E W Scripps Co (SSP) 2016 Q3 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to the Scripps third quarter earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Carolyn Micheli, please go ahead.

Thanks, Greg, good morning, everyone. Thanks for joining us for a discussion of the E.W. Scripps Company's 2016 third-quarter results.

A reminder that our conference call and webcast include forward-looking statements, and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. You can visit Scripps.com for more information, such as today's release and financial tables.

You also can sign up to receive emails any time we disclose financial information, and you can listen to an audio replay of this call. The link to the replay will be up there this afternoon and available for a week.

We'll hear first this morning from Chief Financial Officer, Tim Wesolowski; and then Brian Lawlor, who heads our Broadcast Operations; followed by Adam Symson, our Chief Digital Officer; and then Scripps' Chairman, President and 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, and thanks for joining us today. The press release contains the details of our third-quarter performance, and we will be filing our 10-Q later today so that you can get even more details there. Right now, I'd like to spend a couple of minutes going through the highlights of the quarter, our balance sheet and cash position, capital allocation and fourth-quarter guidance.

Our television division's total revenue for the third quarter was up 25% compared to the prior year, that includes growth in our core business on a same-station basis. Our guidance of up between 35% and 45% was based on political revenue of about twice what we realized. Expenses were up 11%, better than our guidance, and driven by increases in the programming fees we pay to our network Partners.

Third-quarter political advertising for the television division was $27 million. With just a few days left until election day, we expect full-year political advertising to be about $100 million. Clearly, that's well below our expectations.

In the third quarter, the two Presidential candidates spent about a third of what their predecessors spent on our stations in the third quarter of 2012. And the expected revenue from key Senate races in Ohio, Florida, Colorado and Wisconsin dried up as those races became much less competitive during the third quarter.

As we often remind you, political advertising revenue is all about geography and how the state races actually play out. Brian will give more color in a moment on our political advertising revenue in this most unusual year.

Retransmission revenue was up 46% in the third quarter. We're currently negotiating two renewals covering about 3 million households that will drive a nice increase in our fourth-quarter retransmission revenue, and an estimated 20% increase in full-year 2017 revenue.

Radio revenue was down 5% in the third quarter, which was in line with our guidance. Expenses were up about 3%, beating guidance, and that includes $500,000 of expenses related to flood cleanup at our operations in Wichita, Kansas.

Turning now to our digital businesses. Third-quarter results, of course, include Cracked, which was acquired during the second quarter of this year. On a reported basis, revenue was up 45%, excluding the impact of Cracked and Midroll which was acquired in mid-July of last year, total revenue increased 20%.

Total digital expenses were up 48%, a little better than our guidance. Excluding the impact of Cracked and Midroll, expenses increased 16%. Expenses in our shared services and corporate segment were $8.5 million or about $1 million better than our guidance.

Touching on the balance sheet. We ended the quarter with $88 million in cash which was up from our second-quarter balance of $66 million, and with net debt of $300 million we continue to have the best balance sheet in the broadcast industry.

From the beginning of the year through the end of October, we purchased about 2 million shares of stock for about $35 million. About $49 million remains under the share repurchase authorization that expires at the end of this year.

We provided detailed revenue and expense guidance for the fourth quarter in our earnings release, and I think it's pretty straightforward. And we will provide 2017 guidance on our next call in February.

And I'm going to turn it over to Brian to talk about the broadcast business, and Brian is battling a pretty good case of bronchitis unfortunately this morning.

Thanks for the medical report, Tim. Thank you, good morning, everyone.

This year's Presidential race has played out very different than we had modeled entering the year. While the Scripps geographic footprint was perfectly aligned with some of the most competitive and best of financed races in the country during the 2012 elections, that has turned out not to be the case this year.

As we told you in the first quarter, we entered the year expecting Florida, Ohio, Nevada, Colorado and Wisconsin to all receive very active Presidential race spending. On our second-quarter call in August, we updated you that both Colorado and Wisconsin had fallen off the list of battleground states. At that time, we were still optimistic that we would see aggressive spending in our three remaining swing states once the candidates cleared the conventions.

