TKO Group Holdings Inc (TKO) 2003 Q1 法說會逐字稿

Good morning and welcome to the quarterly financial earnings teleconference call. My name is Sarah and I'll be the conference coordinator. If at any time you do require my assistance, please press the star and 0 and I'll return to assist you. At this time I'd like to turn the call over to Mr. Phil Livingston CFO of World Wrestling Entertainment. Go ahead, please.

Thank you operator and welcome to everyone here for the WWE Q1 earnings call. I'm Phil Livingston, I'm the Chief Financial Officer of WWE and I'm pleased to have with me, as usual, Linda McMahon, the CEO of the WWE. She's in Phoenix as we speak this morning. I'm sitting in Stamford, but Linda has been out at SummerSlam and last night in Tucson at RAW, so she's joining us from Phoenix.

I point out to everyone if you haven't accessed it yet, our press release and the PDF file of the presentation that we're going to go through this morning is on our Web site corporate.WWE.com And I encourage you if you already haven't done that go to that site, pull down the presentation PDF. We are going to walk through it and refer to page numbers and you'll need to move along with us as we go.

On page one of that presentation is our standard Safe Harbor statement that I just draw your attention to. We try to be as informative and as open as possible, and give you our view of what is going on in the business.

I know you need to understand that and we give you estimates and use our judgment to understand the trends, but there are risks in business as you all know and things change so that we caution you to be conscious of that as we do our best to tell you what's happening in the business.

On Page 2 you see the outline and the format for our call today. Linda McMahon, our CEO is going to go through the operational highlights, important trends that are going on in our business. I'll take you through the financial results of the quarter and give you a view of our revised outlook for the balance of 2004, fiscal 2004 that we're now in.

So, with that, I'll turn it over to you, Linda. Welcome and why don't you go ahead with our operational highlights.

Thank you, Phil and good morning, everyone.

It is hot in Phoenix. For any of you who may not be located here I think for SummerSlam not only did we have a hot event in the arena, but it was 116 degrees outside. But we had a sold out event with very, very enthusiastic fans cheering throughout the early evening and night and they even stood outside in the parking lot in that heat for about 3 or 4 hours in the afternoon. So it's good to see that kind of enthusiasm for our product.

And it was an event that was sold out well in advance. So we are looking at those kinds of trends and hoping for more of those as we continue to build our story lines and have our introduction of new characters. Excuse me one second.

I think the good news to report today is we've had a good solid quarter. I am very pleased and feel not just only encouraged but very enthusiastic now about the way that the two separation of the brands which SmackDown! and RAW is sticking, really growing.

I think I said on the last conference call that the first kind of real test was the fact that we would have our first RAW only Pay-Per-View which was Bad Blood and that was, I believe, in June and then Vengeance was in July and that was SmackDown!.

Now, Vengeance -- just one of those rare anomalies -- occurred two days after the close of our fiscal quarter so for this particular quarter we are only reporting two Pay-Per-View events where we normally have three.

But the good news about both Bad Blood and Vengeance, Bad Blood exceeded last year's number which was the jointly produced Pay-Per-View with both brands and Vengeance is going to be right at the number from last year. It might not get quite where it was last year, but again, one brand only.

So we know what we are doing is working, it is having the effect that we wanted it to have and so we're glad to see that sticky factor if you will now with both of those brands.

So good news on that front and we are seeing that on an international basis as well that our audiences around the world are really getting it with the brand separation.

So we are very encouraged now that we took the right path continuing to build that, so that was a good success and we will now be anxiously awaiting to see what SummerSlam did in the Pay-Per-View numbers which we just had this past Sunday.

You know, following right along with our growth and development, where I have talked about where I think still the frontier for us is is our international developing business and we continue to have a thriving international live event business, and I'm on Page 3 of what you are looking at this morning. And if you want to follow along with that I think that Phil referenced it's Internet, our presentation this morning. So I'm on Page 3.

Our live event market is really strong. We've had we've had the eastern tour in Thailand and Japan in mid-July, we were again back in Australia July 31st. Coming up in October we're going to be in the UK, Germany and Finland.

