E W Scripps Co (SSP) 2016 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Scripps' first-quarter earnings conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host, Head of Investor Relations. Please go ahead, Carolyn Micheli.

Thanks, Tammy. Good morning, everyone. Thank you for joining us for a recap of the E.W. Scripps Company's 2016 first-quarter 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 more information, such as today's release and financial tables. You also can sign up to receive emails anytime we disclose financial information, and you can listen to an audio replay of this call. A link to the replay will be up there this afternoon and available for a week.

We'll hear first this morning from: Scripps President and CEO, Rich Boehne; then from Chief Financial Officer, Tim Wesolowski; and then Brian Lawlor, who heads our Broadcast Operations; followed by Adam Symson, our Chief Digital Officer. Also in the room today are Radio Division Head, Steve Wexler, and Controller and Treasurer, Doug Lyons.

Now, here's Rich.

Thanks, Carolyn. Good morning, everyone. Thanks joining us today. We're looking back at a very strong first quarter, where we reached or in some cases exceeded our financial targets, and surpassed our expected political revenue. And since then, we also have expanded our portfolio of national digital businesses.

We are now more than a quarter of the way into this election year and climbing toward the peak of our four-year political revenue cycle. We have seen later-than-expected presidential primary action and earlier-than-expected spending for US Senate races in Ohio and Nevada, Colorado and Wisconsin, and those are meaningful to our performance in the first half of this year. You know, television remains the best way for candidates in federal, state, and local races to reach a wide swath of highly likely voters.

Broadcasts target the most valuable audiences in specific geographies that closely match the geographic structure of the elections themselves. We also build the value of the local TV ecosystem through in-depth news coverage. Scripps has committed to providing at least 100 minutes of election coverage every week in each of our 24 network affiliate markets. And to further boost that coverage, we recently hired Washington-based Mike Sax, who has reported on Congress with the National Law Journal and Legal Times, and he was the founding host of the Huffington Post Streaming Network. Our political coverage sheds light for our audiences on the critical issues facing them in their communities, and it further cements our well-established position as the most valuable platform for reaching voters in election years. More from Brian on TV and the elections in just a couple minutes.

Turning to our digital division. A few weeks ago, we finalized the purchase of the well-known humor and satire brand, Cracked. At Scripps, our digital businesses and investments fall into two buckets: local brands and national brands. Targeting somewhat different audiences, but both supported by evolving advertising formats and platforms. The local web and mobile brands include the dot com and mobile businesses in all of our local TV and radio markets. Revenues from those businesses grew, really, very nicely in the first quarter.

The second bucket is the national brands, built primarily around video and audio. Among the national brands is Midroll, the leader in audio streaming and podcasting. Midroll creates, distributes, and monetizing podcast programming, which is one of the important emerging mediums for younger audiences.

On the video front, our news and information network, Newsy, is building audience and revenue across web, mobile, and social platforms, but with a particular focus on over-the-top media consumers. Newsy is now widely available on the major OTT video platforms, Roku, Apple TV, and Comcast Watchable. The most recent addition to Newsy's lineup is Sling TV, where newsy is live and gaining traction.

Our newest national brand, as I said added to the portfolio last month, is Cracked, which has an already strong web, mobile, and social media audience. Its large and loyal following has it well-positioned to expand now with much more audio and video. We will move quickly with Cracked by leveraging the relationships and distribution partnerships we have developed with Newsy. Newsy and Cracked also create a very nice network effect from an audience development perspective, and Cracked and Newsy together strengthen our position to win very valuable over-the-top shelf space.

The addition of Cracked now means that nearly half of our digital division revenue comes from large scale national brands, with the remainder coming from our local digital operations. And Adam will talk more in a few minutes about the Cracked audience, and you can find a whole investor presentation and an info video about Cracked at our website, under Investor Information.

Now finally, to learn more about our digital tragedy, please join us on Wednesday, June 29, in New York City, where we will host an Investor Day focused on our digital businesses and the broader marketplace in which they compete and build value. Watch for some details in the coming weeks. We are going to talk more that day about our specific Scripps' digital strategies, how the over-the-top marketplaces are evolving, and what you need to know about digital programmatic advertising and media consumption trends. Hope we get a chance to see you that day.

Now here's Tim to talk about our first-quarter results.

Good morning, and thanks for joining us today. I am not going to spend a lot of time repeating the numbers that you can see in our press release. I would like to spend a few minutes talking about the highlights from the first quarter, our cash position, capital allocation matters, and our guidance for the second quarter. Brian and Adam will give much more color on our results in a few minutes, and I want to remind you that we will be filing our Form 10-Q later today.

Overall, the quarter unfolded very much as we expected. Consolidated revenue is right in line with our expectations, and the segment profit was several million dollars higher as we did a good job of expense control. Of course the political season is ramping up, and we were able to capitalize on our terrific political footprint.

