E W Scripps Co (SSP) 2015 Q4 法說會逐字稿

Good morning, ladies and gentlemen, thank you for standing by and welcome to the Scripps fourth-quarter earnings conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded and will be made available for replay beginning today at 11:00 AM Eastern Standard Time and running until March 11, 2016 at 11:59 PM. To access the AT&T executive playback service during that time please dial 1-800-475-6701. Internationally you may dial area code 320-365-3844 and the access code is 385050. The numbers again are 1-800-475-6701 and area code 320-365-3844 with an access code of 385050.

It is now my pleasure to turn the conference call over to your host, Head of Investor Relations for E.W. Scripps Company, Carolyn Micheli. Go ahead please.

Thanks Alan. Good morning everyone and thank you for joining us for a recap of the E.W. Scripps company's fourth-quarter results. A remind 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 www.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 the call. The length of the replay will be up there this afternoon and available for a week.

We'll hear first this morning from Scripps' Chief Financial Officer, Tim Wesolowski; then Brian Lawlor who heads our television division, and radio; followed by Adam Symson, our Chief Digital Officer; and finally from our CEO, Rich Boehne. Also in the room are radio division head Steve Wexler; and Controller and Treasurer Doug Lyons. Now here's Tim.

Good morning, thanks for joining us today as we report our fourth-quarter results and closeout 2015, which has been a productive and transformative year for Scripps. I will spend a few minutes talking about highlights for the fourth quarter, our year-end cash position, capital allocation matters and our 2016 guidance.

I'm not going to spend a lot of time repeating the numbers for the fourth quarter. You can see them in our press release. We will be filing our form 10-K later today.

I did want to touch on a few highlights and Brian and Adam will be providing more color in a few minutes. As I talk about our results and our guidance I will be using comparisons to our 2014 adjusted combined numbers to help you better understand the underlying trends in our business. The adjusted combined numbers give a picture of the 2014 and 2015 years as though we had merged in the journal and granite broadcast assets by the beginning of 2014. Our assumptions and disclosures are also included in the supplemental information that begins on page E-7 of today's press release. I encourage you to read those very carefully.

Today we will use those to compare fourth-quarter and year-end results on an apples to apples basis. And meanwhile you can find the as reported results in today's press release. In the fourth quarter our television group's total revenue performance was very much in line with the guidance we had provided. However, political guidance was $4 million and we came in at $2 million, as spending in some of the state races was lighter than we had expected. Of course those numbers will be rounding errors as the 2016 political season truly kicks in.

TV expenses were about $2 million higher than our guidance as we accelerated spending to maximize our opportunity to capture political advertising revenue this year. We also accelerated some normal maintenance at some of our properties.

In our radio group, October and November revenue tracked closely with our expectations, but there was a slowdown in December across most of our markets. That one month decline caused radio revenue to be down compared to our guidance. But things are looking better here in the first quarter.

We are reporting an 11% decline in Q4 revenue, compared to the adjusted combined numbers. There is a bit of noise, including some political revenue in the 2014 numbers. Ad sales were really down about half that amount. Expenses in the radio group were down in line with our expectations at about 5%.

Fourth-quarter results for our digital segment include Midroll, the podcasting company we acquired in July. Due to both the acquisition and strong organic growth, our digital revenue was up about 50% year over year. Our fourth-quarter consolidated results include a non-cash charge of about $46 million, from the lump sum pension plan buyout which we announced last quarter.

Before I get to our guidance, I would like to touch on the balance sheet and a few capital allocation matters. We closed the year with more than $100 million in cash and total debt of about $400 million. So that is net debt of about $300 million, or net leverage of only about two times on a two-year blended basis.

We repurchased about 1.2 million shares since we reinstituted our share repurchase program in the second quarter. In 2015 we returned $75 million of capital to shareholders, including the $60 million dividend as part of the journal transaction. We have about $75 million of share repurchase authorization remaining.

We provided both first-quarter and full-year 2016 guidance in our press release. I believe we gave you all the information you need to feed your models. But just to bring it all into focus, here are the three big drivers of our 2016 financial performance.

Growth in re-trans revenue, growth and re-trans after network compensation, and incremental political advertising in this presidential election year. Over the past six months or so we have been saying that we expect a 50% increase in re-trans revenue, and a 50% increase in re-trans after network comp in 2016. We've also been saying we would be disappointed if 2016 political revenue did not exceed the $143 million combined Scripps, journal and granite amount in 2012.

The full-year guidance we provided today is very much in line with what we've been saying for the past six months. Our guidance includes more than $150 million of political revenue. And as you know, there can be a great deal of variability in political ad spending depending on how the races play out. Our guidance for re-trans revenue is about $220 million. Network compensation, which is included our program and program license expense line, is consistent with what we've been saying about the net increase.

In terms of first-quarter guidance, we said we expect total television revenue to be up 11% to 13%. And that includes core TV advertising of flat to down a bit, depending upon how the dollars shakeout between core and political.

Also in the first-quarter guidance, I wanted to highlight a few wrinkles. We expect shared services and corporate expense to be up about $4 million versus the run rate for the rest of 2016, primarily due to the timing of non-cash stock compensation expense. That expense fell in the second quarter last year, because of the close date of the journal merger.

