Nexstar Media Group, Inc. Q4 FY2021 Earnings Call

Good day, everyone and welcome to the Nexstar Media Group Fourth Quarter 2021 Results Conference Call. Today's call is being recorded. And now at this time, I'd like to turn the call over to Joe Jaffoni of Investor Relations. Please go ahead.

Thank you, April, and good morning everyone. I'll just read the Safe Harbor language, and then we'll get right into the call and your questions. All statements and comments made by management during today's conference call other than statements of historical fact may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Nexstar cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during today's call. For additional details on these risks and uncertainties, please see Nexstar's Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission, or the 10-K for the December 31, 2021 year which will be filed with the SEC on or about February 25, 2022 and Nexstar's subsequent filings, public filings with the SEC. Nexstar undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Thank you for your patience. With that, it's now my pleasure to turn the conference over to your host, Nexstar Chairman and Chief Executive Officer, Perry Sook. Perry, please go ahead.

Thank you, Joseph, and good morning everyone. Thank you very much for joining us today. Nexstar's 2021 fourth quarter financial results mark the end of an outstanding year for the company as we achieved another record year with full year 2021 revenues exceeding what was also a record 2020, which as you will recall, included record political revenues. In 2021 we grew revenues across each of core advertising, distribution and digital demonstrating the strength of our business and also the recovery of the ad market. Our fourth quarter and full year 2021 net revenue, adjusted EBITDA and free cash flow, all exceeded consensus expectations. We are also pleased this morning to issue our guidance for average annual free cash flow for the 2022-2023 cycle of $1.4 billion annually, which again, will be a record amount of cash flow for Nexstar. Tom Carter, Nexstar's President and Chief Operating Officer; and Lee Ann Gliha, our Chief Financial Officer are also here with me this morning. I'll start with a summary of recent highlights and developments, followed by Tom's operational review and Lee Ann's financial review, then we'll open for questions. First, I'd like to comment that we're feeling good about the overall business environment. So far in Q1 2022, our core advertising is pacing ahead of 2019 levels, which is a real testament to the strength of our business and the economy since our largest category auto, while recovering remained still somewhat challenged. Q1 2022 has benefited from the Olympics and Super Bowl as we are the second largest NBC affiliate group, as well as early political impact spending in response to the upcoming Supreme Court nomination and other local and national political issues. Local television advertising remains the gold standard for effective political campaigns because it has the biggest credible influence on voters. For 2022, we anticipate we will generate a record level of mid-term net political revenue eclipsing our pro forma 2018 midterm political revenue number of $383 million. We also anticipate a recovery in the automotive category. In addition, as Tom will cover later, we continue to see strength in the sports betting category with new states legalizing online sports betting, including New York, Connecticut and Louisiana and most recently, Illinois, which is expected to come online in March and we already have orders on the books. Likewise, you can expect to see continued growth in our distribution revenue based on 2021 MVPD renewals and the annual escalators we have in all of our contracts. In 2022 we have contracts representing more than half of our subscribers up for renewal and repricing, which will benefit us in 2023. In 2021, we significantly expanded programming at NewsNation, with 13 hours of original news programming per weekday and we completed the accretive acquisition of The Hill's digital political news platform bringing synergies across multiple of our business lines. From a financial perspective, we are the only cable news network to launch profitably, while our audience for NewsNation is still modest, we are the fastest growing cable news network and advertisers are validating our strategy and NewsNation's unbiased content as we generate the same CPMs as our cable news network peers. In the fourth quarter and throughout 2021, we continue to focus on leveraging Nexstar's industry leading scale and content platform to drive near and long-term growth, while creating value for our customers, shareholders and communities. Over the course of the year Nexstar launched multicast network, Rewind TV, which together with Antenna TV, our other owned and operated network as well as our multicast services generate combined eight figures of annual adjusted EBITDA. In 2021 we deployed NEXTGEN TV in 17 markets, expanding our coverage to 29% of all US television households and we're on pace to launch additional stations to increase our reach to 50% of the US population by the end of this year. Nexstar is among the nation's largest holders of spectrum and we believe our scale and national reach will be critically important to cultivating demand for its use. What we're most excited about are the myriad new revenue opportunities that our spectrum will represent. Consistent with our capital allocation priorities and focus on enhancing shareholder value, in January, our Board of Directors increased Nexstar's quarterly cash dividend by 29% to $0.90 per share per quarter. The double-digit increase in Nexstar's dividend for the ninth consecutive year, ongoing opportunistic share repurchases and our free cash flow growth will allow us to continue delivering industry-leading returns to our shareholders. And of course, we will continue to pursue M&A opportunistically to drive shareholder value as we've done for our almost 26-year history. Our approach of saying at Nexstar, we'd like to read the financials from the bottom up. We apply that ethos to pretty much everything that we do including our M&A. In January, we released a new investor deck on our website, which I encourage you to review. The deck highlights the assets and scale of our business, the investment thesis for the company and how we plan to grow both in the short and long-term. Nexstar is a scaled business with a significantly larger footprint than other broadcasters. We reach over 210 million people in the United States with our television signals and over 120 million monthly uniques with our digital assets making us the top 10 digital news and information property. We also have a differentiated free cash flow focused model which positions us well versus the larger diversified media interests. For those of you looking to invest in Nexstar, we think this could not be a better time. We have excellent three-year visibility on the business with 2022 being a political year, 2023 benefiting from our expectation of increased retransmission revenue as more than half of our distribution agreements will be up for renewal towards the back half of 2022. And in 2024 we have both the presidential election year, and we will also have the benefit of the increased revenue from 2023 distribution agreement renewals. This solid expected financial performance will provide us with the financial flexibility to expand and pursue strategic organic growth initiatives, as well as accretive M&A, while supporting growing shareholder returns. With all of that said, let me now turn the call over to Tom Carter for our operations review. Tom?