Now, I think the one area of the world that we are still not strong in our television market really is Latin and South America. Though we're continuing to work hard to develop those markets we're not really prepared to tour there yet.

And that will come later than, I think the strength that we are seeing in the European tours, clearly in the Asian tours and then in Australia. We're very, very much encouraged with the growth in that developing business and as always the live event tours and television penetration are driving the ancillary markets and the ancillary businesses.

For instance, we've now signed new deals in Germany and Italy in licensing deals. Australia has doubled the number of licensees that we have there and one of the things that we are doing in Australia is working very closely with Gassne, which is our licensing agent there to work with local promotions for the fast moving consumer goods like Burger King, et cetera.

And we look to hook in really with more local partnerships with K-mart and Toys 'R Us which we've not been able to do much of yet but with the growth of our television and the strengthening there in Australia and again with the two tours that we have now on an annual basis, we are really cultivating and growing that market.

Also, in Asia, boy, Japan is really taking off for us with our new television deal there with Fuji TV which is our broadcast partner now, coupled with J Sky B, we're having great success with a retail chain called JSV. They have great -- they're primarily sporting goods stores but they do offer pretty eclectic merchandise, and they have a whole section for WWE. They had a great success with their one store, they're opening now, our area in the second one and building on that business. So we know that our formula is working.

The touring, the television growth that we are seeing. I think Phil you're going address probably that our international television revenues rights fees are up some where around 19%. You will probably correct me.

No, that's correct, that's good.

But I think that is about where we are. So we're very pleased with our international growth in those live events and we will continue to return to the Asian market probably twice a year, Australia twice a year, Europe will be twice a year with maybe a third tour or fourth tour into Europe now, because we do have also new television deal with Italia Uno.

And we are looking to expand in other of those markets that will expand the base from a very concentrated tour business that we have done throughout the UK which has been successful but we want now to build off that into those other European marketplace. So I think our international programming is right on target.

If you want to turn over to Page 4. Our other highlights with our business, our upfront advertising deals going into the new season we had kind of double digit increases with our upfront sales.

RAW and SmackDown! continued to be number one rated programs certainly where we're the number one program on UPN. RAW continues each week to either be the one, two or three program for all of cable for its regularly scheduled programming. So our advertisers are very happy to see us continue to be there and we are continuing to hold strongly in that male teen market.

So, I'm very bullish on our business. I think we have really good trends where we're still seeing our softer sectors at this point are in live events and in our Branded Merchandise. I do believe the economy is playing some part in that.

You know, we're no different than other consumer goods that are out there. At retail, for the Branded Merchandise business, excuse me, we are seeing a great deal of competition especially for the license world. There are 13 hot properties out there now and we are a male really dominated boys licensed product. And there is so much competition with Spiderman, X-Men, Ninja, Power Rangers, and we are in a very high mass market business. And over this past year, K-mart has closed approximately 600 of 1400 stores. Ames Department stores closed all of its stores and both of those had large concentrations for JAX, especially JAX, which is our toy retailer.

So we clearly felt some of the effects of those closings. And with our live event business being soft, naturally we have fewer attendance, we had fewer people buying our products. So we're working in that area to really build that Branded Merchandise segment back up, which I certainly expect that we will see working more with the retailers for promotions as I mentioned even on the international market like Australia. Those are some of the things that we are doing here in the United States as well and focusing our energies on that to grow that side.

So I think there's nothing but opportunity and upside there where as Branded Merchandise used to be about 30% of our overall revenue, it's down to about 16% and we are looking forward to building that area back up.

So, on Page 5, what I've just alluded to, our key drivers, our average event attendance. As you will see, we're hanging in there. We had three fewer events in this quarter than we did a year ago. Our Pay-Per-View buys, our Bad Blood, as I said, that was just remarkable with the new brand that we did just about flat to even to last year and it was a strong event for us last year with both brands.