Unfortunately, the level of Presidential spending affected how much we received in those three states. Donald Trump and Hillary Clinton together have spent about half what their predecessors spent nationally in 2012. And as Tim, said that impact has been felt even more at Scripps where the loss of several key swing states resulted in the Presidential candidates during the third quarter spending roughly a third of what the two Presidential candidates spent on our stations in the third quarter of 2012.

Donald Trump in particular spent a fraction of what past Republican candidates have spent on television ads. And because Scripps have projected Presidential campaign TV spending to account for about 30% of our total political ad revenue this year, we were disportionately hit by the low amount of Presidential advertising.

We faced challenges on the Senate side as well. We entered the year with competitive Senate races in Florida, Ohio, Nevada, Wisconsin and Colorado. But by late August, Republicans Marco Rubio in Florida and Ralph Portman in Ohio and Democrat Michael Bennett in Colorado had all polled significantly ahead in their Senate races, and Wisconsin's race also grew wider.

As a result, most of our outside money moved to competitive races outside of our footprint. As we said earlier, geography is the key. If you're where the races are competitive, you stand to perform very well in political spending.

That has been our case for our station Las Vegas. Nevada has remained competitive in both the Senate and the Presidential races, and we have written 50% more political ad revenue there so far than the station did in all of 2012.

Another way of looking at the map, 85% of the revenue difference from our 2012 political performance can be attributed to lower spending in just five markets. Cleveland, Cincinnati, Detroit, Denver and Milwaukee.

On the core advertising front, despite some political displacement, core was able to finish up to the prior year on a same-station basis. Given that we were able to add more than $22 million in political dollars to our stations versus last year, we believe that our core growth speaks to the health of the local TV ad space.

Among our top-five advertising categories, all five showed year-to-year growth. Automotive grew 2.5%, services grew 2%, retail had impressive 9% growth, travel and leisure was up double digits, and food services was also up more than 2%.

During the third quarter, we took in more than $10 million in Summer Olympic ad revenue at our five NBC stations. This was a double-digit increase over the last Summer Olympics. We were also proud that our NBC powerhouse in West Palm Beach was among the highest-rated Olympic stations, finishing as the top-rated station in the country in the opening ceremonies.

On the original programming front, we're seeing strong ratings performance from our infotainment show The List. This show is 100% owned and produced by Scripps, and as of September is being seen in 44 markets across the US, covering nearly 30% of all US households.

Ad our viral video show, Right This Minute whom which we partner with Cox and Raycom is showing significant national growth. Now in its sixth season, Right This Minute is distributed in 94% of the US, including running on all the ABC owned stations. This season Right This Minute is being sold and distributed by Disney's syndication group, which has brought multiple blue-chip advertisers to the program.

And finally, Scripps is proud of the investigative reporting work of our team at KNXV in Phoenix, which was awarded a national Emmy for its series Arizona's Dental Danger. The multi-part series uncovered serious problems with the way the state oversees licensing of dentists, providing a very important service to its community and resulting in some pretty significant law changes.

And now I'd like to spend a moment on radio before I turn it over to Adam. We continue to see challenging conditions in several key markets for our radio group, including Milwaukee, Omaha and Tulsa.

As has been the case all year, our smaller markets performed in line with expectations but our largest markets were challenged. The Brewers baseball season, in particular, continued to dampen results in our big Milwaukee market in the third quarter.

As we have shared in the past, a big part of our radio strategy is to develop new cross-platform initiatives in our combined TV and radio markets. In the third quarter, our team in Omaha created a new TV radio digital business called the Omaha Sports Insider, which enhances Scripps' sports footprint in Omaha and combines the resources of our TV and radio stations to create new revenue-generating opportunities around Nebraska's big sports passion. We also were honored in our Springfield, Missouri market where KTTS FM earlier this week received the small-market station of the year award from the Country Music Association.

And now, here's Adam.

Thanks, Brian, and good morning.

Tim already hit the key elements of our digital performance for the third quarter. Our reported revenue increase of 45% was just a few hundred thousand dollars away from our guidance, and we saw strong organic revenue growth from the businesses that we owned in both periods of almost 30%.

On the local side of our digital business which accounts for a little over half of the revenue in the segment, revenue grew by 20% year over year. That was in line with our expectations, and driven by strong performance with programmatic advertising. Our local digital platforms offer broadscale to national advertisers, so we continued to see strong demand for advertising across our local markets in the national and regional programmatic marketplace with higher costs per thousands than many in the industry.