Thanks, Perry, and good morning, everyone. We're extremely proud of the consistent growth of our operating results throughout the pandemic as well as the more than 12,000 members of the Nexstar Nation across the country who while serving their local communities have consistently demonstrated their ability to offset challenges putting Nexstar on a path for continued success and growth. Operationally Nexstar's strong 2021 rebound continued in the fourth quarter. Nexstar's net revenue of $1.25 billion topped consensus expectations and excluding political advertising revenue, net revenue increased 13.8% over the 2020 fourth quarter, reflecting our success in delivering continued strong growth across all of our non-political revenue sources. Core television advertising revenue for the quarter were $494 million, an increase of 3.4% over the prior year's quarter as healthy demand from advertisers resulted in solid growth in eight of Nexstar's top 10 advertising categories. Q4 top gaining categories were entertainment, sports betting, medical healthcare, department stores, and retail stores and telecom, offset by continued declines in auto and insurance. As we've done consistently for many quarters, Nexstar's local sales initiatives continue to deliver healthy levels of new business with our sales teams generating new to television revenue of $37 million marking an increase of 33% over the prior year's quarter. In comparison to the pre-COVID market environment of 2019, Q4 2021 levels were still slightly below Q4 2019 levels due in large part to the decline in automotive, but if we take out the highest and the lowest scores, excluding automotive our weakest category, and sports betting, our best performing category over that timeframe, 2021 fourth quarter core television advertising exceeded pro forma 2019 levels with growth across a wide swath of our advertisers. We expect Nexstar's positive ad trends to continue, and as you heard Perry say, are pacing that way in Q1 of 2022. As mentioned, sports betting was a bright spot for us as it was a top five category in all of 2021 and in the fourth quarter. We continue to see strength in 2022 in a category as new states such as New York, Connecticut, and Louisiana have launched online sports betting in the fourth quarter of 2021 and early in 2022. We anticipate a new law in Illinois, allowing remote registration for online gambling expected to take effect in early March to positively impact the online sports betting category through our stations in that state and our station in neighboring Missouri which has coverage in Illinois. We are cautiously optimistic about this category given the continued spend we see in markets that we've been live in for a longer period of time, but we'll see how these sports books evolve their spending over a period of time. We do know that local television has been an effective way for sports books to increase their brand awareness and attract new players to their sites and apps. The power of Nexstar's portfolio has also been beneficial to us in capturing these sports dollars. For example, we're seeing significant dollars in New York, where given the breadth of our assets we reached the entire state. Overall in Q4 2021 approximately 57% of our core advertising was from the services category and 43% from goods, including 16% from auto. Our concentration in services-based businesses has helped insulate Nexstar from exposure to categories with supply chain disruptions like automotive. In addition, we expect that this should bode well for us in an inflationary environment where our customers have less near-term pressure on cost of goods sold. In addition, our overall fixed cost infrastructure should be beneficial as we have a top line that can grow with inflation. Fourth quarter distribution revenue of 16.6% from the prior year rose 16.6% from the prior year to approximately $616 million, reflecting the renewal of distribution agreements in 2020 on better terms. We continue to have good visibility into our net economics with all four of our big three affiliations contracted through December of 2022 and only our ABC affiliation agreement up at the end of that year. We expect continued retransmission growth reflecting contract