In the first quarter, our television group's total revenue was up 13% compared to the adjusted combined results, which was at the high-end of our guidance. Expenses were up 14%, also in line with our guidance. The biggest factor driving the expense increase is network compensation expense, and remember that our total retrans revenue will be up 50% this year.

Our largest expense category is employee compensation and benefits, and we were able to hold that category flat versus the prior-year's adjusted combined numbers. We booked a bit over $9 million of political revenue in the quarter, principally from our stations in Florida, Michigan, Nevada, Ohio, and Wisconsin.

In our radio group, we are reporting a revenue decline of about 4.5% compared to the prior year, during which the stations were owned by Journal Communications. Similar to last quarter, there is a bit of noise in that comparison, because Scripps applies a different valuation to non-cash barter revenue than Journal did, and on an apples-to-apples basis, ad sales were down between 1% and 2%. April 1 marked the companies one-year anniversary of the closing of the Journal transaction, so beginning next quarter, our quarterly comparisons will be against our actual reported results in 2015, and we can say goodbye to the adjusted combined comparisons.

In our digital reporting segment, first-quarter results include Midroll, which we acquired in July of last year, but do not include our most recent acquisition, Cracked. Digital revenue for the quarter exceeded our guidance of up about 45%. The actual results show growth of 56%. We also did better on the expense line, as our expenses increased 16% versus our guidance of about 30%.

These two factors combined to post first-quarter digital division results that were $2 million better than the prior year. The lower Q1 expenses came primarily from slower-than-planned hiring across the division. Our second-quarter digital expense guidance is an increase in the high-30% range, both because of our Cracked acquisition and from normal spending in our digital segment.

Touching on the balance sheet for a minute. We ended the quarter with more than $95 million in cash and total debt of about $400 million. So that is a net debt of about $305 million, or net leverage still about 2 times on a two-year blended basis. Of course, we funded the purchase of Cracked for $39 million after quarter end. Even after that modest size acquisition, we continue to have the best balance sheet in the industry.

From the beginning of the year to April 29, we purchased about 760,000 shares of stock for about $13 million. And as of today, there is about $71 million remaining under the share repurchase authorization that expires at the end of the year.

In the first quarter, our overall tax rate was negative19%. While we reported pre-tax income, we also reported a tax benefit. We adopted a new accounting standard in the quarter that simplifies certain aspects of the accounting for employee share-based payments. As a result, all tax benefits on stock compensation will now be recognized in the tax provision in the P&L. We provided detailed revenue and expense guidance by segment for the second quarter in our earnings release.

The Q2 and full-year guidance for the digital segment now includes the results of the Cracked business from the time of the close on April 12. Last year, Cracked had annual revenue of about $11 million and was profitable. And during the first 12 months that we'll operate the business, we expect revenue to grow and the business to contribute to segment profit. We expect more than $7 million of revenue from Cracked in 2016.

So to summarize the first quarter, so far so good. Revenue was very much in line with what we thought, and our segment profit was stronger.

Here is Brian to talk about broadcast.

Thanks, Tim. Good morning everybody. This year the Scripps' television division is poised to generate record cash flow thanks in part to about $220 million of retransmission revenue, up 50% and largely driven by the reset of our Time Warner contracts to full-market rates. And we expect more than $150 million of political advertising revenue, most airing in the second half of the year.

But as we have said before, hitting this full-year political ad revenue milestone requires a strong first-half performance, and as Tim just reported we are right on track. First quarter was stronger than we expected, as the presidential hopefuls ran through the primary calendar with aggressive spending. Candidate and PAC advertising was heavy in the key primary states, and we saw some earlier than expected Senate dollars in Ohio, Colorado, Nevada, and Wisconsin. The early activity in these Senate states is essential to our second-quarter results.

Now we're looking toward the start of the presidential general election in order to size up the second half of the year. We know we will have an intense fight for the White House, accompanied by all the necessary spending. We will complement this advertising in our newscasts with robust electric coverage and analysis that will help our audiences navigate all the races in our markets and make informed decisions. That coverage, combined with our unique Washington political sale strategy, reinforces Scripps as one of the best positioned to capture political ad dollars.

The nine March primaries in Scripps' markets did compress some inventory for those stations in the last month of the quarter. We worked hard to manage our inventory and pricing, but ultimately did see some displacement of our core advertising in several of these primary election markets. On a pure spot comparison, revenue for local and national advertising in the first quarter was down 2% on a same-station basis to the year-ago quarter, but if you back out the differential from the Super Bowl on only having two CBS stations versus the five NBC stations that we had a year ago, the decline is only about 1%.