While we expect an increase of about 50% in both re-trans and re-trans after network comp for the year, we will see the smallest benefit from that in Q1 due to the timing and terms of the contracts. You can see our full guidance in the release. But there are just a couple of other items worth noting. Our cash flow will be very strong because we have modest debt repayments, pension contributions, and expected tax payments this year.

And now here is Brian to talk about our broadcast business.

Thanks Tim, good morning everybody. Since we last spoke in November we've successfully renegotiated a new retransmission agreement with Time Warner Cable, covering our three million Time Warner and Bright House households. As most of you are aware, this has been a challenge we've had to manage since the split of our Company in 2008.

The new agreement is the primary driver of our 50% increase in both retransmission revenue and what we keep after network comp. That puts us at about $220 million of re-trans revenue compared to $147 million in 2015. The other major negotiation we completed since our third quarter call is with NBC.

We renewed our affiliation agreement covering all five of our NBC stations. With NBC complete we now have relatively new agreements with all four of the big four networks, covering the large majority of our major network stations. This smooth renewal of these affiliation agreements reinforces the strong partnerships between the major broadcast networks and their local affiliate station groups. Together we promote high-quality, prime time network programming in our local markets. We share coverage of news events across the country and we build consumer focused digital brands.

Moving on to 2016, this year's presidential election marks the high point of our four-year election cycle. The open race is projected to bring record election spending across the broadcast TV industry, including at Scripps. It is still too soon to know exactly how all of this will shakeout.

We have guided to greater than $150 million in total political advertising revenue this year. But political ad spending quickly moves when the races get tight. That can work for us or against us. In the presidential field, having a large number of candidates can slow spending if the primary season drags on too long. In that case, campaigns follow state primaries into May and June.

In our perfect scenario we are looking for the primary process to be largely complete after the primaries on March 15. That will mean a shift to general election strategy by the middle of the second quarter, which should bring early spending to the 10 key presidential states. We have stations in 6 of those 10 states.

In addition to the presidential race we have five competitive US Senate races in our markets. We have 11 US House races and two gubernatorial races. As a reminder, Scripps handles political different than most of our peers, with a Washington DC sales office that is uniquely positioned to capture money across all of these races, and move quickly to get campaign and pack advertising on the air.

It is hard to believe that it has been 11 months since our merger with the journal TV and radio stations. 2015 was a very busy year at Scripps as we work to advance all of our technology, our workflows, our systems processes across all of our new stations. Our stations are all focused on creating the highest standard of journalism across all platforms and providing the largest possible audience for politicians and local advertisers in 2016 and beyond.

And now let's talk about the radio division. Local radio revenue, which accounts for more than 85% of total radio revenue, fell short of expectations as a result of a softening ad market in December. Despite that disappointing month, radio had a real good year as it tracked on plan most of the year, delivering solid ratings and revenue numbers across our markets.

The division also did a good job of expense management, largely accomplished through lower employee costs. We continue to like the creativity, the spirit, and localism of our radio teams as well as the consistent cash flow this division delivers.

Finally, our radio group was honored to be recognized recently by the Academy of Country Music. Our country and news station KTTS in Springfield, Missouri, was named small market station of the year. This is great validation of its work to serve its community and the Scripps radio group's focus on appealing to local audiences. And now here's Adam Symson with highlights from digital.

Thanks Brian and good morning everybody. As I began, I want to remind you that unlike some of our peers, the Scripps digital segment is a portfolio of various local and national digital products. As we look ahead to 2016, we expect about 65% of our revenue to come from local market related products and services. The rest of the revenue will come from our national brands. And I will talk more about those in a moment.

Looking back at the full-year 2015, total digital revenue was up 50% over 2014 on an adjusted combined basis. Our results were buoyed by more than a full quarter of revenue contribution from our podcasting company, Midroll. We also saw gains driven by our strategies in the local digital marketplace tied to advertising sales and data-driven direct from consumer revenue streams.

Breaking that down a bit, let's focus on the local marketplace first. During 2015 we saw strong year-over-year revenue growth in our local market business. Our 24 local TV markets served up 1.5 billion total page views in the year. Which represents a compelling platform of scale to local, regional, and national advertisers.

During fourth quarter, local revenue was up more than 17% on an adjusted combined basis. For the year, local digital revenue was up 19%. That growth was driven by our aggressive local sales strategy, along with a sharp focus on data-driven consumer and programmatic revenue. Fourth quarter was terrific for programmatic as we grew our rate by 34%, which resulted in 85% year-over-year revenue growth. As a reminder, programmatic advertising is the sale of display advertising to national and regional advertisers in a real-time option. It is simply the way national and regional digital business is being placed now, and we are reaping the rewards of our focus.

On the national digital side, our businesses include over-the-top video news service, Newsy, and podcasting company, Midroll Media. Since we last spoke, Newsy has added a number of new distribution and syndication partners. Its content is now available in on demand and linear formats on OTT services including Apple TV, Watchable from Comcast, Pluto TV, Roku, Amazon Fire TV and Google Chromecast. On connected televisions through Xumo, on all major smartphone platforms and of course at www.newsy.com. And coming soon, we will be announcing Newsy's live launch on Dish's Sling TV.