renewals on better terms representing a mid to high single-digit percentage of subscribers in 2021 and more than half of our subscribers in 2022 resulting in a higher rate of growth from this revenue source in 2023. Q4 digital revenue increased 56.3% year-over-year to approximately $102 million with digital adjusted EBITDA up substantially over the prior year period. Our top line increase was driven by strong year-over-year growth in our local digital advertising revenue and agency services business and contributions from last year's acquisition of BestReviews and the full first quarter contribution from The Hill. With the momentum of our audience development strategy and content we expect growth in our digital revenue and cash flow going forward. Top-line growth of our non-political sources combined with expense management drove fourth quarter adjusted EBITDA and free cash flow before one-time transaction expenses of $499 million and $330 million respectively. Nexstar generated a 39.8% adjusted EBITDA margin and we converted approximately 66% of our adjusted EBITDA to free cash flow. Before turning it over to Lee Ann, I'd like a moment to highlight our recent work and success on ESG initiatives as I know this is an important topic to our Board, communities and employees, shareholders and other constituents and stakeholders. The Board of Directors recently took a positive action from a governance perspective by unanimously voting to recommend that shareholders approve an amendment to the corporate charter to eliminate the Company's class B and class C common stock classes. The class A common stock has been the only class of shares outstanding since 2013. So this is the cleanup to bring the charter in lockstep with the practice to only have one class of voting stock, which is a good governance practice. Additionally, from a governance perspective, we expanded our commitment to fair and unbiased reporting by management adding restrictions on our journalist direct involvement in local, state and national politics. Nexstar almost formalized a policy prohibiting the Nexstar political action committee from soliciting or accepting contributions from Nexstar journalists and news personnel. Having an unbiased and fair reporting process on all of our news products is a core tenant for Nexstar as evidenced by NewsNation, The Hill and our local TV news. Regarding human capital management, we have significantly increased our disclosure around workforce demographics via our September 2020 census, which was disclosed in last year's proxy. We anticipate updating this information in our 2022 proxy in advance of this year's annual meeting. Also in 2021 our workforce – for our workforce we established the diversity inclusion council and a mentorship program to support the success of these initiatives in May of 2021 we promoted Courtney Williams to the newly created position of Chief Diversity Officer, where she is responsible for leading the company's efforts to expand diversity in hiring, promotion and retention. Ms. Williams also serves as Chairperson of the Nexstar D&I Counsel. 2021 was the first year of a multi-year partnership Nexstar has with Feeding America, which combined cash and in-kind contributions totaled more than $1.6 million in its first year. The combined efforts led Feeding America to name Nexstar a leadership partner. From an environmental perspective media and entertainment has been judged by SASB to not exhibit primary characteristics of the key types of climate change risk, Nexstar, however, is in the process of building systems to better track our current power consumption levels in order to thoughtfully map a plan for future usage reduction and an increase in sourcing of sustainable power. Additionally, we continue to look for ways in which we can reduce our overall carbon footprint by becoming more efficient. Some of our current initiatives include replacing lighting and transmission equipment that consumes less power. In summary, we're excited not only about the strength and results of our existing platform but by the many organic and M&A growth opportunities in front of us. With that, it's my pleasure to turn the call over to Lee Ann for the financial review and update. Lee Ann?

