Earnings Call Transcript - SSP Q4 2023

Operator, Operator

Thank you for standing by. Welcome to the Scripps Fourth Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Executive Vice President of Investor Relations, Carolyn Micheli. Please go ahead.

Carolyn Micheli, Executive Vice President of Investor Relations

Thanks, Rich. Good morning, everyone, and thank you for joining us for a discussion of the E.W. Scripps Company's financial results and business strategies. You can visit scripps.com for more information and a link to the replay of this call. 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. We do not intend to update any forward-looking statements we make today. Included on this call will be a discussion of certain non-GAAP financial measures that are provided as supplements to assist management and the public in their analysis and valuation of the company. These metrics are not formulated in accordance with GAAP and are not meant to replace GAAP financial measures and may differ from other companies' uses or formulations. Included in our earnings release are the reconciliations of non-GAAP financial measures to the GAAP measures reported in our financial statements. We'll hear first this morning from Scripps' Chief Financial Officer, Jason Combs; then from Scripps' Chief Operating Officer, Lisa Knutson; and finally from President and CEO, Adam Symson. Here's Jason.

Jason Combs, Chief Financial Officer

Thanks, Carolyn. Good morning, everyone, and thank you for joining us. Let's start today with a look at our strong finish to 2023. I want to review a few fourth quarter and year-end highlights. Then I'll give guidance for the first quarter and several full year items, and I'll conclude with capital allocation and our debt picture. We were very pleased to end 2023 by significantly exceeding our free cash flow expectations. On our last earnings call in November, we set a range of $50 million to $60 million in full year free cash flow, and we ended at about $77 million. The over performance was driven by our highest political advertising revenue for an off-cycle election year as well as stronger-than-expected ad revenue results in Scripps Networks. Also in 2023, we achieved $752 million in distribution revenue as we renewed 75% of our pay-TV households. That was up 15% over 2022, and those results drove net distribution dollars up more than 40%. We are pleased we were able to successfully avoid any blackouts with the cable and satellite providers throughout all of those negotiations. For the fourth quarter of 2023, we reported finance results that nearly all met or exceeded the expectations we set in November. We executed tight expense management, and our Scripps Networks revenue came in better than expected at down only 7%, driving Networks segment profit performance. Scripps Networks revenue for the fourth quarter was $230 million, exceeding our guidance because of better-than-expected revenue from all three key areas: general market, connected TV and direct response. Scripps Networks Q4 segment expenses were $166 million, down 1.2% from the prior year quarter. Segment profit in Networks was $64 million. In our Local Media division, total revenue was down 12% from the prior year quarter due to the absence of election year political advertising revenue. Political ad revenue in Q4 2023 did exceed our expectations at $16 million, driven by spending in Montana and Ohio. Total political ad revenue for 2023 was $33 million. As I mentioned before, the highest for an off-cycle election. Fourth quarter local core advertising revenue was up 1% from the prior year period, and local distribution revenue was up 22%, fueled by renewals of our cable and satellite agreements. Local Media expenses were up less than 5% from the prior year quarter. This increase reflects higher programming fees and the cost of sports rights agreements with two National Hockey League teams. Local Media segment profit was nearly $86 million. In the segment labeled other, we reported a fourth quarter loss of $12 million. The segment includes spend on promoting our Tablo over-the-air viewing device. Shared services and corporate expenses were $24 million, up a bit from our November guidance as better-than-expected quarterly results drove our variable compensation higher. The loss attributable to shareholders of Scripps was $268 million or $3.17 