And Vengeance is not reported in this quarter, you'll see that next quarter. Our ratings which are one of our primary drivers are flat to last year for the same period but we are starting to see over the past few weeks even hitting some 4s and some 4.2s with RAW and UPN with SmackDown! is certainly holding.

We've some preemptions on UPN with the start of baseball season that has been in and also football kicking off in some of those local markets. And the replay for us on the Saturday night or another time slot doesn't give us that consistency of positioning on Thursday night.

So we see a little bit of fluctuation there but all in all, I think the UPN number is strong and is holding where we want it to be. So I'm very encouraged and happy to see those ratings that have not only stabilized, but, as I mentioned last quarter and continue to see this time, starting to inch up just a little bit but it's a slow process. But I really do think we're getting there with the right formula with the story lines and our character development.

And then I think lastly, which is not part of the presentation that you are looking at, a couple of things. We, with our film division in L.A , are still working in development of new television product that not only includes our talent and guest star appearances, but some of them that really won't relate to any of our talent at all.

And we do have writers that are working in development of those projects as well as our, you know, Pay-Per-View and direct to home video film projects that I've been mentioning. It's, that is a slow, very conservative cautious build that we are doing but the projects are continuing to be in development.

And moving forward with interest that we are seeing, you know, marketplaces I mentioned before from especially from UPN. So, those areas are moving along very well.

And then lastly, one of the items that we've really been wanting to move is the monetization of our tape library that we have. I mean, we have tens of thousands of hours. We have been looking at the development of video on demand SVOD as you've heard me talk about.

You know we are a content provider and we look to provide that content to all of the platforms, you know, that are available today and those that will be developed. You know, wireless, the SVOD, the VOD, all of those applications. And we have just in the last month hired a new Senior Vice President to absolutely monetize that library for us.

His name is Tom Borecka. He comes from the world of ITT, Hannah Barbera, Turner, most recently with CableVision and American Movie Classics, and has helped do for them exactly what we want him to do for us. And that is to monetize our library to develop those programs that will give us the low hanging fruit, the short-term goals of product that can be readily available and shortly in the marketplace as well as the long term project of further development of SVOD channels.

So Tom is very busy, he knows what the priorities are there and every day I'm going okay where are we today is so I'm really following him very closely on that development.

So I think our businesses, it's strong, it's good, we're very bullish on it. We're still having a great deal of fun doing what we are doing. I -- on a little personal note I did get to have a couple of cameo appearances recently so of course, as I've always said when I watch my performances I don't give up my day job.

So Phil, I think that kind of gives a good kind of overview and I'll let you pick up really on the particular financial aspects and then we will be available to answer some questions from everyone.

Okay. Great. Thank you, Linda.

A couple of highlights on the key drivers page that Linda covered as well. I would point out that two of the three key drivers are positive and these are the key drivers that we watch in our business and I also remind you that we post these key drivers weekly on our Web site you can get our ratings graph and our live attendance graph and our Pay-Per-View buys graph on a weekly basis updated on our Web site. They are the key drivers, they are important to us so we provide that information on a weekly basis.

But two of the three are positive. The Pay-Per-View buys are essentially flat when you look at it year-over-year and you factor in the two versus three anomaly that we have in this quarter, as to the Pay-Per-View events, our ratings are flat year-over-year but they're showing a nice upward trend recently which I think you see on Page 6 of the presentation.

So those two are positive after some declines in the prior periods. We're seeing our Pay-Per-View buys and our ratings holding and even improving and our Pay-Per-View buys have been beating our expectations. And we're a large part of the current quarter being a good quarter in terms of profitability.

On Page 7, you see the basic results. Our revenues were $74.7 million in the quarter. That was down 10.7 but the essential way to look at that $5 million of that was caused by the Pay-Per-View. The fact that Vengeance was on I think July 25th or July 27th, two days after the end of our fiscal quarter.

So it gets reported in the next quarter, and is simply a calendar anomaly and will result in four events being in the second fiscal quarter and of course we will remind you about that next quarter.