So as we have said before, we focus on maximizing revenue by taking the highest margin dollars, and that is exactly what we did this quarter. We were pleased to have such a strong political advertising demand, which drove our performance to the top of our guidance. Meanwhile, we're making strong progress with our original programming. We announced during the first quarter that we are partnering with Raycom to develop concepts for new shows, while sharing both the risk and the reward.

Having partners like Raycom has served us well with our viral video show RightThisMinute, which reaches almost 90% of the country and will begin airing this fall on the Disney-owned ABC stations. We are also seeing success heading into the fifth season of our original show, The List. Several other media companies have committed to run the show, beginning in September. We will have a more formal announcement of those details when we conclude our selling cycle.

And now, turning to our radio operations, we were down a bit, as Tim said, in radio advertising revenue during the first quarter. January sales were softer than expected, offsetting some pretty good gains in March. Looking ahead to the second quarter, we are expecting some softness in the quarter as a result of some legacy advertisers having pared back their commitment for spending in the Milwaukee Brewers, an important revenue line for our Milwaukee radio cluster.

Just like in television, Scripps' radio stations play an important role in the political discourse. In Milwaukee, for instance, our well-known radio commentator, Charlie Sykes, received national coverage for his interview with Donald Trump just before the Wisconsin primary. Charlie continues to be a part of the national conversation, and just recently has appeared on Fox News, CNN, and MSNBC.

And now here's Adam with highlights of our digital reporting segment.

Thanks, Brian, and good morning, everybody. As I begin, I want to remind you once again that the Scripps' digital segment is a portfolio of local and national digital products.

The local market business had accounted for about 65% of our digital revenue, but the acquisition of Cracked has both grown our digital revenue pie and redistributed it. We now expect the local business to account for just over half of the revenue, giving us a nearly balanced contribution between the local and national businesses. We do expect the national scalable businesses to continue to see high growth over the coming years.

On the expense side, the division spent a little less than we expected during the first quarter. As Tim mentioned, we took our time finding the right people to fill important positions, especially in sales and editorial. In many cases, those people are now on board and contributing.

Now let's start by talking about our local business. We are off to a great start to the year, as we continue to develop our local brands into leadership positions with local audiences and advertisers. We are positioning ourselves to be the local news brands to turn to on all of the digital platforms, including over-the-top television, and I am pleased to share the news that next week we will launch individual branded Roku apps for all of our local TV stations.

We are obviously very focused on the OTT platform. It is as important for our local brands as it is for the national brands that I will discuss in a moment. I said on our last call that local revenue for the full-year 2015 grew about 20%, and I am pleased to say that, that pace continued in first quarter. We saw stand out growth from sales of pre-roll video inventory, as well as in the display advertising we sell through the national and regional programmatic exchanges.

Now let's talk about the newly acquired Cracked, and then the other national brands, Newsy and Midroll. Cracked provides a great vehicle for us to continue to diversify our audience and accelerate our over-the-top and broader digital strategy. Cracked is one of the most popular entertainment and comedy and satire brands in digital media. We already know that 18 to 34 year-olds heavily rely on satire and humor as the lens through which they view world events. Witness the popularity of the Daily Show, the Colbert Report, and John Oliver.

Younger audiences are choosing new forms of journalism, storytelling, and social commentary to help them dissect world events, pop culture, history, and science, and on digital platforms Cracked is a leader in the genre. Cracked distributes its content through a very high-traffic website. Each month, they reach an average of about 20 million unique visitors. But here is what we find most enticing about the brand. About 50% of that audience comes directly to the site, and then spends an average of eight minutes engaging with stories and video.

That is a strong proxy for loyalty in the digital world, and an important reason why we think it is well-positioned to make a move into the emerging content marketplaces of digital video, over-the-top television, and podcasting. Cracked has already had a good start. It delivers 20 million video views a month, and already produces the very popular Cracked podcast with Midroll.

Turning to an update now on our OTT news network, Newsy. During the first quarter, we added a number of new distribution and syndication partners to continue our grab for more valuable shelf space. Newsy is now live and On Demand on the most important platforms that deliver video to audiences choosing this marketplace for news and entertainment. We are talking about set-top box platforms and services like Apple TV, Watchable from Comcast, Pluto TV, Roku, Amazon Fire TV, and Google Chromecast, and during first quarter, Dish's Sling TV joined that list.

Although it is early in the development of the over-the-top ecosystem, all of these distribution agreements we have signed, combined with our marketing activities, resulted in Newsy reaching a record audience during the first quarter. Newsy videos were viewed nearly 300 million times across all of our platforms and distribution partners. That is a 40% increase over the first quarter of last year, putting us on track to exceed our goal of 1 billion video views for Newsy during 2016.

These are important signs of growth for us and Madison Avenue. In fact, Newsy has been invited to tell its story for the first time at the NewFronts in New York on Monday. That's the digital advertising world's version of the UpFronts, and we'll be showcasing Newsy to large and influential advertising agencies and brands.