Moving to the national side, which accounts for about 45% of the segment revenue, let's start with Midroll, our industry-leading podcast company. Midroll continues to grow nicely, meeting our expectations. We promoted our Head of Business Development, Erik Diehn, to CEO, and Lex Friedman to Chief Revenue Officer. Many of you met Lex at our digital investor day in June.

In the third quarter, Midroll had record sales. The number of podcast ad impressions inside the shows that we create and manage also hit another new high, 900 million compared to 750 million ad impressions in the second quarter of 2016. And despite even that continued growth in supply, rates for advertising grew as more advertisers are turning to podcasts to reach desirable young audiences.

At Cracked, which we just acquired in April, we are leveraging our existing relationships with over-the-top TV platforms to extend this popular humor and satire brand onto new services. Such as Connected TV's Zumo and set-top box Roku, with more deals signed but yet to be announced.

Meanwhile, we're making progress integrating Cracked on to our programmatic advertising platforms, but the transition and expected rise in rates is taking a little longer than we had anticipated. We feel good about Cracked's strategy, and the important role humor plays in the way millennials dissect the world.

Finally, turning to our over-the-top news service Newsy. We delivered 330 million video views last quarter, up 75% over the same period last year and on track to exceed our goal of 1 billion video views for the year, which by the way doesn't include social network views. Our focus on over-the-top platforms such as Dish's Sling TV, Roku and Pluto TV are driving this growth.

During the quarter, we also went live with Hulu, and we signed our first cable system, Cincinnati Bell's Fioptics which is running Newsy live, our linear programming product. This new cable carriage is testament to Newsy's engaging content, and opens the door to another distribution channel for us. Demand for over-the-top video advertising continues to be strong, and CPMs at Newsy are holding steady at $20 to $40.

We are particularly proud of Newsy's national Emmy nomination for its Presidential primary fact checking series, Check 2016. Newsy has done a great job of covering the stories that matter to its discerning younger audiences during the campaign, it's nice to see that work recognized. As we head into 2017, Newsy is in good position with the attention of the important video distribution platforms, audiences and the advertisers that want to reach them.

Now, here's Rich.

Thanks, Adam. Thanks, everybody, for joining us this morning.

This morning, we're five days away from electing the next President of the United States. One thing we know for sure, TV and political messages continue to create great impact together.

TV is the strongest media platform for candidates and causes to educate viewers, and create a better informed electorate. Even in this unusual, really unusual, election year, that message came through loud and clear.

Some Washington pundits will say earned media has an increasingly impactful role in the election year dialogue, and based on what we've seen in 2016 they would be absolutely right. Hey, we're big believers in the value of objective news coverage, that is after all our business.

At the same time, Hillary Clinton has been strong in key states where she spent significantly on television advertising. And as Donald Trump has increased his local TV spending recently, state polls have grown much closer. So we'll see how things play out on Tuesday, but we know that broadcast TV political advertising remains the clearest and most far-reaching vehicle for political candidates and issue groups to share their paid campaign messages.

Speaking of earned media, no one knows better than Scripps that media coverage can take many forms and cover many consumer platforms from podcasting to over-the-top video and radio. Our journalists across these platforms and in our many local and national brands worked hard this election year to cover the issues, and candidates who mattered most to their audiences.

At Midroll, we produced the podcast of David Gregory who has interviewed a host of political analysts and insiders on his popular podcast the David Gregory Show. At Newsy, as Adam mentioned, we secured a national Emmy nomination for our Presidential primary fact finding, and at our local television stations we provided at least 100 minutes a week of political news coverage in each of our markets in order to serve those great communities.

A key strategy of ours was to use the heightened attention of the election year to build the value of our new digital brands to satisfy the unmet needs of their rapidly growing target audiences. Now those audiences happen to be younger and more upscale than general audiences, and they're great audiences on which to build organically growing businesses for the future. I don't know yet whether Hillary Clinton or Donald Trump will prevail on Tuesday, but I can tell you that we at Scripps have already won by successfully using this election to establish these new brands.

Finally, a reminder in the midst of this political season, speaking of impact, it looks like we will take in about $100 million of high-margin political ad dollars this year. That revenue combined with strong growth in our retransmission revenue and solid performance in our local TV core gives us an excellent cash position heading into 2017. As has been the case for some time, Scripps' financial flexibility puts us in an enviable position to take advantage of growth opportunities where we see attractive returns on investment.