Thank you, Tom, and good morning everyone. The solid foundation of Nexstar's operations and financial position allowed us to achieve strong results for the fourth quarter and the full year 2021, setting us up well for a promising start to 2022. As Tom mentioned, net revenue for the quarter fell 9.5% compared to the same quarter last year due to political comparisons. Excluding political revenue, net revenue rose by 13.8%. On a comparable station basis, net revenue dropped 12.6% but increased by 8.9% excluding political revenue. Same station core revenues grew by 2% for the quarter and 8.7% for the year. Distribution revenue increased 15.8% for the quarter and 12.9% for the year, while digital revenue went up 4.4% for the quarter and 11.1% for the year. Nexstar achieved an all-time high net revenue of $4.65 billion for the full year, marking a 3.3% increase from the prior year. This impressive revenue growth was fueled by record core advertising, distribution, and digital revenue, all of which saw double-digit growth over 2020 levels, compensating for a $462 million decline in political advertising revenue. Excluding political revenue, the net revenue increased by 15.3%. In the fourth quarter, direct operating expenses, SG&A, and trade expenses all rose, primarily due to higher core and digital advertising revenues and expenses related to station and digital acquisitions, including a full quarter of expenses from The Hill. Total corporate expenses were around $44 million, which included approximately $12 million in non-cash compensation. Fourth quarter CapEx was roughly $42 million, with spectrum repack CapEx at about $3 million, and we received $1.8 million in reimbursements from the FCC. Total interest expense for the fourth quarter decreased by 6% to around $70 million. Cash interest expense was approximately $66 million, down from $70.6 million last year due mainly to lower first-lien borrowings and a reduced interest rate. Fourth quarter operating cash taxes were $72.5 million. We also recorded $17 million in distributions from equity investments due to our 31% stake in the TV Food Network during the fourth quarter, which continued to perform strongly. For the full year, these distributions totaled $239.5 million, a 7% increase from the previous year. Looking ahead, we estimate corporate overhead, excluding stock compensation and transaction costs, to be around $35 million in the first quarter and approximately $140 million for the full year. Non-cash compensation is projected to be about $30 million for the quarter and $58 million for the full year, though this will vary based on stock price and actual grants. Operating cash taxes are forecasted to reach approximately $374 million to $386 million for the full year. To provide some context, we utilize a 26.5% tax rate to calculate our estimated tax before one-time and other adjustments. Timing-wise, a small state tax payment will occur in the first quarter, with two payments usually made in the second quarter and one in each of the third and fourth quarters. Cash CapEx is expected to be around $41 million for the first quarter and $150 million for the full year, as we typically allocate more funds to CapEx in even-numbered political years than in non-political years. We anticipate Nexstar's cash interest expense to total roughly $68 million for the first quarter and $300 million for the full year, considering current LIBOR estimates and anticipated debt repayments. Regarding the balance sheet, Nexstar's outstanding debt as of December 31, 2021, stood at $7.42 billion. Total net debt was about $7.4 billion at year-end, down from $7.7 billion at December 31, 2020. For first-lien covenant purposes, net debt was $4.6 billion. Our net first-lien covenant ratio at the end of the year was 2.3 times, which is well below our first-lien covenant limit of 4.25 times. Our total net leverage for covenant purposes at the end of the quarter was 3.7 times. The slight increase over the prior quarter was due to the fourth quarter’s political revenue from 2020 dropping out of the last 12 months' covenant EBITDA calculation. We anticipate a reduction in leverage by the end of 2022, driven by freeing up cash flow to reduce debt and increase EBITDA in alignment with our outlook for the year. For the entire year, we returned $655 million, or 53% of our free cash flow, to shareholders in 2021. The rest of our free cash flow was allocated for acquisitions, CapEx, and debt repayment. Moving forward, we will continue to strategically deploy our cash in ways that align with our commitment to maximizing shareholder value. Given the factors discussed by Perry and Tom earlier, we are optimistic about the prospects for 2022 and remain confident in our ability to enhance shareholder value and achieve our new average annual free cash flow guidance of approximately $1.4 billion over the 2022-2023 cycle. Before we open the floor for questions, I'd like to note that regarding our 2022-2023 free cash flow guidance, we’ve factored in our current best estimates for growth in our core business, assuming no mergers and acquisitions or unusual transactions. Therefore, free cash flow will be channeled into debt repayment, dividends, and share repurchases. We've also accounted for the rising interest rate environment, which will impact our expected growth due to our significant floating rate debt load. That concludes the financial review for this call. I will now turn it over to the operator to open the line for questions.