But the other $5 million in decline comes from the Branded Merchandise businesses. As Linda discussed some of the key trends and I will talk more about those later on.

EBITDA was $5.7 million in the quarter versus $7.1 million and I encourage you to kind of look through and I'll give you some more details of those numbers in the following slides to understand that.

But the bottom line that I'd like you to take away from this call is that we basically had $10 million of less revenue in the quarter, but really in essence. we had a better profitability in the quarter as a result of the Pay-Per-View buys being good and costs management and the whole works.

Our earnings per share in the quarter was 4 cents versus 5 cents last year.

On Page 8, these are some of the items that I just kind of highlight for you and help you in your analysis of the results of the quarter. You see the reported EBITDA of 5.7 versus 7.1 last year.

We know the Vengeance (inaudible). This is an estimate at this point obviously but it's a pretty good estimate. So we know that Vengeance will produce about $2.6 million of incremental EBITDA and if it were to shift a couple days and just think about it that way.

We did in this quarter also have, and I talked about those of you devoted WWE conference call attendees will recall that last quarter we had someone default on a payment schedule that we worked out with them. At the last minute they defaulted on that and so we fully reserved a receivable and proceeded to negotiate and press them hard and in this quarter we collected a couple million dollars of that.

So that is a favorable item in this quarter that was a negative item last quarter so you could subtract that in normalizing. And then we did have a one time million dollar expense related to an asset acquisition.

And then on the other side last year we had a favorable settlement with the Parent Television Council, $3.5 million that we had received last year. So when you normalize EBITDA, you see that we actually had a better profitability on even lower revenue year-over-year.

On Page 9 you see our overall revenue picture. You see that live events as Linda talked about still a little bit soft, bolstered by great results on the international tour but live events revenue down 6%, Pay-Per-View down 28%. That's really just a reflection of the two versus three events. TV and TV advertising are in good shape and you see the Branded Merchandise down 32% and I'll talk more about the details there as we go through those sections.

On Page 10, you see the summary of the live event with three viewer events in the period, ten international events, versus four in 2003, well attended better than budgeted. We actually added another date as the tour tickets unfolded and moved ahead. We are doing well to clearly Canada and other international markets are hot now and we continue to focus and promote those events nicely.

Then on Page 11, you see our Pay-Per-View revenue. Really the Pay-Per-View buys are driven by great story lines and exciting talent and the ratings the uptrend in the ratings is helping definitely. The buys are basically even with last year. The buys for Vengeance were about 275,000 is our view at this point.

We'll, all of you know that are devoted WWE shareholders and know the story, the end of the story very well, know that our businesses vary driven by the profitability -- not the business, though the profitability is very driven by the Pay-Per-View buys and it can be very variable on the upside and the downside.

And the SummerSlam, which just happened this past Sunday night we'll get the preliminary numbers during this current week and analyze them and post our first estimate next Thursday in our weekly posting. And I think that will be an important SummerSlam is kind of what we call one of our the big four events and we have good expectations for the ratings were good going into SummerSlam.

So next week we'll post the SummerSlam numbers. Those will be an important number to watch and seeing how we come out in our year.

On Page 12, you see there our TV rights fees are up 14%. We get TV rights fees for our TV programmings under our deal with Viacom. We get rights fees on RAW, Heat, Velocity and Confidential.

In the international area which Linda referenced and noteworthy is international rights fees were up 19%. We get rights fees from B SKY B in the UK, and J SKY Sports in Japan.

Also a part of this is and we include in here, is the executive producer fees that we get on movies and production that our super stars are in. I noted last night on RAW I saw the first ad, maybe I've missed previous ads, but I saw the first ad for The Rock's new movie on RAW last night. That was fun to watch and we did get about $1 million dollars of fees earned during this quarter, there are more fees to come, but $1 million dollars during this quarter that add to the TV rights fees.

On Page 13, you see our TV advertising revenue, up $16.1 million, off just lightly just with some changes in sponsorship revenue in the quarter. Our ratings are kind of consistent with the prior period, so the TV ad ratings earnings rates are about consistent with the prior year.