We are seeing strong traction with the over-the-top audience in this emerging ecosystem, especially with millennials. Apple TV even named Newsy a best of 2015 app. We project Newsy will draw more than 1 billion video views this year.

And average session length on some of our most important OTT platforms like Roku and Apple TV, is currently exceeding 30 minutes. While it is still early in the development of the marketplace and our business, we are seeing the kind of high demand and high rate from advertisers that we are looking for.

We are also gathering meaningful momentum at Midroll. Midroll owns and operates its own podcast, sells advertising for well over 200 other top podcasts, and runs a podcast platform called Howl, with a direct from consumer subscription base. Since the start of the fourth quarter, Midroll has added big new podcasts to the catalog, including former ESPN commentator, Bill Simmons and musician and actress, is Issa Rae.

And now we have the top parenting podcast, The Longest Shortest Time. From the momentum we are seeing with audiences and advertisers we believe that podcasting will be one of the important mediums for entertainment and journalism for the future.

During the fourth quarter of 2015 Midroll's podcasts were downloaded an average of 113 million times per month. More recently, Fast Company named Midroll one of its 10 most innovative companies in the media and marketing and advertising categories. This is great reinforcement of what we already knew. Podcasting is a burgeoning business that is captioning audiences with engaging, entertaining and informative content of all kinds.

Now, before I turn it over to Rich I want to draw your attention to an important investigation our teams at WCPO Digital and the Scripps bureau in DC did together over the last week, into the Department of Veteran Affairs and the Cincinnati VA Hospital. Scripps is committed to being an important voice in the American conversation through impactful enterprise journalism. And there is already significant fallout from our reporting. We expect things to get better for veterans seeking medical care as a result. You can read more about this important investigation at www.WCPO.com. And now here's Rich.

Thanks, Adam. That is a great important story, I hope people get a chance to go take a look at it at www.WCPO.com.

Good morning everyone, much of what you just heard from Tim and Brian is about the strong cash flow-through that broadcasters can deliver through their natural cycles. We have aggressively prepared the enterprise to take the fullest advantage of 2016.

Our local on-air and digital platforms will play an essential role in determining who will be the next president of the United States, as well as determining who will join the Senate, the House and several key governor's mansions. As broadcasters and local news organizations, we venture into this election year with both weighty responsibility, and as you well know tremendous opportunity for our owners.

In addition to the promise of political advertising, we have quietly and successfully negotiated Scripps into a position to dramatically increase our retransmission revenue, and the dollars that flow from there to the bottom line. Thanks to these three big financial propellants as Tim outlined earlier, we step up the strong cash flow growth in 2016. At the same time though, we are looking beyond the election year, building value through quickly evolving digital brands both local and national.

As Adam talked about, we have built market-leading digital brands in the local markets where we expect strong organic growth, revenue growth to continue. In addition to that incremental revenue, our digital brands play a key role in our on-air success, building audiences across all platforms that touch local consumers. More by the day we're seeing evidence that long-term success in local markets requires a holistic strategy.

We are also building value in two growing marketplaces with national scale. Over-the-top television and podcasting. In both cases we moved ahead of the curve making prudent investments ahead of an expected acceleration in the development of audiences and revenues. Our acquisition of broadcasting company, Midroll, in 2015 was a good example of that strategy.

Podcasting has expanded significantly in just the months since we entered the business. Our organic growth has been terrific and we continue to look for opportunities to leverage our investment by pulling in more talent, more shows, more revenue streams and technology partners to increase our share of the podcasting market, and further deliver attractive returns on investment.

On the video side of over-the-top, we are rapidly expanding the potential audience of Newsy through a series of carriage agreements with the leading services, which will soon include one of the strongest OTT brands, Sling TV. Our aggressive strategy shift at Newsy in 2015, taking advantage of what Newsy can deliver in terms of high quality programming for younger audiences, gives us a meaningful opportunity to build value in the rapidly growing OTT marketplace.

We have assembled this opportunity affordably and skillfully. And you will be hearing much more about Newsy in the months ahead as viewership begins to build, and we take advantage of this wild election year to define Newsy's brand for its target audience.

We are building value in our digital segment through both modest acquisition and investment through the P&L, so far so good. We back this up with one of the strongest balance sheets in the industry, with net debt under two times cash flow, and projected strong cash flow for this year we have a financial oomph to acquire attractive businesses and buy more of the businesses we already know and love through share repurchase.

Thanks very much for dialing in this morning. Operator, I think we are ready to take questions.

Thank you.

(Operator Instructions)

Our first question will come from the line of Marci Ryvicker with Wells Fargo, go ahead.

Thanks. You commented on a slowdown in radio in December. Can you talk about what caused it? How you started the year? And maybe how radio compared to TV toward the end of the year and into the first part of the year?

Hi Marci, it is Steve Wexler. I will talk a little bit about December. As Tim mentioned at the outset, October and November were actually tracking real well, and in line with our guidance. December clearly did not. That is really the story of fourth quarter.

We have seen moderating on that since December. March looking a little better than February and February a little bit better than January.

In terms of how that tracks with TV, I will defer to Brian to comment on that. But December was really the story for us in that fourth quarter.

I'm sorry was in a specific ad category? Or was it broad-based or region?

It was broad based. Auto was actually up for us in the quarter, so I can't point to one category and say that was the culprit. It was fairly broad in the month, it was across most of the markets.