Switching to our over-the-top audio business, Midroll is increasing its investment in content by expanding its catalog of owned and operated podcasts and creating more original shows. We have recently launched several high-profile shows, including the David Gregory Show, featuring the former Meet the Press host, and Beautiful Stories From Anonymous People with comedian Chris Gethard. As a reminder, Midroll makes most of its money from advertising on the dozens of shows it owns and the more than 200 shows it represents.

Wrapping up the national side of the house, we are focused on building digital media brands that create high-quality content that resonates with desirable audiences. Regardless of the particular digital platform, people gravitate towards brands that speak to them. It is humor and satire, news with context, and good storytelling in general that draws audiences who then draw advertisers and other sources of revenue. That is why we believe in the scalability and opportunity of these content brands.

And now, Tammy, we are ready for your questions.

(Operator Instructions)

Michael Kupinski.

Thanks. Congratulations on a good quarter.

Brian, thanks for giving color on the decline in the first quarter core revenues. Given that we have started stronger in political advertising, do you have any revised thoughts on the company's political guidance for the year?

Good morning, Mike.

No. Obviously, we had a very good quarter. Our first-quarter of $9.3 million political was up about 40% over 2012, so that came out of the gate pretty quickly.

I think there is still, especially this week, as we get a feel for the candidates, there is some moving about the electoral vote map, and some potential states may change and swing in and out of being swing states. We still like our footprint a lot. Obviously, being in Florida and Ohio are going to be critical. Out in Nevada, Colorado, Wisconsin, it looks like some things that we are reading, Michigan and Arizona may play a larger role than what we expected, but also some others may play a little less of a role.

I think the biggest thing, Mike, as we look at second quarter, to think about -- in 2012, really the general election spending started the first week of April, and now it is going to start the first week of June. So some of that growth that we saw in first quarter -- we expect that we will continue to grow off of first quarter in second quarter in terms of our true political dollars. But it may not be up 40%, because they are starting actually two months later in terms of the general election spending. So I think second quarter may flatten a little bit of it out, but we continue to feel really good about the $150 million that we projected for the year.

And there was some concern about tier two auto. Can you talk about the auto category in the first quarter, and then looking in terms of momentum in the second quarter, are there other key categories that were strong in the first quarter that appears not to be following through in the second quarter? Can you give us maybe some month-to-month pacing at about how the second quarter is looking?

Auto in first quarter was actually down 3%, but I would not read into that 3% as much. Again, a lot of that was Super Bowl. Typically, we would sell a lot of advertising, and as I said earlier, we had quite a bit of money that did not return because of our shift from NBC to CBS. So that was much flatter than the three really represents.

The good news is we feel really good about second quarter. We like our pacing. We think the category is going to be up in the quarter, and so we feel like automotive remains very strong for us.

In terms of the other categories -- in terms of services -- most of the segments within services remain really healthy; legal, medical, education, financial. Financial was terrific for us in the first quarter. It was up almost 30%, which is more than $0.5 million. The one part inside of services that was pretty soft in the first quarter was insurance. So there were a couple of markets where there was a big step back in terms of insurance dollars, but all the other segments within services were very healthy.

We had a really good quarter in our third largest category, retail. It was up mid-single digits, which was one of the healthier quarters we've seen in a while. So we feel good about that. Travel and leisure was up double digits. Home improvement was up close to double-digits. Communication was up double digits, as was media. So again, I think you flatten out the automotive a little bit as a result of some of our Super Bowl flattening, but everything else was relatively healthy.

Are you seeing the outlook looks similar month-to-month in terms of the second quarter? You are starting up pretty strong, and it is looking fairly strong throughout the quarter?

Yes. I don't see a lot of change as we look out to project the second quarter.

Okay. And my final question is, when looking at the current M&A environment, do you believe that the discussions regarding M&A have kind of increased now that the FCC is turning its attention towards the forward auction? Where are you seeing opportunities at this point? Is it in television or digital?

Mike, it is Rich. I think you are still in the -- you are still really in the guts of the auction period, so I don't think we are seeing a lot of changes in the M&A marketplace around stations. The pipeline is reasonably quiet for the moment.

We just did the Cracked deal just a couple weeks ago, so we are getting that folded in. We continue to look for other opportunities, but nothing that is right on the front burner at the moment.

Okay. That's all I have. Thank you.

Kyle Evans, Stephens.

Thanks for taking my question. Brian, you just ticked down a bunch of ad categories with up, up, up, but we are looking at adown 1% core, ex-Super Bowl, and it looks like the guide, if you hold political flat and retrans flat is for down core again. Can you help me reconcile the positive outlook on all those ad categories with those two numbers?