Then on Page 14 you see our Branded Merchandise--business, $12 million of revenue, down $4 million, down from about $17 million last year, is that right? I'm pretty sure that's right. And $4 million of profit contribution to margins in the Branded Merchandise area held steady at 34% by we clearly had a decline in year-over-year Branded Merchandise segments.

Venue merchandise is down with attendance. You know, the average attendance of events is off about 10% year-over-year, and the per cap spending was down in this period and we ended up with $2 million less of venue merchandise.

And the magazine business and our magazine business is suffering with the retail and the economy.

We did have one fewer special. We basically have two magazines that come out regularly and then we have a series of special magazines that come on and we did have lower sell through on our magazine business that contributed another $1.8 million of the decline.

And our home video business was off about $1 million dollars year-over-year and that's largely due to the change we had the lawsuit and many of you are familiar with the World Wildlife Foundation, had to change the name from WWF to WWE. And that impacted our ability to use old catalog titles. We had to pull old catalog titles that had WWF throughout the material and on the packaging.

So the actual number of titles that we have available is being rebuilt. This is a thing that will work out over time. And our new titles continue to be popular, and continue to be viewed well, but we essentially have fewer titles out there available in the home video business.

So if you cut through the $5 million decline year-over-year of Branded merch, $2 million from venue merchandise sales at the venues, $1.8 million from the magazine publishing business and about a $1 million from the home video business. We continue to work licensing deals. I think Stone Cold has got a book coming out in the fall for the holiday season that we are all excited about and looking forward to.

The new version of our video games for play PlayStation 2 and Game Cube will be coming out in the fall. Those are hot and top sellers in the video game category we're looking forward to those new products as well.

On Page 15, I just highlight for you, I think we did a good job in the quarter of managing SG&A. We've been working on keeping costs down and the SG&A and the overhead area. SG&A was $19.7 million versus $21.8 last year.

Some of the items that I highlighted for you earlier that were kind of unusual transactions and both of it's flow through, most or all, I think all of them flow through the SG&A line, the bad debt expense, et cetera. But no matter how you look at it, SG&A is down and it is good that it is down.

I'd also highlight that during this quarter we did implement, it's a small impact in the quarter, but we implemented a restricted stock program for senior management. We reduced the option, the annual option grant granted a little more restricted stock for the first time, trying to encourage senior management to own the stock and hold the stock and share the interests of our shareholders.

So we implemented a restricted stock program that will vest over 7 years with earlier acceleration upon the achievement of $65 million of EBITDA.

So one of the, you know, cost management building new products, developing new talent, great story lines all contribute to our hitting that $65 million of EBITDA. And I think the management team is very focused on those kind of achievements that will benefit the shareholders.

On Page 16, you see our balance sheet. Our balance sheet is in great shape. It's very clean, very simple balance sheet to understand. We do have $263 million of cash on hand. Accounts receivable are down. The balance sheet is simply in good shape, very little debt. We basically have a mortgage on this building, and it is all the debt that we have.

On Page 17 you see our cash flow statement. We had great cash flow in the quarter. Part of this you see we at year end right after WrestleMania we have a large receivable from Pay-Per-View and we collect the receivable so it flows into cash in the quarter so we have $16.7 million of cash from operations.

We spent $2.5 million on CAPEX and some other asset acquisitions. And we spent $22.2 million on share buybacks and the dividend.

We spent $19 million buying the Viacom stake back and we spent about $3 million, actually $2.7 million, on our first ever dividend that we declared and paid during this past quarter. So a good cash flow, balance sheet's in great shape, great cash flow business, great value business.

Page 18. You see our outlook. And the bottom line news here is that we're holding our revenue forecast where it was basically feeling like our Pay-Per-View business is up and international prospects are up, and the live events are still a little soft. So holding revenue, but we feel more confident about profitability, so we have increased our expectations of the profitability by about $2.5 million in a range. o we now expect EBITDA to fall between $42.5 million and $47.5 million .