per share. Pretax cost for the quarter included a non-cash goodwill impairment charge for Scripps Networks of $266 million. In addition, we recorded $9.4 million in restructuring charges. These charges increased the loss attributable to shareholders by $3.15 per share. The restructuring costs are related to our company-wide reorganization. We are on track to realize annualized savings of more than $40 million by the middle of this year. As of quarter end, cash and cash equivalents totaled $35 million. Our net debt at quarter end was $2.9 billion. We ended the year with net leverage of 5.7 times per the calculations in our credit agreements. And now I'd like to discuss a few key guidance items for the first quarter and full year 2024. For the first quarter, in the Scripps Networks division, we expect revenue to be flat to down low single digits. We expect first quarter Networks segment expenses to be down low single digits. We expect total Local Media revenue to be up in the low teens percent range. We expect local core ad revenue to be flat to up low single digits. Lisa will give more color in a moment about our strong start to the quarter with key categories, including auto. We expect Q1 Local Media expenses to be up about 10%. If you back out the costs associated with our new sports deals, network fee step-ups and one-time facility work, Local Media expenses would be up in the low to mid-single digits. First quarter shared services costs are expected to be about $24 million. We expect the segment labeled other to generate a loss of about $7 million in Q1 as we continue to educate consumers about free over-the-air viewing and to promote our Tablo device. Now I'd like to touch on several full year items. We expect our local political advertising revenue to come in between $210 million and $250 million in this presidential election year. We expect connected TV revenue for the Networks to increase by more than 40%, excluding the impact of our low-margin programmatic product that we're sunsetting. We expect our distribution revenue growth to be modest this year because we're renewing only 5% of our pay-TV households. We expect capital expenditures of $70 million to $80 million. That includes one-time cost to build out a new station facility and to reconfigure office spaces where we're consolidating our footprint to lower operating expenses. We expect cash interest this year of between $200 million to $210 million, cash taxes of $50 million to $60 million and depreciation and amortization of $150 million to $160 million. We do not have any required pension contributions this year. I'd like to end by discussing capital allocation and debt paydown. As you know, Scripps took on significant debt in early 2021 to acquire ION Media. The strategic purchase of ION formed the foundation of our Scripps Networks segment, which has helped Scripps to diversify its revenue base and to build strong nationwide over-the-air audience reach. The new segment has increased the durability and profitability of our enterprise. The ION television stations and the spectrum have opened up significant growth opportunity for the company in local and national media through Scripps Sports. Remarkably, in the three years since acquiring that debt, Scripps has already paid down 22%, significantly outpacing our peer group. We brought our total debt down by nearly $1 billion from about $4 billion to about $3 billion today. That represents 98% of our discretionary capital applied toward debt reduction. Focusing on debt paydown, we have elected to defer the payment of our preferred equity dividend to Berkshire Hathaway this quarter. This deferral was permitted under the terms of our agreement with Berkshire. A deferral will allow us to maximize the paydown of our traditional bank debt and provide us with more flexibility in refinancing our upcoming maturities. This will change our rate on the preferred dividend from 8% to 9%. This year, it is our intention to deleverage by cash from our political advertising revenue, incremental cash flow that may come from other top line revenue, operating expense levers, and financing levers. So when you hear us say every quarter that our top capital allocation priority is paying down debt, we are backing that up with our actions. Now here's Lisa to share highlights for both the Local Media and Scripps Networks operations.