Our Tucson market was an exception, performed better than the market and Omaha also performed better than the market in fourth quarter. But we had shortfalls in the others.

Hey Marci, it's Brian. It actually was not all that different, radio's performance than TV. We obviously reported same station plus one.

But we actually had a lot of momentum in the first half of the quarter. Obviously with displacement and so forth, but October was up double-digits over prior year in core and then started to slow.

We got kind of bit by some of that same cancellation bug in December and actually took a couple million bucks off the books that we had on written. For us, most of that cancellation was in the auto category. And really kind of around the dealer group business. We've talked before about kind of the disbanding and the repurposing of some of those dollars and that was a little bit the case as we saw there.

As we've gone into first quarter, I like what I see. January we did not have a problem with cancellations. January was healthy and as I sit here today, I see a quarter that is building and gaining momentum. We've had a really good week this week and as a result of that we continue to feel very optimistic that we are in a healthy first quarter.

Are auto dealerships strong? Would you say they are strong or up?

No, I wouldn't, we had -- so let me just address a couple of categories here real quick. We had a really good fourth quarter with most of our categories. We've talked about how important services is, and that was up mid-singles. We had our best retail quarter in several years, up more than 12%.

Travel and leisure was up double-digits. Food stores was up, home improvements was up almost double-digits. Media was up over 40%. So automotive was the one and it really was as a result of those cancellations.

We're kind of tracking right to be on plan in fourth quarter, and we wound up down a little over 1. As we look at first quarter, we do see auto right now pacing down. As I mentioned, the auto dealer groups is where we are seeing the erosion. Factories are kind of, you know flat.

We are doing really well with individual dealers. We were up about 20% in fourth quarter, and we are seeing that as well. Just like last week, Hyundai announced they were disbanding their tier 2 advertising.

So, in, let me get this right, 2013, no 2014, Hyundai was supporting about 75 markets across the US. Last year they cut that but they were supporting 50 markets in terms of funding dealer groups. And last week or two weeks ago they announced they weren't going to fund any this year.

Obviously we changed our strategy then, we get a lot more aggressive with the individual Hyundai dealers. So we've been reacting to this trend. Not just with Hyundai but with the others for the last year or two, but I think that's kind of a little bit of what we're seeing. Other categories look good for first quarter, but I do expect auto right now to be down just a bit.

Okay. Brian, one question, would your political number or forecast for the year be higher if Trump hadn't been so successful so far?

No. We kind of were locking in on this a couple of months ago as we looked at the opportunity. We have eight big stations that more than 70% of our political is going to come from this year. We've got three stations in Florida, two stations in Ohio, a station in Denver, Las Vegas, and Milwaukee. Those will be big markets for us.

Trump is an interesting dynamic. He has obviously spent less right now than some of the others. And it remains to be seen you know what he will spend you know by himself.

What we do know is the Democrats are going to spend heavy. If money aren't supporting PACs I think you're going to move to the Senate races and at the end of the day, if you want to get elected you're going to have to spend some money.

You're not going to get elected on a 30 second sound bite on the Today Show and Good Morning America. It's going to take a larger presence than that.

So we think the money will be in the ecosystem. You know whether it is spent by Trump or supporting Trump, or targeting Trump or whether some of that really moves to the Senate races. We like our footprint regardless, and feel good about our number.

Thank you so much.

Next we will go to the line of Dan Kurnos with Benchmark Company, please go ahead.

Great, thanks. Good morning, just to follow quickly on a couple of topics that Marci was just bringing up. Just in terms of core, Brian, in Q1 again on TV side.

You know maybe a little bit lower than some of your peers are sort of pacing even ex Super Bowl. I know you guys don't have that exposure per se versus everyone else.

But I guess, is there anything else you would call out either geographically or ratings wise? I know that someone else had called out, ABC is kind of a stealth performer for them. Is there any other additional color as to pacings in Q1?

You know Dan, I would just say, kind of look at our total revenue number of up 11% and 13%. I know inevitably we have the conversation of political versus core.

But the way we manage the businesses, quite frankly, is we go for the biggest opportunity dollar. And so, once we kind of look at where our total revenue is we kind of back into where we think political and the core will be. A lot of it is the moving pieces.

We still have eight more primaries in the next three weeks, across our platform. So really, how healthy those are, you've got big Michigan, you've got big Florida, you've got big Ohio. So how much political we take there will really dictate what our core number is. So maybe we are being a little conservative on the core number.

But I think more importantly what we see is huge pot of money in [plus 11% to 13%]. We will go for the best available dollar at every unit we sell.

So we don't say, now we are going to pass on $1,000 political ad because we need to take a $700 core spot. We will take the $1000 every time. And however it shakes out at the end, I think we will roll up to a number you guys should be pleased with.

That's fair, Brian, it's certainly more call out on displacement earlier than many of your peers. So given its higher margin, obviously that would be beneficial to you. So that's helpful color.

And then just following up on radio again. I know you guys are pleased with the underlying cash flow here. But maybe if you want to talk about, Brian, if you want to link it together with some of the potential synergies you've called out on the political side given your exposure with radio and TV end markets to capture upside in political? If you are starting to see that already and how you balance that out with just its overall core performance?