And now, operator, we are ready for questions.

(Operator Instructions)

Michael Kupinski, Noble Financial.

Thank you, and thanks for taking the questions. It seemed that the campaign spent advertising dollars on other platforms, including cable networks. Did you notice any shift in the way the campaign spent money on the cycle?

Hey, Mike, it's Brian. We certainly didn't see that on the local level, and in fact we've been in regular communication with the top political shops in Washington on both the Republican and the Democratic side. They've confirmed to us that there was no additional shift of digital dollars, and that the broadcast dollars held up pretty well.

I think it just moved around obviously from market to market really, as we said in the prepared remarks, it's really about where the races were. And I think in this case, the down-ballot stuff was very lucrative, especially in some of the big Senate races that remain competitive. So I think when it all shakes out, you're not going to see much of a shift. That's certainly not what we're hearing.

But what is interesting is that you guys were out in front in the expectation that political advertising would not be in line with the most recent past election cycle growth, unfortunately it was below even your expectation. But directionally, you were right.

So with that as a backdrop, can you talk about your thoughts on the next cycle, the midterms, which is in sight for some investors in terms of their time horizon? Why would you think that the midterms might actually see a better opportunity, and whether or not this returns back to the normal growth cycle for political?

Mike, that's a fair question. I think we've spent a lot of time assessing that ourselves. So let me just tell you what I do know.

I do know that the Presidential election, the fact that Colorado and Wisconsin dropped off early. And even in the states that remained competitive, the level of spending from where it was previously was dramatically below for that race. So the candidate money was dramatically below, we said in the third quarter it was a third of what it had been previously and then of course Donald Trump didn't even have his own super PAC, so the PAC money it was way off.

What I also know is that the candidate spending on all the down-ballot stuff, the Senate, the house and the gubernatorial is all up for us significantly over 2012. So the down-ballot stuff was very healthy.

And I think you know, as we saw and I referenced, if we were in one of those big Senate competitive races like we were in Nevada, the money was robust. We saw healthy outside spending in Florida and Ohio early, and then all of a sudden the polls started to drift to 7, 8, 9 point difference and all of a sudden that money got pulled out of here and moved to other states. So as I just kind of start to look out to two years from now, I think the candidate spending percent at house and gubernatorial was all up.

So nothing replaced that, and I think if you were aware that the true competitive races on the Senate were, I think you saw a ton of money. Our issue really was -- and we saw, we had record spending in 2012 as a result of our Presidential footprint.

A lot of our models were built on that Presidential footprint being across really five competitive states -- Florida, Ohio, Nevada, Colorado and Wisconsin. Colorado and Wisconsin dropped out early, and the others were much softer.

So we'll continue to analyze that in the next couple of months like you will. But at the end of the day, I think there is a lot of signals in this that if you were where the races were, that was a benefit and the candidate money was really robust at the down ballot which is the next big race.

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

Got you. And do you believe that the disappointing political advertising, because this has been fueled across the board, it's not just you, increases the prospects of some of the other broadcasters that might want to join larger groups? Especially for some of those that might be have cut out of spectrum auctions.

Has this increased the level of M&A discussion in your view and is it possible that you might be able to acquire companies at better prices than before? Can you talk a little bit about maybe the prospect of multiples if you happen to hear what might be going on out there?

Hey, Michael, it's Rich. There's not a ton going on out there at the moment. I think the auction has still frozen the market. And then what's been going on with the election has people -- it's been hand-to-hand combat the last few weeks, and I don't think anybody is terribly focused at the moment on the M&A market.

We'll see what happens after everything, let's hope, quiets down the next week or so and then the auction works its way through. But there's not a whole lot in the pipeline at the moment, which maybe would say that there will be a real explosion of supply once we get through all this.

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

Thanks.

John Janedis, Jefferies.

Thanks. Hey, Brian, I wanted to dig in a little bit more on your Senate race commentary. I think the market has had this base case assumption that all races in these key states are going to be competitive.

But in the past few cycles, when it became clear that races were less competitive, did all of that money get pulled or was their spend to try to change that competitive dynamic? I just ask because I just don't recall this dynamic to this extent in the past.