Lisa Knutson, Chief Operating Officer

Thanks, Jason, and good morning, everyone. I'm pleased to start by sharing that the advertising momentum we saw begin to build in the fourth quarter has continued as we move through the first quarter. That's true across both our operating segments from Local Media core advertising to several of our national network revenue streams. This morning, I will give you color on our local core advertising categories for Q4 and Q1 and then discuss the trends we are seeing in national advertising with Scripps Networks. Then I'd like to look ahead to this season's upfront, which will be upon us very quickly, and we'll wrap up with our political outlook. In Local Media for the fourth quarter, we saw our top five categories end up higher year-over-year. The top performer was automotive, up 9%; followed by home improvement, up 8%; and the media and communications category, up 6%. Also notable with services, our largest category, which was up 3%. That is the first quarter services has finished up year-over-year in five quarters. Moving into the first quarter. The services category is up quarter-to-date as are our automotive, home improvement and retail segments. We see continued momentum as we move through this quarter and are optimistic about a solid finish. Turning to Scripps Networks. The fourth quarter saw us begin to build back some of the direct response advertising dollars that had declined as inflation spiked in recent quarters, and easing of inflation has brought back direct response advertisers who are reliant on tapping consumers' discretionary income. Demand is up, and therefore, so are our ad rates. As you know, the entire national advertising marketplace was challenged by last year's weak upfront, which was down 10%. For Scripps, the upfront typically lays in a nice foundation, 30% or so of first quarter dollars. We're making up ground with our aggressive tactics to drive rate in direct response and scatter, and that accounts for the momentum you see in our first quarter guidance. In fact, scatter pricing is up more than 35% over upfront pricing. Connected TV revenue has continued to be strong for Scripps Networks. 2023 saw a year-over-year increase of nearly 70% after backing out the impact of the low-margin programmatic products we are discontinuing. Looking ahead, we're expecting more than 45% growth in our connected TV revenue for the first quarter. And for the full year, we are guiding to more than a 40% increase in connected TV, again after removing the programmatic product to show the extent of organic growth. We're benefiting from continued audience growth as Americans seek out new options for ad-supported free TV, and we continue to expand our distribution within the marketplace. In the fourth quarter, we launched ION on Pluto and it quickly grew to be the number one network on its entertainment tier. Likewise, ION was named by Google TV as one of the most watched live channels of 2023. ION is the only broadcast network available in the fast marketplace, which is a premium programming lineup that includes top-rated procedurals and live sports. If the analysts are correct in describing fast as the new cable, then ION and the Scripps Networks are exceptionally positioned for more connected TV revenue growth. I want to talk now about our aggressive approach to selling the upfront this coming season and why we expect significant improvements in our outcome. This year, under the direction of our new Chief Revenue Officer, who came to us from NBCU, we are taking a much more aggressive stance. We've scheduled our upfront for April 9, a month ahead of the large conglomerates' in-person events. We are expecting several hundred buyers to attend. The new approach is commensurate with the stronger position we hold as a result of our expansion into live sports, the most valuable content genre for linear TV. Scripps Sports and our partnership with the WNBA and the National Women's Soccer League are the foundation for recasting ION into an entertainment destination for younger and more diverse audiences of scale, which is more attractive than ever to advertisers. Our national sports sales efforts are drawing new premium advertisers to ION and other Scripps Networks brands across all time periods. Sports advertising is serving as the tip of the spear for scatter market advertising in general. To that end, we are focused on growing our base of regular advertisers drawn by our sports programming and expanding into connected TV and into our popular entertainment brands with a specific focus on multicultural. In addition to the lift from sports, we are seeing rating successes that also position us well to benefit as the ad market recovers. In fact, the Scripps Networks are the only national entertainment portfolio showing year-over-year growth in the first quarter, both in prime and total day. We are delivering 7% more households and 5% more total viewers than at the same time last year. This growth is separate and in addition to the audience growth and momentum we are experiencing on connected TV. I'd like to conclude by giving you color on our political ad revenue opportunity for 2024. As you know, each race, each market and each election year are different. Spending is determined by where the toss-ups are taking place and where the national parties and PACs put their ad dollars to work. What we know for sure is that the ecosystem of spending will be larger than ever. And we know that local broadcasters will continue to take the lion's share of that spending. Ad Impact puts the total election spend at $10.2 billion compared to $9 billion in 2020. And the firm says 52% of the advertising spend will go to local broadcasters compared to 48% last time. For Scripps, Jason mentioned, our clearest line of sight now is a range of $210 million to $250 million. Presumably, we're going to see the same two candidates running as in 2020, but there are a couple of new factors to think about here. One, Biden's support is not what it was in 2020; and two, much of the money Trump has raised is going to his legal defense, not to his campaign. So while experts say there will be a greater level of fundraising for this cycle, it won't necessarily be spent on the presidential race. The states where Scripps does expect to benefit from presidential election spending are Arizona, Nevada, Wisconsin, and Michigan. Turning to the U.S. Senate races. Scripps has local stations in seven competitive states, all of which have Democrats defending their current seats. Montana is a big one with Senator Jon Tester. We're already seeing significant orders coming into Montana, where Scripps commands strong market share across the state. We're also well positioned in Ohio with two big ABC stations, and in Wisconsin, Maryland, Michigan, and Arizona, which also are projected to have tight Senate races with national money pouring in to support parties' candidates. In Nevada, our Las Vegas stations will benefit from both a contested Senate race and being in a presidential swing state. We have no contested governors' races this cycle and fewer competitive house races because of gerrymandering and redistricting efforts nationwide. However, another area of opportunity that could be beneficial is the ballot referendums in some of our bigger states, including Florida. It's estimated that up to seven states could have controversial ballot issues. One such measure in Ohio last fall helped to drive our overperformance with political for the year. So we'll be watching to see whether those issues make it on to the ballot in key states this summer. Before I turn it over to Adam, I'd like to thank Scripps employees for their hard work and perseverance during an especially demanding time. A year ago, the company began a significant reorganization. In addition to realizing meaningful cost savings, we have made many changes to the way that we do business. We have acted with urgency in rethinking the best ways to serve our audiences and our advertisers and to create new value for the enterprise. While necessary, the changes haven't been easy, and I credit our resilient employees for making it work. And now here's Adam.