Dan, it Steve. On political, there aren't necessarily TV radio opportunities in political because they obviously act in different ways and in different platforms. For us in radio political is really going to be a Wisconsin phenomenon. Brian mentioned Milwaukee.

We're obviously, we have a big presence with our stations there. And we see political opportunity in places like Omaha because of its proximity to Iowa, that is a dual market for us. And actually some local races in places like Springfield and Tucson. But that's how the radio landscape on political is looking for us.

Okay. Fair enough. And then Adam, so you don't feel left out. Let me ask you a couple of questions on the tech side here.

Maybe I'm thinking about it wrong, you are really trying to establish Newsy's brand. You've clearly gotten much better distribution here. I look at it kind of as a national first type of platform.

But you have obviously built out and have with the local stations and Midroll a lot of developing organic content that I would think you could ultimately embed in there on a more localized basis to A, enhance monetization and B, sort of improve viewership and retention. You know if I'm thinking about it wrong, I would like you to sort of correct me. I know we are still early days there. And do you have any thoughts on ultimately implementing some kind of, forgetting OTT but some kind of gating system for website viewership?

No, Dan, I think you're actually thinking about it exactly right. And we have done a number of the things you mentioned on the Newsy side today. Newsy is well showcased throughout our local digital products, and in fact appears even over the air in, for example a couple of our local programs, The Now for example we've got a Newsy segment almost daily.

So we do that for a couple of reasons. One, we think it brings benefit to our local market audience. Newsy's content is really sticky. It's developed for the digital audience. And when we develop good content for our local market, both digital and over the air audiences, we want to make sure that we use it well there.

And then finally, obviously we want to make sure that we are leveraging every opportunity we have to build the Newsy brand. So every time consumers are on our local websites and they're watching a Newsy video, we make sure they know they can also subscribe to our Newsy Facebook page and find Newsy in all of the OTT apps. Primarily we do see it as a national business with scale, but suffice it to say we are absolutely taking full advantage of all of our assets to support our strategy.

And thoughts on potentially implementing at least some kind of subscriber, it does not have to be paid, but at least some sort of sign up gate for it on the Internet?

Yes, I mean actually we've been very aggressive through www.newsy.com and also through some of the technical implementations we have with OTT in order to get that first party data, or to create registration around the Newsy brand. It's nothing more than in many cases, encouraging people to create a watchlist so that they can synch their experience and their preferences across different platforms.

And Newsy's audience is highly engaged and so when we push out content that is much more personalized and custom to what they are looking for we feel like we get higher engagement. So we don't have any plans to make it a paid subscription business right now. Most of the OTT ecosystem, especially around news and information is not paid, but we definitely see benefits to create e-mail gating and registration systems.

Great, and last for me on Midroll, just how you think about the balance between growing out their paid sub business and continuing to ramp CPMs and supporting it via the traditional ad model?

I think it is, for us, both of them are important strategy. We think that there is a growing -- we don't think, we actually are seeing a growing audience of advertisers, and brands that are willing to pay good CPMs to get in front of these millennial audiences. So that is going to continue to be a very very important part of the business.

At the same time, when we are investing money and creating premium audio content. In the beginning we might be making some of these shows free, and then later putting them behind the wall because we know that we want to build that subscription base for that much more engaged power user. So we think premium, like we sort of built today, is probably the right way to go for now.

Great, thanks for all the color guys, appreciate it.

Our next question will be from the line of Michael Kupinski with Noble Financial Group, go ahead please.

Thank you, and good morning. Just a couple of quick questions on Newsy. How many people have downloaded the app at this point?

Well Mike, exact numbers on the downloads are difficult to determine because each one of the platforms sort of keeps records in its own way. I can tell you we measure -- the proxy for growth that we measure is in video view distribution. And we saw 225 million video views in the fourth quarter. That is up about 22% over third quarter, and up 30% over prior year.

For the year, we did just about 800 million video views. And that is again up 33% for the year over 2014. So what we are looking for is continued growth as we expand distribution, even when we can't necessarily determine the number of unique installs. It depends on the platform.

When I look at for example, Roku, we've go about 600,000 downloads of the Newsy app in Roku, and we are routinely in the top 5, top 10 of news and information providers. And while we are happy with the number of downloads there and obviously always working harder to get more. What we are really excited about is when we see things like, you know 30 minutes in terms of average session length. That is just remarkable in any digital platform. So we see that on Roku and we look at the demographics being millennial majority, we know we are moving in the right direction.

I also understand that scaling your local digital business is important to bringing your digital business to profitability. Where do you stand in terms of the journal stations being up to speed and scaling, I guess to the standards of where Scripps stations are?

Yes, Mike, so over the last two quarters we successfully migrated all of the journal stations, the TV markets, on to our platform, our revenue strategy and our content strategy. Which was really important. Because not only does it bring sort of financial efficiency to the cost structure. But it also brings them under the same strategy.

We are able to use our central content team to deliver a national news, breaking news at the same time. Work with all of our different consumer-facing revenue products which we think is going provide quite a bit of lift over the coming year.

So we're there, technically speaking. We have hired now leadership in the markets to make sure that we've got the right focus. And frankly, we are working really really closely with the broadcast group in the newsrooms to ensure that the new stations play by the same play book that the other Scripps stations do. We think that's exactly the path we need to get to in to bring the stations, the entire collection of local markets to profitability over the course of the next year or so.