Yes. Look, as I said, auto was down a bit, and that is our second-biggest category. I talked about some of the segments within services that were healthy, but the insurance hit was a big one. So that had that category down too, but it is not a -- the story I was trying to tell was it is not a major problem relative to all the services, it is just one segment within it.

We also had some other smaller categories that had some decline, but at the end of it, I think also -- and I touched on it in the prepared remarks, we did have -- and make some conscious decisions about preempting some core advertisers in favor of political.

And I think we talked about it last quarter, but we look at it as in terms of what is the total revenue we can drive? And we had a heck of a quarter, up over 13%. And I think we are looking at second quarter in the same way.

We have the target on the big total revenue number and how core versus political shakes out. We will go after the top dollars. The highest priced units, and so the way we look at it -- everything is in fluctuation as we price and move our inventory along. So we could have taken less political. As I said, we had a record boomer political quarter.

We could have taken less political and had core plus 1%. I don't know, maybe then people would be more excited. At the end of the day, we did as a public company what we think is best, which is to maximize revenue. We had a fabulous presidential and political quarter, and as a result of that, we made conscious decisions that core was going to be down and we were really comfortable with that.

I think we will make the same decisions in second. We are looking for a great quarter. It is going roll up with a lot of core and a lot of political. What that balance looks like, I don't know yet. We will just seize the opportunity as it comes along.

Great. Thanks.

Could you give us maybe some updated thinking around net retrans for the rest of this year? Maybe just an update on the timeline for network and MVPD renewals for the balance of the year?

So we expect our retrans revenue to be about flat Q1, Q2, and Q3, and then we have got a retrans renewal at the end of Q3, which will kick the revenue up in Q4. We are not updating our full-year guidance, and we are comfortable with where we talked about retrans being, in total. And as far as programming expense, we don't anticipate much of a change in that on a sequential basis by quarter for the rest of the year.

Okay. Thank you.

You know, we have got our big renewals behind us, ABC, NBC and CBS. And those are reflected in the Q1 numbers and shouldn't be a big change for the rest of the year.

Thanks Tim.

Marci Ryvicker, Wells Fargo Securities.

Thanks. I have a couple.

Brian, can you give us the Super Bowl numbers this year versus last year? Just so we have them?

Marci, there is about -- almost $0.75 million differential between the two.

Okay. And then in radio, down mid-singles: I am assuming that still includes the difference in accounting treatment for trade and barter. Can you give us -- is it still underlying down low singles?

Marci, it is Steve Wexler. Are you are referring to second quarter or first quarter?

Yes, for second quarter for radio.

For second quarter, we've cycled through the adjusted combined, so that is no longer a comparison that we have to explain and deal with going forward. The second quarter is really more a story, Brian mentioned in the prepared remarks, Milwaukee, where Brewers baseball is proving to be a little more challenging than we would have expected and that we have seen historically. Other than Milwaukee in baseball, a little softness here and there, but really that is the driver of our guidance for Q2 right now.

Okay. And then for the digital division, based on your comments, it sounds like you have absorbed all of the hiring expenses, so that is probably what is reflected in Q2?

That is exactly right Marci.

The Q2 guidance includes the integration of Cracked, as well as the pickup in hiring expenses. That is why we've reissued guidance for second quarter and the full-year.

Got it. And then last question is for Tim. Can you give us your expected GAAP tax effective rate for the full-year?

That is very difficult now because of this accounting change. So I think what I would do is, for the rest of the year, I would assume it is going to be in the 38% range or so. But because of the early adoption that we did of this accounting change, there will be more volatility for us and for everybody else. So take that expense in Q1 that we recognized, use 38% for the next three quarters, and then whatever that works out to for the full year.

Great. Thank you all so much.

Dan Kurnos, Benchmark Company.

Great. Thanks. Good morning.

Most of my TV questions have been asked, so I will pester Adam a bit here on the digital side. But first, just out of curiosity, Rich, I suspect there is probably no real firm answer to this. But just has the -- CBS's announcement to IPO the radio business have any impact on how you are viewing your own radio assets?

I think the answer is no. You mean, does it --

Does it change the way you look at it in terms of the strategic asset, or would you -- just how you view the marketplace at all, the way that they're viewing their assets right now?

I'd say again, no. It doesn't push us towards being a buyer or a seller at this point. Radio for us is a primarily local business that generates good cash flow. It marries up well with television in some of our markets, so we like the portfolio. We have quite a lot.

Obviously, we do look for some opportunities, but no. I don't think -- other than seeing the headline about CBS that caused much other excitement or angst around here.

I figured that was the answer, but thanks for the color anyway.

So turning to digital, just a few things here. Is there any way that you guys can give us a little bit more granularity in terms of the performance? Obviously we have got some color on local, but just the other buckets, just how they performed in the quarter?