Adam Symson, President and CEO

Thanks, Lisa, and good morning, everyone. It's been a tumultuous several months in the U.S. media landscape. Last September, after a 10-day impasse, during which you would have thought we were witnessing the end of pay TV, Disney and Charter announced the landmark distribution agreement that reinforced the power of the cable bundle. Then just a few weeks ago, Disney, Fox and Warner Bros. Discovery announced the sports streaming partnership. And again, from the market's reaction, you would have thought it was literally the end of television. I completely understand why even the most seasoned media investors are struggling to sort through the chaos. I've been a part of this business for a while. And while it feels like the market is always ready to believe the worst about broadcast, as a journalist myself, leading a company with a journalism mission, I prefer to deal in facts and steer clear of rumor, innuendo, and speculation. So I thought I'd start this morning with what we actually know about these changes to the marketplace and how they impact Scripps. To start, the yet-to-be-named sports-focused streaming joint venture will be yet another virtual MVPD in an already crowded and somewhat established marketplace. It will also be competing with and likely cannibalizing other streaming products from the very same companies that make up the partnership. At somewhere between $40 and $50 a month, it will be less expensive than most of its virtual MVPD competitors. And it will also be much less of a complete consumer proposition than the existing pay-TV bundles. If this is all about attracting the sports fanatic, it's hard to say it's a slam dunk. March Madness will be incomplete. The Olympics will be missing outright, and subscribers will get only half of the NFL, the very sport that makes up the top 200 programs on TV. It's the introduction of yet another service into a fragmented landscape that will likely confuse and confound an already frustrated consumer. This is not to say that the new offering won't get subscribers. If, as the partners say, it will target cord cutters, we at Scripps will very much benefit from increased distribution fees and strength and reach. Executives have confirmed over and over that affiliates like Scripps will be carried along and compensated just as we are with the other virtual MVPDs. I can't see why analysts, nor investors would see this as some sort of killer outcome. But hey, if it adds new value to linear television, I'll be happy to root for its success and take advantage of its reach because we'll get paid for our ABC and Fox affiliates. To be clear, fragmentation and disruption were here well before the JV announcement. And Scripps has already been driving growth in this chaos, even if Wall Street has yet to recognize it. We continue to reap the benefits of retransmission revenue and expect to do so for years to come. Last year, we renewed 75% of our subscribers, drove net distribution margin expansion, and created new incremental value through agreements driven by our sports strategy. There should be more growth here to come from the productive relationships we have with both traditional and virtual pay-TV platforms. Pay television is still a solid business that will support Scripps as we transition to our next growth phase. Because of our platform diversification strategy, distribution revenue accounts for less than one third of Scripps' total company revenue, so we are much less reliant on it than others. Our reach in revenue are buoyed by the growing over-the-air audience and our aggressive moves in connected TV, strategies that are paying off and powering real financial growth. Aggressively tackling future opportunities even when they are disruptive has been a consistent thread in the Scripps story. And thanks to our foresight, connected TV revenues for the enterprise should be well past $140 million this year. As Lisa pointed out, our Networks portfolio stands alone with growing ratings. And with our focus on live sports, momentum is on our side in the advertising market, too. Once again, we benefit from pay TV reach but aren't limited by it. We are growing opportunity around it. Scripps is heavily leaning into the opportunity of free TV, and we're making it even easier for media consumers with Tablo, which delivers the most popular linear programs via over the air right alongside another 65 or so premium fast channels. You could even think of Tablo as the only fast platform to offer the NFL and college sports. That in and of itself makes it a more compelling sports proposition than the new joint venture service, and it's free. Tablo can now be found in most major retailers. Walmart.com launched in January. Amazon is the top retail partner accounting for about 60% of sales. The Home Shopping Network launched Tablo in October with exceptional results, selling out its first airing in only a few minutes, and we expect HSN to drive a significant portion of unit sales in 2024. As we move into this year, we'll continue to explore partnerships, both regional and national, to expand our footprint and scale. Since we launched our latest version in August, we have had incredible engagement with users. The first-party data show us that on average, customers are watching two hours a day and that OTA programming accounts for most of that viewing. 50% of that time is spent watching live sports, news, and talk shows. Speaking of data, Tablo is the only platform in the market that directly measures over-the-air viewing. Our back end measures all of the same data that set-top boxes do and more. That valuable data and the monetization of the fast platform are the recurring revenue streams that drive value further downstream and will make up the average revenue per user metrics we'll share with you in the future. While the Tablo platform makes TV easy, it's live sports and live news that make linear television most relevant today. And that's why we continue to aggressively pursue sports rights that are appropriate to our local market depth and the scale of our national reach with ION. For local broadcasters, in particular, winning sports rights is yet another catalyst for the growth of over the air among cord cutters and for the durability of the pay TV bundle. It's a growth strategy that's creating immediate new value. For just the two National Hockey League partnerships that we already have underway in Los Angeles and Phoenix, we project a 3% lift in core advertising revenue for 2024, and we continue to see many partnership opportunities with the teams ahead in both the near term and long term. On the national side, last year, we completed a very successful first season with the WNBA. Here's to the power of ION's reach and our CTV plus OTA plus pay TV strategy. The WNBA Spotlight on ION, the Friday Night franchise we launched, grew the WNBA's audience by 30%, while drawing a hefty premium above typical ad rates on ION for that time period. 65% of the revenue last season was from new-to-Scripps advertisers. This year, we'll be back with the WNBA on Friday nights, and it will be women's soccer on Saturday nights. Scripps is proud to be launching a franchise night doubleheader for the NWSL as part of the league's landmark rights agreement. We start the season on Saturday, March 16. Sponsorships and advertising sales are well underway and having the intended effect on our whole Networks portfolio. 2023 was a tough year as a result of an unsteady and uncertain economy, but there's a lot to celebrate in the work this company is doing to best position itself for continuously improving near-term performance and long-term value creation. And now operator, we're ready for your questions.

