlier investments? I'm just curious about where you're at with that – with Newsy?

Yes. Thanks Mike. So Newsy is just a little over six months into its newest revision of Newsy with being an over-the-air network. And remember Newsy’s strength prior to making this change last year was also on the CTV side. And so we're not Nielsen rated at this point in time so I can't share with you those kinds of viewer trends, but what I can share with you is, on the CTV side, which we're well established in our viewing on CTV is up 40% versus prior year on Newsy. So we see that as really great engagement in some of the work that we've done to really improve the product is coming through. And I would say, the investments that we've made were to your point, we're really now mining to make sure that we are taking advantage of those investments. So the investment trend on Newsy is sort of has moderated but in the first half of the year, we're lapping those expenses will be in the second half of the year.

Mike, if I could add, the news space, depending on how you define it is potentially crowded, but the space for quality objective journalism on television in our opinion is not crowded. And what we saw happen across the Street with CNN, pulling the plug on CNN+ is a validation of our strategy that America is very interested in quality objective journalism, particularly if it's delivered for free and our reach across America with both CTV and OTA makes Newsy a unique proposition at this moment. And we're really beginning again without Nielsen ratings, really beginning to see that resonate. So for us, it's very much stay the course, continue to build the brand, continue to expose more Americans to the quality objective reporting that's coming out of our team at Newsy and monetize it.

Thanks Adam. And one last question for Brian in terms of Local Media, I was just wondering if you can give us the tone of advertising, particularly local advertising. Are you seeing advertisers shifting in terms of booking their advertising, maybe closer to air time, I'm just wondering in terms of how much visibility you're getting in terms of the patient data as you go forward. And if there has been a shift towards advertising being booked sooner?

Hey Mike, it's Brian. Yes, I think you're spot on there that I think first of all, just reported the five of our top seven categories were up in Q1. And if you take out sports betting and auto, all of our core was plus 11. So those are pretty significant numbers. But that said, yes, there has been a change to the pace of how people are booking business, clients that would normally book at a quarter at a time, or even month to month are definitely holding back and booking two weeks out or a week out. And they're really waiting, due to supply chain issues to determine if they're going to have enough product to sell. And then they've also got to look at, do they have the employees to think of the service category. Do I have enough employees to go install a fence or put on a roof or deliver a hot tub and do I have the hot tub, or are they back ordered? So all of those things are factors now, but I can tell you in first quarter, as we got to March, we were seeing bookings month – week to week to week, that was building through the month as people were identifying, okay, I got the product and I got the staff, I can move forward, but it is we have less visibility than we've had in the past as we're working week to week now.

Got you. All right. Thank you very much. Appreciate that.

Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners. Please go ahead.

Yes. Hi Brian, your net retrans outlook for this year, I think you guys said last call. You thought it'd be flattish for the year. What are you thinking right now?

Hey, Craig, it's Jason. Yes. So we continue to look at it as being flattish. If you recall, we only have about 20% of our subscriber base renewing this year and some contractual network comp step ups. So flattish this year, but as you look forward to next year, 75% of our sub base renewing, we are really optimistic about some nice net retrans growth in 2023.

Okay. Very thanks to the update there. And the other thing – the services category, Brian on your TV stations, in the first quarter, what percent of the total was that? And maybe just talk about what specific piece underneath the services were really, really strong in your mind, what you saw there?

Yes, hey Craig. A third of our core advertising was in the services category and it's been that way now for a couple of quarters. So it's a big material part of our success. And when we talk about developing a thousand plus new advertisers a lot of that is in the service area, inside of services, you have medical, financial, legal educational. So there there's a lot there, but a lot of that is local. And a lot of that is our focus of our sellers. We're not going to sit around and just accept that auto's down, we're going to do something about it and work actively to replace it. And this is a category that decisions can be made by local owners and we can take advantage of that. And so, it's about a third of our business. It was up double-digits, as I said, 11% inside that medical was up almost 30% in spending. So that's a big subcategory inside there. Financial segment was up, the legal segment was up. So banks, insurance are all part of financial and they're healthy. So a lot of different segments there, but very healthy.

That's great. That's all I have. I actually do have one more thing, on the Scripps Networks side. Did you see a material slow down in your ad revenue there soon after the invasion of Ukraine back on February 24. This is a material slowdown soon after that, and it sort of stabilized several weeks later. How was that cadence? I'm curious.

I would not say a material slow down. I think after the Ukraine invasion, it was probably later in the quarter toward the end of March that we started to see, as large advertisers were pulling out of Russia is probably the timing of that.

And as she mentioned a moment before Craig may feels like, if not stability maybe even an uptick to the benefit of the advertising marketplace.

Great. That's all I had. Thank you.

Thank you. Our next question comes from the line of Jennifer Lovell with Principal Global Investors. Please go ahead.

Good morning. Thanks for taking the question. As it relates to your free cash flow guidance, I was wondering if you could provide us with capital allocation priorities.

Well, in the near-term, our capital allocation priority is consistent, we’ve been saying since the ION transaction, it's paying down debt. We've made a lot of progress since the ION deal closed. We've paid down nearly $700 million in debt. And we're on the path to getting to four times levered by the end of the quarter and back – sorry, by the end of the year and then into the threes next year. So that's our number one priority.

And those leverage targets, are they net leverage targets or gross leverage targets?

That's our net as defined by our bank covenants.

Okay, great. And one other question as it relates to sports betting, do you have any geographies that have newly launched here in the second quarter or have pending launches this summer?

Yes. Hey, Jennifer, it's Brian. Nothing in the second quarter, we do have a couple that launched in the first quarter. New York, Louisiana started in the first quarter, as I mentioned earlier, Arizona at the end of the year. So they're still in their first cycle. I think the ones that will be up next will be Ohio and Kansas. And we expect both of those to come online in the fall, hopefully in time for the NFL season.

Thank you.

Thank you. There are no questions remaining in the queue. Please continue.

Thank you, Tony. That's the conclusion of this call.

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