Income from continuing operations to be $23 million to $26 million and earnings per share to be 34 to 38 cents a share for the year from continuing operations. So, if we achieve that range in numbers, EBITDA will grow anywhere from 13% to 26%. This year I hope that we will be at the higher end and earnings per share will grow 48% to 65% taking those numbers year-over-year on the face of it.

So, in summary I'd say that we had a good quarter. It was solid, you know, solid quarter. I think management did a good job of watching costs and continuing to invest in great stars and great story lines.

The Pay-Per-View business was especially given I can't emphasize this enough, Linda reemphasized it to, implementing the brand split strategy in the Pay-Per-View business, and seeing the Pay-Per-View results given a RAW-only Pay-Per-View and a SmackDown! only Pay-Per-View was very encouraging to all of us, and you should take that as an encouraging side, too.

Our international opportunities look good and were good in this quarter.

And I tell you that we continue to focus on our vision to be the preeminent global provider of entertainment that evokes a uniquely passionate emotion from our fans. And we continue to focus on our values where we put our fans first, where we're passionate about our product and where we prize innovation.

So with that, operator we'll turn it back over to you and ask if there are questions from the crowd, and let it go with that.

[OPERATOR INSTRUCTIONS] We'll take the first question from the site of Bobby Melnick of Terrier Partners. Go ahead, please.

Hi, thank you. One quick question and then one more philosophical question, if I may. Can you help to try and breakdown, versus the same quarter of last year, what the absence if any of the costs associated with your New York facility meant to this quarter vis-a-vis last quarter?

And then sort of a philosophical question after that that is unrelated if I may.

Last quarter we had $1.3 million loss last year from the World, and that's in discontinued operations so it breaks out pretty clearly on that one line item. And in the current quarter we had $200,000 of loss from that operation.

So about a $1 million pickup.

Yep.

Okay.

On the bottom line.

And philosophically, you've spoken in the past about the sorts of things you are looking for in terms of how you might deploy a portion of your large cash holdings.

Can you provide an update, please as to whether any of that has changed, whether it's still content? Linda, in the past you've spoken about looking at all sorts of things from film to distribution to your own network to et cetera. Can you just provide please an update on what the corporate thinking is now?

It really hasn't deviated very much from what I've said in the past. I think that, as I said with the hiring of Tom Borecka, we clearly are going be making some investments in the development of you know monetizing our film library. I don't think those are going to be very big costs at this particular point. I expect them to be more revenue generating.

With the film distribution, we are working, as I said, to develop those projects to go to market, which I think the primary first one may wind up to be a theatrical release that we would offset with a good partner. But I believe that the concentration and focus as we move forward with it will be to introduce it first to direct to DVD and home video.

If it shows it's got more legs than that, we would do some preliminary theatrical releases to see what kind of legs it would have both domestically and internationally, but again our investment in those would be, really protected on our down side basis.

So I think that we're continuing to invest in those content sides. I have not yet as we've looked out, found any company or operation for acquisition at this point. But as I've said before, we are not opposed to that as long as it would be accretive to what we are doing.

Thank you.

Next question, operator.

We'll take the next question from the site of Andrew Eritenberri (ph) with Gabelli. Go ahead Please.

Thanks. Just following up on the previous question, could you just kind of talk about monetizing the library, you know, maybe what the range of options are hypothetically kind of things that you're tossing around without getting into too much detail?

Okay. Because it would be difficult to go into much detail.

Right.

We started a bit already with our Fanatic series, that we offer pretty much on Direct TV. We haven't expanded that yet to In Demand. But the products that I think that are available for us, and again we do have--this project hasn't moved as quickly as I would like because of the restraints or constraints placed on us as a result of the WWF ruling you know in the UK.

Right.

So a lot of cleanup that has to be done in certain segments you know, of that library to put it out and some reworking. So we've been spending some time looking at that. How do we go about it, there'll be some cost involved in that but again it's not going to be multimillion dollars of costs but we have to make sure that we are within the rulings before we go out with those things.