Thank you. We'll first hear from Steven Cahall of Wells Fargo. Please go ahead.

Thanks. I've got one each for Perry, Tom and Lee Ann. Maybe first Perry, could you just provide us a little more color around the elimination of the B&C class shares? I always thought of those as maybe like a poison pill for times when the stock were down precipitously like in 2020. So does the elimination of that suggest that maybe there is a better M&A environment out there? We've seen the company transact today with both strategic and financial buyers. So, any color on your thinking on the share price elimination would be great. And then, Tom, what do you think happens to core ads this fall? Typically we model in crowd out pushing core down in the mid-term, it sounds like you might get auto back right around the time that political is there. So, do you think the dealers are going to spend and pay those politically due straight or will there be some crowd out? And then finally, Lee Ann I think you said you didn't join Nexstar to just pay the dividend and buyback stock. When do you think about M&A, what are some of the things that you're looking for in the marketplace? Thank you.

That's quite a lot to unpack, Steve, but let me begin. The three-class share structure was established when we were a controlled company, with ABRY as a partner and myself holding B shares, which were super voting shares with ten votes each. We eliminated those when ABRY exited their stake in the company. So, we are essentially tidying things up by removing the B and C class shares, with the C class shares never actually being issued. I agree with you that transitioning to a one-class stock system, where there's one share and one vote, creates a more favorable environment for shareholders. This step was taken by us, and we believe it will lead to a positive outcome for shareholders when they vote on it at our annual meeting in June.

And Steve, to follow up on that, this also makes Nexstar eligible for certain indices that do not include multi-share class stock structures. Currently, we are excluded from some of those indices, but after the shareholders' actions in June, we expect to be eligible and hopefully viewed positively from that standpoint. Regarding your question on advertising, we believe that auto will rebound to some extent in the latter part of the year and be able to compete with a politically heavy environment. We’re confident that even if auto is nominally excluded for a 6 to 8 week period in September and October, or pushed back to November or December, there is significant pent-up demand. Once inventory starts moving, dealers will become more competitive in their efforts to push inventory through their lots and attract consumers. That’s our perspective on the auto market in the second half of the year.

Yeah. And with respect to M&A, Nexstar has done a ton of M&A over the history, and that's created a lot of value for shareholders. And so, I anticipate that we'll continue to do the same going forward. I think from our perspective what we would look for, I mean clearly, first, if we can do station M&A, that's our bread and butter, we know how to do that. That creates a lot of value. We would continue to do that to the extent there are opportunities within the current regulatory framework. But then I think also, we're going to just look for businesses that we can leverage using our scale and the platform that we have. So that kind of pushes us towards more content-based businesses. You can look at what we've done in the past with respect to The Hill where now we can utilize that content on NewsNation and other of our websites or for example BestReviews where we were able to air commercials about BestReviews that helped drive the traffic to the BestReviews website. So those are the types of things that we'll think about and as we'll always be looking for what we can do to generate the best return for shareholders.

Thank you.

Great. Thanks. Good morning, Perry and everyone, there's a stroll down memory of late a few thousand percent to go. Just maybe one kind of complex multi-part question around retrans. As you guys think about the evolution of the market now, we've heard from Paramount talking about flat affiliate growth and that's a combination of sort of more minimal step-ups on the growth side and also significantly for you guys no real step-ups on renewals on network comp or on the reverse side. Clearly we think that the broadcast will be better on growth just given local news and how kind of the disparity between eyeballs in the bundle. But just help us think through sort of the net retrans guide embedded in your free cash flow? And also as these guys continue to put more and more dollars behind streaming and streaming content how the evolution of their own premium bundle impacts that outlook? Thanks.