Brian, going back to the political question. I know that in the past you guys have given pretty conservative guidance on political. I know in the last cycle you actually raised your political forecast three times. I was just wondering in terms of looking at political aside from the Trump issues. Are there any other particular markets that you are being a little bit more conservative on regarding maybe gubernatorial or Senate races, or things like that that you feel might be a little hedging a little bit?

Hey Mike, look I would love to be in a position where you call me a sandbagger the end of the year and I move my numbers up three times. Look, I don't look at this as a conservative number. I look at it as a really realistic number. As I said in the prepared remarks. You know it moves.

And we know where our races are, we know where we are in those six -- what we think will be the highly contested presidential states. Our five big Senate races, we had two open positions. One in Florida, one in Nevada and then Colorado, Ohio, and Wisconsin there's incumbents. We've got two gubernatorial. So what we don't know, and I kind of referred to this earlier, is for example some of that PAC money, if it doesn't flow to the presidential it could then flow to the Senate races.

And for us, you know, that may provide an opportunity for some of those markets that greater than maybe what we have modeled. But at the end of the day, really it is about the footprint. And as you've seen with the Senate and House races. You know if something is within 5 points it gets a lot of support. Once somebody kind of gets an advantage over somebody else of 5 points, the parties just take their money and they move to somewhere else where it is neck and neck.

And to sit here today and be able to call on you know we've modeled that where we think these hot races and where there's likely races. But at the end of the day, you know something moves from three points to seven points early on, and a lot of that outside influence money suddenly moves along and goes to -- and if it moves to New Hampshire, or North Carolina, Virginia or Pennsylvania that doesn't benefit us. If it moves back into our markets, it does.

So we are really putting together a puzzle here as we work through the year. But I don't think -- I think what we put out here is a pretty realistic number. And you know with some tight races and some luck, hopefully we will be able to surpass it. But if some things get wide or some money moves around a little bit, it could be in jeopardy. So I'm sure it will be an ongoing dialogue with you all year.

And on the television expense side. Obviously some moving parts there. I was just wondering if you can differentiate for me the difference in programming and syndication versus network comp? If you can give me maybe the magnitude of the percentage increases or decreases in just those two line items?

Sure. Our total programming line was up 39%. But our syndicated line is down 30%? Really all of our, most of our programming expense there, probably 80% is network affiliation numbers.

And I can tell you that if you look at all of our expenses, Mike, if you exclude the network affiliation, our expenses are up 1.4%. So really the story is completely our increased fees to the networks. But we continue to do a really do that nice job of cutting back on the syndication with, and launching, expanding our own shows across our larger footprint.

In terms of your network affiliation agreements. Are you paying a network comp on your Comcast subs at this point?

I think we are paying something. I think that is fair to say, that no one is saying because we are not getting paid they are kind of giving us a grace period, that is not the case anymore. We are paying something at least in most of those markets, even though we are really not been compensated from Comcast on that. But all of that is rolled up into our numbers. And because of the significant numbers we have we've got really good cover on it.

Okay, that's all I have. Thank you.

Thank you.

We will move next to the line of Craig Huber with Huber Research Partners, go ahead.

Yes, good morning. Likewise I have some question on the TV cost side. Your outlook here for TV costs up mid-teens for Q1 and for the full year here. Can you help us understand -- take out network comp, what's everything else you think is going to up, particularly the employee line please?

So again, I think similar to what I just said, Craig, by the way it's Brian. I think we will be up everything else less than 2%, probably more in the range of about 1.5%. So our compensation is about 50% of total expenses and I think that is up low single-digits. And then you've kind of got everything else.

You've got national rep, you've got Nielsen, you've got promotion, news services, helicopters, you've got building maintenance, technology, research, all of that. So all of that with comp and everything rolls up to maybe 1.5% increase, and all of the other expenses around network affiliation.

And the syndication line, Brian, within that 1.5% to 2% overall excluding network comp, or how should we think about syndication please?

That is separate. So that is in our total programming line. And that number is down quite a bit, Craig.

Was that 10%-plus are you thinking?

It is, yes

A year. Okay. And then just to be clear these five NBC stations, the renewal here, were those all started the year end or January 1?

Correct.

All synched up now

Yes

Also can you give a little more clarity please on the auto TV category? You touched on this before. Maybe I missed part of it. How much of was auto down in December and can you just quantify what it generally was for that important category for TV please?

Are you asking for December or for fourth quarter?

December. Because you'll probably tell me there's a lot of noise with October year over year in that, right?

October was great, we were up double-digits in auto for October because of that noise. December was down mid-singles.

How is January please?

I think January, we were up mid-singles.

What did you say overall TV advertising, Brian in January, did please?

I don't think we did. I think what we said was we had a pretty good January and we are building momentum through the quarter

Flattish to fair is a statement?

We gave guidance for the full first quarter on that, and talked about on core and total revenue up 11% to 13%, but we didn't say anything about January.

And then also guess lastly, what's the funding status of your pension right now?

We have an unfunded liability at the end of 2015 of about $200 million and we will be making a pension contributions to the plan in 2016 of something between $5 million and $10 million.