So I'm not trying to be vague by that, but I think the first levels of opportunity are going to be on SVOD, video on demand and some wireless applications that we are working on now with Bell Mobility in Canada as well as with a distributor here in the United States for, you know, that's primarily wireless applications with repurposing of content that we already have.

We have acquired the AWA and the ECW library. We are growing to become, you know, kind of the, one of the unique places to go for wrestling classics here.

And I think that the classic series is one that we're going to be looking to roll out, you know, pretty quickly because it is already there and it doesn't involve a lot of the, you know the fund constraints. So those will be the first moving pieces that we will look for to monetize the library.

Okay. I just had two quick questions on the upfront. Can you talk about what percentage of your inventory you sold versus last year and also what kind of ratings guarantees that you gave in the upfront this year?

Phil, you might have that information more readily available in front of you.

Hold on one second.

Let me speak in general while Phil is checking those specifically for you.

Okay.

Typically we try to withhold 20% to 30% of our inventory in the upfront so that we can sell it in the scatter market because typically the scatter market as you get into the Christmas season, et cetera, is more in demand so we try not to go out to sell everything across the board. I think that's pretty much the way the industry works anyway.

As you know, we are not selling inventory in UPN. This year we have, starting with the television year, well, we're just going into that television year with UPN, so the available inventory to be sold is reduced in total number of minutes, though we do have guaranteed license fee from UPN.

Right.

So we'll see. I think you know bump in our total rights fee and advertising line as a result of that. But our numbers with our inventory, I think we're at a sell through. Phil do you have your fingers on that now do you think?

Linda, the answer you gave I think is the best answer we should give in terms of (inaudible). We withheld about 20% to 30% of the inventory for selling in the spot market and did that very consciously feeling good about our ratings and the prices we were seeing and the demand. So we could have sold more and we held back a good chunk for the spot market.

Right.

Our actuals are holding in with kind of the general philosophy that we've always maintained. Okay. I didn't have that specific number so I'm glad that is where we are.

You were close. Anything else, Andrew?

Anything on the guarantees? Ratings guarantees?

We are selling, let me think. It varies, depending on the package, that's put together whether it includes our syndication marketplace. Because we do have syndicated shows that we sell as well as RAW, as well as all the programs on TNN and they're various packages.

So it so depends on whether or not we're selling to a male demo. It depends on what the advertiser is looking for and we sell into the strength and custom those packages. So there are guarantees on CPMs relative to you know whatever demo that we are selling at that particular time.

We have had reserve for under delivery over the past year, but we are eating up that reserve. And I think as we move forward we're a little more conservative so we only put through about a 10% increase in ratings for ourselves moving forward in the market this year.

Okay.

Andrew, what I'd add to that is I'd tell you that we are selling it at a pretty good knockdown from where the ratings were last year.

Right.

A little bit above where we are now so not. So there's not that, I don't anticipate we will have the ADU situation the ratings that we sold on were more conservative than last year. And so I'd expect that we wouldn't be building up our ADU liability in the future

Okay.

We are burning that ADU liability off as we speak delivering a lot of those units in this current month.

And part of that is due to the ratings increase that we've been seeing so that's all a good trend and good news in the area.

All right, thanks.

Okay. Next question, operator?

[OPERATOR INSTRUCTIONS].

Well, summertime and I'm sure everybody is getting ready for Labor Day, so if there are no other questions we'll wait here a second, but we'll let everybody get on to about their business. Anything else, operator?

I'd just like to add, too, Phil, that as always, you know, we are available to take, you know, additional questions et cetera through your office or my office at any time and willing to come and make you know presentations or to take people through how our business works. We're very happy to do that.

Right. Okay, operator?

At this time there appears there's no further questions.

Okay. I'll thank everyone for being on the call. I appreciate it a lot and I thank our team and our employees for all their good work and thank you Linda and have a good trip back and we'll see you soon and we'll talk to you, the investors soon, I hope. Thank you and good day.

Goodbye everyone.

This now concludes today's teleconference. You may disconnect.