Yes, hey John. It did get spent. So let me be clear. The candidates had each on their own raised significant funds.

The candidate spending remained consistent all the way through. But the outside PAC money, which is really significant as we saw in Nevada as we saw a number of years ago, it came in early for supporting those races. As soon as Portman and Rubio especially started to really pull away and then they dramatically pulled away, almost all of that money left our states and went to other places where the Senate races were more competitive.

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

Yes, so we've had a really good year obviously on our key categories. And the second quarter, four of our five top categories were up in the third quarter. All five of our key categories have been up, auto was up, again retail has been up the last two quarters. So actually, we feel really good about our core.

Fourth quarter is really difficult in a Presidential year. We'll do $55 million roughly in political spending in six weeks. That's going to displace a ton.

Just as a point of note, our eight days of November of political advertising will be bigger than all of September was for us. So that just goes to show you how much gets crowded out. So as a result of that, obviously there's going to be a significant amount of displacement plus a lot of people have just stood on the sidelines waiting to get this cleared up.

So in 2014, we did $45 million in political and we had about 10% decline in core year to year. This year we'll do $10 million more. So I think core declined somewhere in that range, maybe a little bit more is reasonable.

I think what's more important, you can't just look at it as, is it up or down? You've got to look at what starts to happen after the election is over, and does momentum continue to build.

Our core was up in second quarter. Our core was up again in third quarter. Our key categories were up in the second quarter, our key categories were up again in third quarter.

We've had a really healthy core year, and I think we're really optimistic that once we get over the clutter of the political, that we can start to rebound then pack stuff in. We won't get back to flat on all of the categories, you just can't after losing six weeks. But more importantly is the return of the health, and we've had a really healthy last six months on core.

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

What you think Brian? (laughter)

I think there's a chance. Fourth round, fifth round, sixth round, somewhere. If it could end in the fourth, I think it gets done this year.

All right. Thanks a lot.

Okay.

Marci Ryvicker, Wells Fargo.

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

Hey, Marci, it's Brian. We've got a nice base laid in. But as in any quarter even taking out the political, you build and you write a lot of points inside of the quarter.

We still have a lot of business to write. I think because of the political, people just sit out and wait. Maybe some are even waiting to see who wins the election to see what that's going to mean to their business and to just the discourse of the country.

But I think even in a normal quarter, we would still have a lot of business to write for December. We've got a real nice base laid in, and if things go as expected I think December will move toward where the last six months has been which has been a really, as I just said, a healthy core environment for our stations over six months.

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

We've had a good -- it's Brian again, Marci. We've had a really good year in auto. Second quarter we were plus [6%], third quarter we were up [2.5%]. So auto has been a really nice category for us.

We've talked a little bit over the last year about some -- of the regional dealer groups dismantling and all that, and that's all lapped itself. Ford honestly has been a little bit of a challenge all year. They've booked money and canceled it, and booked money and canceled it, and so what they are doing now is no different than what they've done all year.

A little fluctuation at SAR still means they have got to sell a lot of cars, we're not talking about a dramatic decline. And so as a result of that, I expect auto and every level of visibility I have right now is -- I expect auto as we wind to the end of the year to continue to build, finish a really good year. And at this point based on the annuals we're negotiating, the discussions we're have, our visibility into the first half of next year for auto remains positive.

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

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

Great. Thank you.

Kyle Evans, Stephens.

Hello, my questions have been answered. Thank you.

Greg, do you want to move on to the next?

Dan Kurnos, Benchmark.

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

Yes, it does. You are right, Dan. The last 10 days have been terrific. After all year the two candidates really focused on Nevada, Ohio and Florida.

Suddenly in the last two weeks, they're in Colorado, they're in the Nebraska, Omaha for us, which touches Iowa. They're back into Wisconsin. Hillary Clinton is also in Arizona and Michigan for the first time.

So our environment in the last 10 days has changed dramatically from what we've seen all year. In fourth quarter, I shared with you that we'll be in that $55 million range.

In 2012 in fourth quarter, we did $63 million. This is exactly now the environment we expected to be in for the last six or eight weeks, unfortunately it only happened in the last two.