And then just even diving a little bit deeper -- now that you have got a wider array of assets, could you break into some of the metrics on the differences in terms of percentage of revenue now coming from say video versus traditional display, both for Cracked and now across the broader portfolio? And then even further than that, just as you think about the distribution strategy, if we could get any color on how you are structuring some of these OTT deals and just how you think about the entire portfolio from a synergistic basis, and not getting too -- I don't want to say scatterbrained is the right word, but making sure that you remain focused on aggregating your strategy rather than being pulled in a bunch of different directions.

Sure, Dan. Those are great questions. We will start with the question about the revenue split.

So, as it stands today, with the integration of Cracked, we are really looking about a business that is 55% local, 45% national, and I would expect that we will continue to see local -- organically see local revenue growth up around 20%, in that range for this year. And national up around 70%, organically. So we continue to see that the national businesses will grow quickly and those businesses scale.

As to going, breaking it down by ad unit, most of the revenue we generate on the local side comes from the sale of display advertising, along with passive and video pre-roll. We don't necessarily break out the data on -- looking across the enterprise, but I can tell you, when it comes to -- when it comes to local advertising and digital display in general, we are seeing CPMs on display advertising at about direct sale about $7 and we've moved programmatic up significantly, with a lot of focus on direct private exchange deals.

We are seeing programmatic hovering at a rate between $2.25 and $2.50, and that is up very significantly over last year. So assuming our sell out is about 45% direct and then 40% programmatic, that gives you a sense as to the health, I think, of the display side.

On the video side, for our local business, we see we are able to sell out almost between 85% and 100% of our video pre-roll in our local markets directly at an average of somewhere between $25 and $35 CPMs. The rest of it is monetize through programmatic advertising at a rate around $10.

So video is still very much in high demand. It is obviously what is pushing us forward in the OTT and the video marketplace. Relative to video advertising, with Newsy and where we expect Cracked to be, Newsy's CPMs continue to be between $20 and $60. We are essentially sold out in the OTT space.

There is high demand by big brands and advertisers looking to reach younger audiences there. The lower rates continue to see a lot of pressure moving up, so we feel pretty good about the way that business is developing, and that is really what is behind pushing Cracked onto the video platforms. Today Cracked does that 20 million video views really through demand media. They really depended on YouTube to serve that audience and to sell the advertising, so we think there is a lot of room ahead as we move Cracked onto some of our video platforms.

And then finally, as it pertains to the audio business with Midroll, this quarter, Midroll managed about 407 million impressions, and depending on the audience size, podcasts fetch an average of around $25 to $30 CPMs, but they can go as high as $100 for some of the big top rated shows. So those are the metrics I think we keep track of. Downloads, impressions. As I mentioned, going back to Newsy for just a second, we are very focused on video views as a metric with Newsy, and we did just under 300 million video views in the quarter.

By the way, I just want to let you know, we are seeing quite a bit of pressure on our video inventory with local and Newsy as a result of political. There is just an incredible amount of demand for political pre-roll, and we are working as hard as we can right now to generate as much video as we can in our local markets and will Newsy, because we see the buyers standing by looking to make buys in pre-roll advertising for political dollars.

Does that answer all your questions, Dan?

Yes. I think most of them, and I can maybe follow up another time.

Just out of curiosity, Adam, just one more from a high-level perspective. As this all continues to scale, I understand why your focus is on impressions and video views and such, obviously the monetization event.

But I also understand there is a lot of noise around the year-over-year traffic metrics, particularly as it relates to Cracked. I have seen the comScore for numbers, but I am just curious if you're going to start thinking about aggregated audience eyeballs and/or starting to give OTT subscriber metrics blended as more telling story of your scale and reach?

Yes, Dan. There is a tremendous amount of conversation between Tim, and Carolyn, and Rich, and I about how do we help you size the business and the progress that we are making.

The tough part of it is many of these platforms use different metrics to share with their partners. As an example, Pluto, where we are seeing really great traction with Newsy and Cracked, shares minutes listened, while directly with Apple TV and Roku we can measure video views. So, coming up with a metric that helps you see the progress we are making is definitely -- there's definitely some work going on back here. But suffice it to say we are definitely focused on it. Right now, the best way to tell the story is in fact to focus on the audience reach.

On the broader question of how we make sure that we are effectively managing the relationships with the partners, the way these agreements work, they either come with a revenue share where we sell the advertising and share revenue back to the platform, where the platform sells advertising and shares the revenue back to us, or we split the impressions. And each one of them is different.

So unlike, I would say, television and cable, which have evolved to a place of mature stability and are easy to understand, this is such a fragmented marketplace that we are managing our way through these relationships every time, ensuring that we work out the best deal we can for the future of the business.

The other thing that some of these deals have down the road is the potential for carriage fees. So we don't have much to say about that right now, but we have definitely structured the deals in a way that gives us that opportunity down the road.