Operator, Operator

We'll begin with the line of Dan Kurnos from the Benchmark Company. Please go ahead.

Dan Kurnos, Analyst

Thanks, good morning. Adam, maybe just to start with sports. Could you just give us your thoughts on the impact of maybe Diamond being allowed to survive, I guess, for another 18 months, given the cash inflow over there and what that might mean for your ability to go after incremental local sports rights? And then, look, obviously, you've been out there a lot on the JV, and I think most people believe that it's going to be de minimis to the marketplace, if it even gets off the ground. But there's obviously been a lot of commentary about sports just moving to streaming over time. And I know that broadcast is included in all of these packages, but just kind of your thoughts on being able to sustain negotiating power and leverage within the sports industry as more and more sports shift to streaming.

Adam Symson, President and CEO

Yes, good morning Dan, thanks for the questions. On the Amazon investment into the RSN, I guess, near term, it means the teams are committed to the RSN contracts until either the RSN breaches those deals or in the event Diamond seeks some sort of discount that the teams decide to reject, which will then open up the opportunity for teams to move in a different direction. Longer term, nothing about this investment changes the reality that the RSNs can't deliver the reach that team owners need given the erosion we're seeing in pay TV. And that's why they continue to turn to broadcasters. So all of this to say, the RSN model is still in critical condition. I think you described it as sort of still thriving. This investment wasn't, in any way, a cure for what ails the RSN model, and I continue to expect that rights will move in the direction of local broadcast. And I continue to expect that Scripps will benefit from those moves. Relative to the joint venture, I don't know if there's more to say than what I already said in my prepared remarks, I guess I would say, I think, there is no math that supports the idea that local rights can move to streaming or move to a D2C product and support a team's need to field a good team and to win. We've modeled it every other way. And while streaming will continue to be an important part on the local end for incremental reach, these teams need broadcast reach, and that's the direction they're all moving in. So my enthusiasm for the opportunity for Scripps Sports has not dampened at all. On the national side, I will tell you, speaking to the leagues and the owners, I think it's safe to say that reach continues to be the primary component for all of these team deals. During the Super Bowl week, you heard Roger Goodell say that he expects at least 90% of all games for the NFL to be broadcast on broadcast television, again, demonstrating the important power of reach. I don't think any of these leagues want to impair their assets over the long term by completely going behind a paywall and being inaccessible to most Americans, especially as we continue to see that streaming landscape get more fragmented, not consolidated. So we believe there will be a continued opportunity for broadcast networks, new opportunity for networks like ION, and of course, we think the continued opportunity for our affiliates that are partnered with the big four networks.