Great, thank you.

Our next question will be from the line of Kyle Evans with Stevens, go ahead.

Hi, thanks for taking my question. Last quarter I believe there was some commentary about a slowdown in core TV related to I believe what you guys called kind of a slowdown in the northern Midwestern. I think you might have highlighted one of your Tennessee stations as well. Has that turned? I didn't hear anything about that on the call so far.

Hey Kyle, it's Brian. So when we referenced that last quarter, we were responding to specifically national. And why national was off a little bit. We didn't bring it up this time because national bounced back and was down I think less than in the neighborhood of flat.

But you know, I referenced on that call maybe eight markets in that kind of northern tier where we saw some national erosion. And quite frankly, it really did not bounce back in most of them.

One or two of the markets moved to positive. But I did go back and specifically look at that same region and it was still tracking down a little bit.

The good news was a couple other markets were tracking up quite a bit, and they were able to cover that. So you know we have a big group, and there are times when some stuff's down and other stuff is up and fortunately in fourth quarter it all kind of balanced each other out.

Great. Adam, you haven't mentioned it I believe, a lot of talk about Midroll and Newsy, can you give us a quick update on the WCPO premium paid TV solution?

Sure. We are making really good progress in building WCPO along with the broadcast side into a really strong local media brand here. I think what we saw with the Veterans Affairs investigation that I referenced is a manifestation of that. The ability to really upset the marketplace here and create a really strong journalism competitor, essentially has thrown the whole market up in the air.

I would say at this point, this is one of the few markets where you have a neck and neck competition between two strong digital competitors around news and information here in Cincinnati, the local paper as well as www.WCPO.com, and we are real happy about that.

Okay, and lastly, Tim, I think you mentioned earlier call an increase in broadcast OpEx related to getting front of some of the political ad dollars that are coming down the pipe, could you be more specific on exactly what that was?

Yes. I can start and maybe Brian can add-on as well. The TV group was very mindful about making sure that as the political race unfolds we are able to take the most advantage of that. And there were some expenses in terms of promotion at the station, would be one of them that we had incurred in Q4, to make sure that we were where we needed to be to capture most of those dollars.

Hey Kyle, it's Brian. As Tim just said, we've been kind of looking especially at those eight markets that I referenced earlier that would be over 70% of our political this year. So we've known for the last year that those were going to be really active markets. And so midyear last year we decided to do everything we could to get the numbers tracking in the right way and realizing that we'd be able to monetize any ratings growth that we could get some momentum on.

So we moved some people around, we added some technology in places, put a couple of more feet on the street. We added some promotion dollars. We did a bunch of different stuff. Each market was unique to a strategy that we developed for that market to try and move the needle, with the expectation that any kind of ratings growth that we could start last year and get traction into this year we would be able to monetize every dollar of that investment. I think that is clear from what we've seen.

Great, thank you.

We have a question queued from the line of Barry Lucas with Gabelli, please go ahead.

Thanks, good morning. I love beating these political horses. Brian, if you look at performance in Las Vegas and what you are seeing today in Denver and maybe even Nashville, I assume it's in whatever guidance you have delivered, but are those markets tracking on plan, ahead of plan, behind plan as you drew up political?

Good morning, Barry. Nevada was great for us. Las Vegas was terrific, that was obviously what the third state in the caucus primary order, and so a lot of players, a lot of money. We outpaced our expectation there.

You mentioned Tennessee and I forget what others, and Denver.

Denver, which Colorado is Tuesday, I believe.

No. I don't think it is. We've got Oklahoma, Tennessee coming up this week and those are kind of light states, we've got Kansas on March 5. Really -- so I think we will get a little bit of money there, but those won't be big markets for us.

For us, Michigan is on March 8, Florida's on March 15, Ohio is on March 15, we've got a couple of others that -- you've got Idaho and Missouri and all. But I think as we are looking, the three big ones that will really dictate at the end of the day how first-quarter performs on political, with Nevada now in the bag would be Michigan, Florida, and Ohio.

Right, okay. Let me switch gears and talking around the digital stuff. Tim, earlier you had described kind of the investments that would be made in digital mainly in the local sales force, and I think you touched on that earlier, but since then you've have made a couple of acquisitions. If you look at the guidance, strong revenue gains and you know by the numbers you are putting up, essentially same kind of EBITDA loss in digital segment.

Is there a way to segment that local versus national? How much is investment spend so that we can get to a point where we see some light at the end of the tunnel?

Hi Barry, it's Rich. Let me kind of give it to you at sort of high-level then I will let Adam give you a little more detail. As we said, if you look at the digital segments you've got several things going on at the same time.

The local piece, which I believe as Adam said is about 65% of the revenue. You know that more by the day becomes a knowable business, where we can see what we think the revenue growth is going to be in the future, and it is going to continue to be strong and a sense of the expenses. So that keeps us moving toward profitability.

But I have to tell you, we can get it to profitability much faster, but we have not been in a big hurry. When we look at the impacts also on the on air side that digital has, we have been pleased to just continue to build out what we believe were the market-leading digital brands and we think there will be value there. So we'll get to profitability over the next couple of years. We could make that quicker if we wanted, but we don't think it's wise.