Got it. And then, Adam, I don't want you to get bored over there so I'll ask you a couple questions. Just on the digital, I know it was maybe a little bit less than you were expecting but it's probably mostly a rounding error. I'm just curious, I know you guys are making a pretty aggressive push into video but we have heard of some pretty significant publisher problems with Google lately.

Just wondering if any of your digital properties are experiencing some of that pushback? We've seen some other guys get penalized.

And then on the OTT side of the equation, we've seen some new launches in the marketplace. I assume you guys are going to try to continue your aggressive distribution strategy. Nice to hear on the cable carriage opportunity, but just wondering how you're viewing the OTT landscape as it also starts to get a little bit saturated? Thanks.

Morning, Dan. Thanks for the question, it's nice to talk.

On the question about CPMs and Google, actually we haven't really experienced any of that pushback. Google is an important partner of ours, but we're also well diversified. We work with a lot of partners in the programmatic marketplace, particularly as it relates to video.

The back half the year has gotten very strong with Newsy. Not only have we continued to expand distribution and the audience has grown and the loyalty continues to grow, but monetization continues to go nicely. CPMs are strong $20 to $40 sellout is very strong, particularly on OTT platforms where we're routinely sold out.

The Newsy's linear product continues to see really nice view times at this point. We're looking above an hour, which provides us a lot of opportunity to serve targeted advertising on OTT platforms through that linear product.

And frankly, the same thing with the local side. Local advertising as it relates to video CPMs, very strong, both direct sales hovering around $28 CPMs and on programmatic advertising with local advertising on video just around $14.

Relative to the continued expansion with OTT, we always figured this was going to be a very fragmented marketplace with OTT. The thing to keep in mind is of course that these are real carriage deals that Newsy is getting. Is not a web business dependent on traffic flow from social or even linked ups from our local websites.

Newsy's audience is growing organically on OTT platforms like Sling TV, Dish, Dish's Sling TV, Pluto TV, Roku and Apple TV, and that's really where we're seeing all of the growth. So we're real pleased with the way we've moved that business. I expect fourth quarter is going to be very good at Newsy, and things are moving in the right direction with the marketplace as is.

Great, thanks for the color. And then just shifting over to I guess the combination of Tim and/or Rich here. Just high level, look, given what's happened with the stock, you've got a buyback in place.

You've talked about your balance sheet being clean. Rich, you mentioned that you were very well positioned to go after maybe more growth opportunities. Just want to get a sense of how you guys are thinking about either aggressively buying back shares like some of your peers have done, or given that we've also seen some of your peers avoid some of the crowd out issue due to scale benefits, just how your balancing those two issues?

Actually, we'll talk about in terms of balancing three, but let me speak to stock repurchase first. We don't disclose what our plans on going forward, but there is somewhat of a pattern that's established looking back. We did -- we bought about $10 million in first quarter, about $10 million in the second quarter, about $10 million in the third quarter and about $5 million in October, to give you a sense of what the pattern has been.

When it comes to allocating capital, generally we think about all of the above. That's buying back stock, returning capital, at the same time looking for station opportunities where we think they have a really good fit with what we do and where we think there's a very good return on investment.

Although, we're not one of those companies that feels compelled, either for reasons of defense or offense, to provide try to run toward the cap. We're much more strategic or surgical acquirers than maybe some of the roll up folks.

And then finally, we have devoted capital to our digital strategy, those new brands that's going really well. And I think -- so we'll continue to put money to work there. So I think were still in a somewhat of an all of the above strategy when it comes to allocating capital, with the absolute strongest focus on long-term returns on investment, cash-on-cash returns

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

We could make it breakeven today if we wanted to. We're creating value, and I think you just heard Adam talk about strong sales at Midroll, incredible carriage and audience momentum at Newsy. So the focus right now is on building out really valuable long-term brands, and less focus on how we can pull that number into the black very quickly.

I got to tell you, if we suddenly cut expenses or trimmed expenses and pulled the digital segment into profitability, it would be a really bad sign. It would say that we've lost faith in what we're building. So were not eager to do that, I'm certainly not eager to do that.

What we're eager to do is to continue to build out really strong valuable businesses. And at some point, investors will recognize that because everybody will. And we'll enjoy the fruits of it.

All right, fair enough. Thanks. Appreciate it.

Craig Huber, Huber Research.