Yes. That was the OTT part. That is really helpful. If they get reclassed as MVPD, that certainly would make some sense. Thanks. I really appreciate the color on that.

Thank you.

Craig Huber, Huber Research Partners.

Yes, good morning. Thank you for taking the questions. Brian, I'll start with you if I could, please. What is your preliminary thoughts on the broadcast network UpFront, here? How do you think it is going to track here versus how it did last year?

Well, obviously I think it had a good year last year, and I don't have any reason or understanding to believe that it is going to be any different this year.

Not significantly better or worse, you're thinking?

Obviously, we are not as close to it as some other companies, but I have not seen big changes forecasted.

Also, obviously the broadcast network advertising has been pretty robust the last six months, say. We're not seeing much flow-through, though, down to the national advertising with local TV stations out there, including your own, but your peers as wells. Why do you think that is, Brian?

Honestly, Craig, I think we are. Our national, in some of our bigger markets, has been a nice improvement for us over where we had been really the two years prior to the last couple of quarters. We were seeing some big declines and it was because the network was running open, and as a result of that, we would have money on our books and then national advertisers were canceling it because at the last minute they could buy the whole country cheaper than say the top 50 DMAs and that is not the case anymore.

We are seeing that pressured trickle down and some scattered trickle down to our top five or six markets, which are in the top 20. Obviously, lots of stuff has moved in and out. It has and it always will through the national line. But I do think we are seeing a positive impact in our larger markets as a result of the health of the network right now.

Okay. Then if you could just talk further, if you would please, Brian, on the TV advertising pacing that you are seeing for the second quarter. Are they tracking flattish or slightly up, slightly down versus the year ago, so far?

I think it is -- if you look at in the totality of what we've reported as consistent with first quarter. But as I said, the categories are tracking well. The key categories are tracking well, and we had a fair amount of political in April as a result of a couple of primaries in the early April. So again, we look at the big picture of the political and the core combined, but I think it is going to be a healthy quarter when both roll up.

In your guidance, Brian, for the second quarter TV advertising -- is political, are you signalling that it's going to be not at the same $9 million number at the first quarter. It might be like $5 million, $6 million, $7 million?

I'm definitely not signaling that. I definitely think we have an opportunity to grow over that $9 million in the second quarter. What I did signal was maybe -- we're up 40% over 2012. I don't think we will be up 40% over second quarter 2012, just because of the later start.

Craig I do want to point out one thing -- I just found this to be fascinating as we kind of rolled up. You and many others on the call and other investors have asked us about the Trump factor and what does that mean for us? When we rolled up everything and looked at the first quarter, all of the spending by the individual candidates, not the PACs, on the Republican side obviously we had five or six different candidates -- Cruise and Carson to Rubio and Kasich, but at the end of the day, Trump spent more money across our stations than any of the other Republican candidates.

So I think that may be contrary to what some of you have been led to believe, but as I have said a couple times when it matters, he spends in the state that is critical for him to win, and that has been our case. We are in a couple of those key markets of Ohio, Florida were important for him to win. Wisconsin, he spent a lot. And when it was all said and done, he spent a good bit more than all of the other candidates that were running for president on the Republican side. So maybe that gives you all hope, as he now is going more public about raising more money.

Also your comments Brian -- I appreciate that. Your comments on auto tracking better here in the second quarter, meaning up. I assume that is maybe up mid-single-digits? I assume if was tracking more than 10% you would've told us?

Yes. I don't see double digit growth.

Okay, and then let me switch over to digital if I could. I was curious on the cost side within digital. Just looking at your historical guidance, pulling the press releases, it looks like three of the last four quarters, your digital cost guidance came in meaningfully lower, which is a good thing, than your guidance, and you've talked about here before about your hiring plans were not as robust as it turned out than what you are originally thinking.

Knowing that historically, how should we think about the second quarter, your guidance here for costs? I'm getting at, are you being overly cautious here? Is there room for it to actually coming in better than your guidance for digital costs in this quarter?

Well, I mean, we issue that guidance using our best skills at the time, and I would say these are businesses in development. So obviously, I am happy with first quarter results, and I would like to be able to say that we can deliver those results all the time, but the fact is that we are pretty intentional about the investments we are making in order to see value and return.

So yes, we had a great first quarter, but we are still very much in a period of investment. Especially on the national side, and I would expect that investment to accelerate through this year as we continue to hire more people at either Newsy, Midroll, and Cracked.

Last question, I promise. Your full-year guidance -- it sounds like from your press release there is no change to when you put your full-year guidance at the end of January versus today except for this Cracked acquisition in digital? Is that fair?

Yes, that is fair -- I think that is a fair way to look at it. The segment losses looks about to be the same. Remember that digital -- the digital segment is that portfolio of different products and businesses, each in their different place and time and a business lifecycle, so adding Cracked in, as I think Tim said, we expect it to contribute north of $7 million in 2016 and remain profitable.