Regarding step-ups, these are clearly influenced by renewals. Over 50% of our subscribers will see price adjustments in 2022, primarily in the second half of the year and mostly in the fourth quarter. This will be a major factor. We also have insights from deals at the end of 2021 that are impacting 2022. As mentioned earlier, we believe our growth potential per subscriber, despite some anticipated subscriber losses, is higher than ever before. Additionally, our retransmission margins will consistently exceed 50% due to the composition of our station portfolio. In key markets, our CW and MyNetwork stations, which are independent, achieve nearly 100% margins on retransmissions, and those areas have a substantial number of subscribers. Thus, the inherent structure of our station group positions us to produce net retransmission margins that we believe will outperform our peers significantly over the long term.

Yeah, I guess, Perry, maybe just more in terms of the net retrans dollar growth. Would you say now, just given the change and sort of the landscape that you are more confident or are seeing equivalently confident in kind of the prior stated net retrans guide or outlook?

Probably more confident, because our negotiations with the networks they realize that we pay for exclusivity and local distribution. We monetize their content through local ad sales and through local distribution via retrans revenue dollars and the less and less exclusive that content becomes the less and less appetite we have to pay increasing premiums for it. So, and I think the networks realize that because their asks are much more moderate in terms of reverse compensation than they have been historically. So we feel, again, scale matters when you're the largest affiliate group for CBS, number two for NBC, number three for ABC, number one for FOX, number one for CW, and number one for MyNetwork. It's important to be important, because then the conversations I think become a lot more business focused and less emotional. And that's quite frankly the way we prefer it.

Hi, everyone. Thanks for having me on. One quick follow-up on auto. I know you describe the category as challenged still. How would you goalpost, is it flattish? Up a little bit? Down a little bit, but still lagging kind of the rest of the verticals you mentioned? Can you give any more granularity around that?

Well, if I look at our fourth quarter results, it was not a high bar performance in 2021, but it was the best quarter of the year in terms of the least percent down to the prior year. And I think it continues on here in 2022. We still projected to be down versus the prior year, and it's anecdotal by nameplate. You saw a lot of key ads in the Super Bowl and you can extrapolate that to growth in our automotive categories in the foreign. And so I think that obviously it's supply chain related, and to a certain extent the way people are buying cars is a little different than it was in the past. I read a stat last week that literally more than 25% of the cars that are being shipped to dealers have already been sold because of the backlog, people go on, they can't find it on the lot, what's available, what's on the truck, what's on a ship coming here and maybe I'll put down $1,000 to reserve that. So we do think though that as time goes on and with the age of vehicles on the road with new models being introduced, there is still a desire for a showroom experience, notwithstanding the problems in some of these delivered to your door companies have had with title and other things like that. So will it ever be 30% of our ad support, again? No, I don't think so, but will it be north of 20%? Yes. Is it now? No, just barely below that. So I think you'll see continued improvement in auto as the year goes on. But we think it'll be kind of a back half of the year event before we start to see improving trends in the category, although it's kind of flat-lined at a level we're not happy with right now, but we're not really seeing wholesale declines in tier one, two, or three spending at this point from kind of the bar that was established in 2021.

That's helpful, Perry. And based on the discussions you're having, do you feel that auto as a category for local TV can get back to pre-pandemic levels? Or has some of that maybe leaked towards digital or other outlets?

I don’t believe it has leaked. I think it will be evident that they are making significant profits now and will need to invest some of that to return to pre-pandemic levels. The car buying experience has changed in some aspects and may rely less on showrooms. Do I think it can return to the levels seen in 2019? Yes, that's possible. Will it return to 2015 levels? Maybe not. So, while it is possible for it to recover, I can't predict whether that will happen in 2022 or 2023, but I think that’s the timeframe we should consider.

Thank you. From our perspective, we will likely continue to reduce our debt, leading to a decline in our leverage due to this repayment and our expectations for increases in EBITDA. To achieve investment grade status, we would need to reduce our debt significantly and allocate more capital towards that goal. However, I'm not convinced that the advantages of being investment grade, in terms of lower potential interest rates, are substantial enough compared to other ways we could redeploy that capital, such as through accretive mergers and acquisitions or share buybacks. Therefore, becoming an investment grade company is not necessarily something we are aiming to achieve in the near or medium term.