Good morning, thank you. The first question I guess on the digital segment, how did the local TV station websites do year over year? Obviously it's much slower than the national side, but what was the collective number there, how much was it up? Thank you.

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

Okay. And then also, Brian, everybody's got a thought on this, but I'm curious to hear your. I know you don't have a lot of FOX or CBS TV stations, but what's your thought about why the NFL ratings are down 10%-plus here? What in your mind has changed versus 12 months ago to account for that?

Hey, Craig, it's Brian. We've been tracking this here at Scripps as well. To your point, we only have two smaller FOX stations, two smaller CBS stations, but we do have a decent NBC footprint. And so I've been tracking this very closely on the Sunday night football game -- football season, and it's interesting.

Last year was a record year for the NFL with some big games, and that was certainly the case with us. In the first half of last season, we had a Packer/Seahawks game in Green Bay that did a 53% rating, which spiked our ratings performance.

But when you look at our ratings this year through the first half of the season and you compare it to 2014, we're basically up a rating point. So up 5% or 6%. And if you even go back and track it all the way back to 2013, we're dead-even with our ratings performance in 2013. So flat to 2013, up over 2014, down a bit over 2015.

But like with anything, you get a couple of big marquee games and it can skew everything. That was certainly the case on us. If we extract that one Packers game, you see four years now of very consistent dominant ratings performance on Sunday Night Football.

So what is number then, Brian, versus last year if you feel the ratings are comparable to what you mentioned your (multiple speakers)?

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

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

We have got a lot of points left to write. As I said, we've got a good base laid in. I think fourth quarter in a political a Presidential year is it doesn't react the same as every other quarter.

Ever quarter builds, this one will build. What's different is you do have some regular consistent advertisers who have sat out the first half of the quarter just fully recognizing that their schedules would be disruptive. So we expect them to be coming back in, although probably a couple of them have made some other quarterly plans.

But I went back and looked at 2014 and 2012, as soon as the election year ends, we write a lot of points and we're expecting the same thing. Again, we don't see a crisis. We've had a great core year, all of our key categories have been up all year.

The last six weeks, they've been really crowded out where people sat on the sidelines. But we're a week away from all of that changing, and I expect that we'll write a ton more business between now and fourth quarter. And I think it's going to be a positive story -- consistent with what we've seen all year.

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

I think there's a fair amount of advertisers that when they -- we work very closely with them. We're sensitive to -- we want to respect them. They are our advertisers 52 weeks a year every year, and it's important that we maintain a really good relationship with them.

So we're honest with them through tracking. And early in the year, we make plans with them to accommodate different day parts or even move schedules around so that they're not left with a bunch of product on the floor that they can't move because we can't run their spots. So I think that dialogue has been consistent.

Some places some people booked money in other places, in other places we've been able to go back in Wisconsin and Colorado and say, hey, this has not been what we thought. We've been able to move some dollars back, but some others said, I think it's coming, let me just wait.

And I think that's a really normal dialogue that happens in our local markets in every election cycle. And we take a lot of -- we respect our local advertisers, and that's why we take that responsibility of having the conversations early and often with them to manage their expectations.

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

So in 2016, as we mentioned, we've still got a couple million subs that we're negotiating on right now. So that's about 17% of our total footprint, and we'll get that benefit obviously in rates that will show in revenue all of next year.

Toward the back half of next year, we've got had another 8% come up. And then 2018 is really big year for us. We've got more than a third of our subs come up in 2018.

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

2016, well right now we have still got 17% left to write, and then --.

The whole year, Brian, for 2016.

Maybe 19% something like that, we only wrote a little bit (multiple speakers).

Very close, okay.

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

Okay. That's very helpful. Thank you.

Barry Lucas, Gabelli & Company.

Thanks and good morning. Brian, [and get attached] a little more here and play devil's advocate looking out to 2020 and the Presidential. You look at the political map. And a lot of states that were reliably red are now purple, or even moving into blue.

And you look at political spending at the Presidential level in places like New York, California that are so solidly blue, there's very little money. So what would give you confidence that we could still see a reasonable level of political spending in the quadrennial years by Presidential candidates? Then I have a follow up.

Hopefully first, I would expect that maybe the candidates would be able to raise more money. This has been certainly a unique cycle in that regard. Second of all, it's really uncommon for both candidates to not have their own super PACs, that was unique this year.