Midroll, the second piece, is profitable and growing. Although there is some investment in there as well as we add other elements to it and try to round out what is already a very strong position we have in podcasting.

And in Newsy is, Newsy is the one I think you and I have talked about. We have an opportunity here, we are building a very strong brand with have a somewhat uncommon content strategy and programming strategy. Carriage agreements with pretty much all of the players. But you know that marketplace will shake out over the next couple of years.

But you know the faster we see growth in Newsy viewership, probably the more aggressive we will be on the investment side. So I sort of look at how the pieces have fall together, we did not budget that segment -- we didn't start out with well, here's what revenue and cash flow needs to be in that segment. We are focused on building value in real businesses inside of it and then the segment number falls out at the bottom.

We don't know want to show losses in any segment for any longer than we have too. But while we are building value we are going to kind of keep our foot on the petal.

Here's Adam for a little more detail.

Yes Barry, let me give you a little bit more detail I think relative to the way we look at the business. So we are guiding to revenue being up more than 40% in digital. And so if we really sort of look at the way we separate the different products and services, we talked about the fact that in the past, think last year local was about 85% of our revenue. And this year, as Rich said, it will be about 65% of the revenue pie.

So both sides of that house are growing really nicely. And we think there is more opportunity obviously in local as well as the national side.

So local last year was up about 19% on an adjusted combined basis. And I expect that growth to be about in that zone in 2016. I expect our national products and services to see about 85% revenue growth this year.

And so I think you can see the businesses, as Rich said, are in different stages of their life cycle. You know there is a lot more faster revenue growth ahead in Midroll and Newsy and the other national scaled opportunities. While we still see a lot of opportunity, 17% to 20% on the local side for the coming year.

Great, thanks Adam. Last one for me. Tim, you gave the number of I think it was 1.2 million shares repurchased since you got back in the market last spring. Can you give us that number for the fourth quarter? And have you been in the market in the first quarter?

Yes, for the fourth quarter we bought about 300,000 shares, in Q4. And we don't comment about whether we are currently active or not.

We have been buying under plans very consistently since the window open again after the journal transaction. And I would continue to expect that -- you and I have talked a lot about capital allocation over the last year or so, 2016 will be a strong cash flow year from us. And I expect we will continue all of the above strategy of continuing to pick up national digital brands, TV stations in attractive markets, and continue with the share repurchase program.

Thanks Tim.

Thanks

(Operator Instructions)

We will go next to the line of Tracy Young, Evercore, please go ahead.

Maybe not surprisingly I have a few more political questions. Four Q4, was there a shift in terms of -- you missed a little bit on the political dollars that I expected. Was there a campaign that didn't happen, or something that didn't happen?

Hi Tracy, it is Brian. You're absolutely right. It was one race, it was the Kentucky gubernatorial, and it was the candidate who ultimately became governor had very little money to spend through the process. So that alone was our shortfall.

Okay. And then looking back at the 2012 race. How much of the dollars were presidential versus issue and local races? Do you have any idea?

We can get you more specifics, I did not break that out for this call. I think, Tim, we just talked about that this week right? I don't want to throw out a bad number to you, Tracy.

Okay, no worries. Thank you very much.

We have a question in queue from the line of John Kornreich with JK Media

I've been on the call since the beginning. Must've missed something in the last 20 minutes. Because the stock has gone from being down 5% to now up 6%. I don't know what I missed. You must've said something terrific Brian that I missed that made it go from minus 6%

I can repeat all the good stuff again John if you'd like?

Brian, what is the activity on the retrans side for this year in terms of new contracts opening up? And in general, what is the contour for 2017 and 2018 gross retrans revenue? You get the 50% jump this year, I assume 2017 maybe levels off or is up single-digit and then picks up again big in two years or whatever, can you give a sense of that?

Yes. I think you will get a sense of it just from the pace of our renewals, John. Obviously we've talked publicly here about Time Warner getting done where we give the benefit this year, but really that was done at the end of last year. We still have another 19% of our subs that come up this year.

We have two big deals that come up, one at the end of September, one at the end of October. Not one of the probably big well -- well, one of them is probably a big four or five and the other one is in that next tier of two or three. In 2017 we have about 10% of our existing subs they come up then, and the 2018 is another big year where we've got 34% of our existing subs come up in 2018. So obviously the money will follow that pace.

It sounds like 2017 will be another good year, not like 2016 in terms of the gross revenue. And then 2018 will quiet down based on the prior activity, and then start picking up again, fair enough?

What I think we've said about 2017 and 2018 is, that we expect a nice double-digit growth in 2017 and 2018. And then of course the Comcast contract comes due in 2019. So we will see a stairstep increase when the impact of that kicks in.

Just to reconfirm, Tim, you said for 2016 the gross and the net will be right in line with each other?

That is correct. Very much like we've been saying for the past six months or so.

And lastly, can you remind me when did you do the ABC network contract?

At the end of 2014.

And so that comes up in 2019?

Yes. It was a five-year deal.

Okay, thanks lot.

Barry, I'd say to your Colorado was not on my list. But you are right, the Democrats are Colorado this coming week. So, sorry to jump in.

(Operator Instructions)

Speakers, we do not appear to have any further questions from the phone lines.

Thank you, Alan. Thanks everybody for joining us today. Take care.

Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.