Thank you. Jim Goss of Barrington Research.

Thank you. I was wondering if you can comment on the changing mix of car advertising categories. It is good to hear that auto is improving. I wonder if you could also compare the values of new and emerging categories to those that may have declined. I know you mentioned that gaming is becoming more significant. In that context, could you also discuss whether the MLB labor action presents an opportunity or a risk?

Sure. Well, just if I look at our fourth quarter top 10 categories, we mentioned that gaming and sports betting lottery, just all gambling taken together was up about 25% over Q4 of 2021, but retail was up 31% and home repair manufacturing up 21%, medical healthcare up 24%, attorneys commercials, we all love to hate, up 12% over the prior year. So eight of our top 10 categories were up over the prior year, and five of those eight were up double digits and not insignificant double digits. Really we have no exposure to speak of to major league baseball. That's more of a RSN issue. I mean the games that air on FOX, but that's network programming they will be replaceable, other network programming so it's really not an issue to us to speak of from a financial point of view. So I think that's kind of our take on both the sports betting and also Major League Baseball. As a fan, I'd like to see him play, but that's going to be up to others. Yes, it is Jim, a couple of things I'll say about that is that, we think you've got to build the toll road before you can charge people to drive on it. And all we're really doing now is activating 3.0 signals, it's not really a 4K viewing experience. It's a pass-through of an up-converted HD signal, but it's basically to light the light in the TV, which will hopefully increase awareness and adoption and help the technology be more fully distributed. We are involved in a test with Scripps in Michigan, which I think I've mentioned before where Scripps has a station at Detroit. We have stations in Lansing, Michigan and Grand Rapids, Michigan, both a Hollywood studio and an OEM are interested in driving a car across the state of Michigan and seeing what kind of an in-car viewing experience that is of either 3D navigation or sets in the headrest facing the back seat. And so there is interest in the technology. There's interest in potential use cases. But we've got to have a much more robust footprint of ATSC 3 signals. And again, you don't need to be broadcasting of 4K picture to take advantage of the ATSC 3.0 spectrum and signal utilization. So the business case might come even sooner down the road than any 4K viewing experience might for local consumers, because of the way the transition has to take place. We don't have a second stick that we can develop into 3.0 like we did with analog to digital and then one day turn all the other ones off right now. We have light houses for 3.0 signals and 1.0 signals during a transition. The transition is voluntary. So it won't be a big bang transition. It will be done kind of on a regional, maybe even market by market basis. So it's hard, but it's not impossible. But again, we agree with BIA/Kelsey that spectrum revenue or rental or high-speed data transmission revenue could one day rival what retrans is to the industry today and so that's why we are leaning forward. I will note that we have had some conversations with Scripps because with their portfolio of Ion stations they and we now have an unduplicated reach of almost 92% of US television households and so, we're talking about getting together to discuss ways we could work together to further advance the business case of ATSC 3.0. So, look for more to come on that as 2022 rolls on.

Thank you. Tom, I want to you, your retrans subs, I think in the last quarter you said it was down 4% to 5% on a trailing 12-month basis. How is that number this quarter, please?

Again it continues that same trajectory, improvement over 2020 and we believe that the fourth quarter was better than the average for the entire year, which was a mid to high 4% number for this year and a mid to high 5% number for 2020. So the trend has stabilized, and is positive from our perspective.

Okay. And my next question. I think in the last few conference calls, you guys have talked about your net retrans for the year, your expectations for 2022 up mid to high single digits. Is that still holding your mind?

On net retrans, yes, mid to high single digits.

Okay. And then I want to ask you guys, when you think about your small versus large markets you think about the different regions around the country that you have your TV stations. Is there a material difference in the ad revenue performance? I was trying to get a gauge for you guys about how the local economy, so there is a significant difference out there in your various markets?