And then for the whole company, your full-year guidance has not changed, other than the digital nuances, versus what you put out there at the end of January?

That is correct. We did not update any guidance for anything else, and the only reason we did it in digital is for Cracked, Craig. Thank you.

Tracy Young, Evercore.

Hi. Brian, you gave some good color on political. Just following up.

You may have said this, but how do you see the breakdown between presidential versus local races? And then in terms of the total dollars for the year, do you still think the number will be around $150 million considering there is more of a flattening out in Q2?

Hey, Tracy. It is Brian.

Yes, we have not changed our forecast of $150 million at this point. We may have better feel for it at the end of second quarter, to see if there's an opportunity to change that at all. We talked in the past about we know how tight the back half of the year is going to be, but really the first half is where you can get some distance between your projection. So we will have to see how the next couple weeks plays out.

The good news is the Senate spending has been very good for us. That was a big foundational part of our first-quarter success and continues. I woke up this morning and turned on the TV, and there behold was a Senate ad, that very first thing I saw and I knew it would be a good day. So in terms of just the breakdown, for the first half -- for the first quarter, I'm sorry, total candidate spending was about 55% in the quarter, which meant issue and PAC was about 45%.

A lot of that was obviously presidential candidates -- of the candidate spending, about half of it was presidential candidate, so we don't think that that is how the year will go. We would expect, when it is all said and done, that issue and PAC takes on about 60% of our billing for the year, but in the first quarter we had a higher influence of candidate spending then we normally would track for the whole year.

Okay. Thanks, and then Tim, I may have missed this in the release, but do you have a cash interest number and the CapEx number for the quarter?

Cash interest would not be that much different than the interest expense number, and the other one was -- CapEx, yes I do. Hold on a second. CapEx was about 6%.

Okay. Thank you very much.

Barry Lucas, Gabelli & Company.

Thank you, and good morning.

Good morning, Barry.

Brian, I don't want to beat this to death on the services category, but was the comps differ on insurance -- was that Obamacare-related? And if so, when do you think you would lap that?

A little bit was Obamacare, Barry, but it was actually a couple of more traditional life and auto folks. Really focused on what we call the desert region, Phoenix, Tucson, Las Vegas. That is where a lot of that insurance dried up for the quarter.

Honestly, our decline was over $1 million in the insurance category. That is what drove services to just be off 2%. But we talked to all the other elements within services that were very healthy. So that was the one nugget and that is the one region, but not a lot of it was Obamacare.

Great. Okay.

Thanks, and I want to get back to capital allocation if we could. The appetite, as you look at the landscape, digital television stations and/or your own stock, which has been under a fair amount of pressure of late, so for Rich or Tim, how do you think about that? How do you balance it, and would you consider stepping up to the plate if something were to become available in terms of a station or a group in the near-term?

Hi, Barry. It is Rich. Sure, and I think obviously we have. In recent months, we have picked up Cracked. We also, hasn't been too long ago, we picked up some stations, and obviously we did a big restructuring of the Company that put us into a whole bunch more TV markets only just the year ago.

I was just thinking about this, if you look at our dashboard and our uses of cash over, let's say, four years across our revenue cycles. We used about 50% of our cash to buy TV stations. A little less than 20% or about 20% to make digital investments, and the other third of our cash we used to return capital.

So that is probably a look at the way we would think about the balance. That would be consistent with the way we think about it today. So yes, if we see the right opportunity, we definitely would step up.

As you well know, we like a very conservative, very flexible balance sheet, so that when the world turns inefficient and chaotic, we can take advantage of opportunities to make just outstanding buys on behalf of our shareholders. So yes, I don't know if we're looking particularly conservative at the moment, but we have a great balance sheet and continue to look for good opportunities to show very strong returns.

Thanks for that, Rich.

To the extent that you are potentially talking to sellers on the station side, is the reluctance a function of what is going to come out of the auction, or nobody is talking because of what is going on-- or about to go on the forward auction?

I think, generally speaking, there is a little bit of stuff in the pipelines. Stuff that you know about and there are some stations obviously coming out of some combinations that have been out on the market, but if you stand back and look at it, I think due to the auction, the M&A market for stations has been fairly quiet, and probably will be until you get some real full clarity on the other side.

Great. Okay. Thanks very much, Rich.

Sure.

Mario Gabelli, GAMCO Investors Incorporated.

I'm just going to ask 14 questions like everyone else. Seriously, Barry beat me to the punch. It was just really your vision for the benefits of consolidation, but obviously sellers out there like XYZ -- I don't want to mention them on the phone.

Thank you very much. I look forward to tracking your success. Take care.

Good to hear from you, Mario.

You too.

There is no further questions in queue.

Thanks Tammy. Do you want to go through the replay details?

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