I think this is going to be a fascinating case study. Because -- I find it so interesting that they really focused on four or five states the entire time, allowed other states to really have no messaging thinking that states were going to go a certain way and now here we are in the last month. Suddenly the polls have tightened up, and now they're reacting and throwing money back in states trying to scramble and pull things out.

So I guess if there's a message there, it's when it really came down to it at the end, they were throwing more money at it and trying to bring more people back in. And I think that analysis will be really interesting of was it their best strategy to stay out of things and not get their messaging consistent in places that have been consistently competitive. Because at the end of the day, everything they've now brought back in, Arizona, Michigan, Wisconsin, Colorado, are all states that have traditionally been really meaningful to the Presidential race.

Some of them were largely ignored this time, and as a result of that they became much more competitive. I think at the end of the day, they're finding out that you got to spend the money to influence the voters.

We've seen that. Hillary Clinton spent some money early and took a lead, now we see Donald Trump adding a lot of money. Things are tightening up and they're going to places where they didn't spend money and suddenly reacting at the end trying to pull some money out. So I think I'd be a lot more concerned if I saw the opposite where it was just drifting away at the end, and they didn't feel a need to spend any more, now they seem to be in over-reaction.

Could we switch gears and talk about margins? I'm looking at a healthy almost 10 point gain in BCF profitability in the quarter, up 5 points or so year to date and yet that still feels light. And we know about retrans, but maybe you could talk about some of the other initiatives you might be taking to improve profitability, or if you have long-term targets or goals -- or even how ever you want to think about it, Brian.

Barry, I think we're really happy with the continued advance of our margins. Obviously we were expecting political to be a good bit more than it turned out, and that would have resulted in record margins for us. We had a really good year, and I think ever since the split of the Company we've been very deliberate on an intentional plan to advance the margins of our television stations.

We've been strategic relative to building out a political footprint and a political office that is very high margin for us. We've been very focused on growing our news audience, and in many of our key markets at the end of the day that's the thing that probably can move the needle the most.

We've been, over the last five or six years, very focused on hubbing on automation, on centralizing costs that we can. I think we've been the most proactive and the most successful in the industry relative to building our own programming, which has returned very high margins to us in a place that free syndication had been fairly diluted.

So we continue to advance more of that, not only are we continuing to move out our own programming across our own groups. But now, as we talked about earlier, we have got two shows in syndication and working on some others. So now we're creating a long tail on that.

Our digital investments are bringing new revenue to our local television stations. And many of our digital focus is in short form content that we're creating on the programming side, if you look in a state where they have Gas Station TV, you probably see a lot of our snackables that we create for The List. That I think we had 70 million-something views just on the last quarter on Gas Station TV.

All of these are new ways for us to take existing content with almost no overhead cost, extend our content and create new margin, driving opportunity. So we have a lot in the hopper that I think will continue to advance our margin growth over the next couple years.

Hey, Barry, it's Rich. And in addition to what Brian just talked about, if you think about how we've acquired in recent years, we don't tend to try to go out and acquire earnings. We are very focused on return on investment. So many of the stations we've acquired did not have industry-standard margins, weren't high-margin stations when we bought them, because again, we were not trying to go out and buy earnings.

But we got them at deals that showed incredibly good returns on investment. And then as we moved the margins up from there, it just dramatically increases that return on investment as we go. So you have to really also look at our investment strategy and our focus on return on investment.

Brian is doing a great job of moving the margins over time. But again, a lot of it has to do with that we don't try to go out and buy earnings. We focus on return on investment, and we'll give you a very good return on investment over time.

Okay. [Jump both] for either one of you with the stations in West Palm and Tampa and Fort Myers and four days left, who's going to win Florida?

The coin is going up in the air, Barry, we're just not going to tell you which side it [sits]. (laughter)

Okay, thank you. Have a great day.

Thanks, Barry.

At this time, there are no further questions.

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

Ladies and gentlemen this conference will be available for replay after 11:00 AM Eastern time today through November 18. You may access the AT&T Teleconference Replay System at any time by dialing 1-800-475-6701, and entering the access code 404822. International participants dial 320-365-3844.

Those numbers once again are 1-800-475-6701 or 320-365-3844, with the access code 404822. That does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.