If there was a difference, I think it's virtually disappeared at this point. The densely populated major markets have been a little slower to reopen compared to markets in Texas or smaller ones that are more socially distanced. From our perspective, the biggest impact in ad revenue has been the introduction of sports betting into communities where it hadn't existed before, which is probably the main catalyst. However, with major cities like DC eliminating mask mandates and restrictions on restaurants, we don't see a significant difference from one market to another. There are many factors that contribute to performance in each market, but I don't believe you would find statistically meaningful variances when sorting by affiliation, geography, or market size. So, I don't think there's much to observe there.

And then I think I heard you guys say you are expecting your core TV ad revenue up in the first quarter year-over-year. I assume that sort of means up low-single digits, maybe you could touch on that, but more importantly I would love to hear your thoughts on the higher inflation rates out there, the outlook for higher interest rates where you've sort of thought is that what that means to your core ad revenues as the year plays out? It's a positive, negative, or sort of neutral in your mind to overall percent change? Thanks.

So historically inflation has been a friend to our business, because it gives us some ability for cover for pricing power and pricing increases. So, I don't think of inflation as a bad thing. I can tell you that when Lee Ann and Tom and I were developing the free cash flow guidance which we gave, we absolutely incorporated a higher interest rate environment that may not be at this point fully recognized by everybody's estimate on the street, but we certainly have taken that into account through '22 and '23, and I think we're being conservative into where we might end up in terms of interest rates there.

And Craig, with regard to our first quarter revenues, I do believe we think it's up, I don't think we characterize a percentage or a range for that at this point, but yes, we do believe that will be an improvement.

Thanks for taking the questions. I've got three. First in terms of M&A, you did say content related. Just wondering what your appetite is for general entertainment versus news where you focus most of your efforts? Second, in sports gaming just wondering, it may be a little bit early to tell, but what you're seeing in retention spending in states after that initial big launch, and I do realize there are big states like Texas and California that haven't launched? And third on the fixed versus floating rate on your interest expense, I know keeping everything floating is certainly worked well for you. Share any thoughts that maybe you might want to fix the interest rates given the proposed interest rate increases? Thanks.

So, let me start by discussing our debt structure in terms of fixed versus floating rates. Currently, about 65% to 70% of our debt is at a floating rate, while the remainder is fixed. We are certainly monitoring the trends in the capital markets. At this moment, it may not be the best time to enter into a fixed rate agreement, but we do consider your point as we plan our capital structure moving forward. Regarding the continuation of sports betting, it's a relatively new market, and I understand that this can make it challenging to provide accurate year-on-year comparisons. However, I can say that some markets have been legal for a while and have performed very well. On the other hand, there are markets that have seen a decline over time. Overall, it's been a mixed situation, but we remain optimistic about the business moving forward as new states continue to launch.

The growth in the first quarter for sports betting remains positive in double digits. This is due in part to new markets as well as existing ones where sports betting has been around for six months or longer. Typically, it ranks among the top three categories in ad revenue. However, as Lee Ann mentioned, the category is still so new that establishing a trend line is challenging. There’s also uncertainty regarding whether Texas will eventually approve sports betting, which is why the largest casino in North America is located just across the state line in Oklahoma. Consequently, we believe that advertising for this category will primarily occur locally and on a state-by-state basis, since we doubt it will become legal in all 50 states. I also forgot the initial question you asked, so could you please repeat it? I think we’ve built the company with local content, which is primarily our local news. We created a national content with our national cable news network. We had political content with The Hill, and so I think the things that you would see us add would be complementary to those. So what are the big category holes or areas there you know sports and weather come to mind that complement what we have already. I don't think you'll see us compete with Netflix for writers and producers to produce scripted entertainment programming, but obviously we air a fair amount of scripted entertainment programming vis-a-vis our syndication and network relationships. So I think there is obviously a desire to have some control of your own destiny there, but at the end of the day it's not going to be the focal point for the company, could it be complementary to what our core competencies are. We'll see as time plays on.

Thank you all for joining us today. We're off to a great start in Q1 of 2022. We look forward to reporting those results to you in early May, and thank you very much for joining us today. That does conclude today's conference. Thank you all for your participation. You may now disconnect.