Dan Kurnos, Analyst

Got it. For the record, Adam, I mentioned survive, not thrive for the RSN. I think it's a different situation. Can you briefly share your thoughts on the national outlook for the year, considering the mix between the general market and direct response still seems to be lagging a bit?

Lisa Knutson, Chief Operating Officer

Yes. In my prepared comments, I mentioned that we experienced a decreased upfront across the marketplace. As a result, we are being proactive in recovering that shortfall in the scatter marketplace and in direct response. I observed this trend in the fourth quarter, and it is continuing into the first quarter, where CPMs in the fourth quarter increased by 4% compared to Q4 of 2022. This year, we are seeing CPMs remain higher than our upfront pricing, with a significant 35% increase in January alone. There is strong momentum in both the general market and the scatter marketplace. Another noteworthy aspect for Scripps is our excellent position to capture CTV revenue both through upfront strategies and by driving organic growth, alongside the new launches I referenced in my comments.

Dan Kurnos, Analyst

Got it. Super helpful. Thank you both. Appreciate it.

Operator, Operator

We'll now go to the line of Steven Cahall with Wells Fargo. Please go ahead.

Steven Cahall, Analyst

Thanks. So three for me. So maybe first, Adam, I appreciate your comment about facts on the sports streaming JV rather than speculation. So I was wondering if you could just tell us what discussions you've had, especially with ABC and Fox as well and whether those discussions have confirmed that this will be classified as a vMVPD in the minds of those counterparties. I think that would be really constructive to the market. And then Lisa, just on national ads, maybe picking up on the last question. So a big sequential improvement in the Q1 guide. Does that turn positive by Q2? It sounds like there's a lot of potential for it to do so, especially with where scatter is. And then finally, just on the political guide. How do we think about how much of that versus your 2020 political is due to just a difference in races? I think there you just have fewer congressional races. And then how much of that is attributable to the comment you made about Trump's PAC putting more towards legal and less towards ads? Thank you.

Adam Symson, President and CEO

Well, Steve, I've mentioned multiple times that I've had direct discussions with top executives at Disney and Fox. They describe this situation as it is, with the virtual MVPDs, and indicate that the arrangement will align with what affiliates have with other virtual MVPDs. This will be consistent because our broadcast networks and theirs are key to the offering, especially since the NFL will primarily be available through the broadcast stations. We will be compensated in the same way we are for other virtual MVPDs. I don't know how to make this clearer. On the day of the announcement, I was told that if these executives are true to their word and actively work to attract cord cutters back to linear television, this will benefit Scripps with increased distribution and additional fees. Is that helpful?

Steven Cahall, Analyst

It is, yes.

Lisa Knutson, Chief Operating Officer

So Steven, we are seeing positive momentum that began in the fourth quarter and is carrying into the first quarter with our guidance. We are optimistic as we continue to see strength in scatter and direct response rates, both of which are up year-over-year and year-to-date in the first quarter compared to 2023. We're aggressively pursuing this, and we mentioned in our guidance that we might come in flat to last year, which is certainly among the best in peer performance, and we expect that momentum to continue throughout the year. Regarding political factors, there are some differences, which I highlighted in my prepared remarks. After redistricting, there are significantly fewer competitive house races compared to 2020. Some of the presidential toss-up states have changed. Florida, which has always been a swing state, has seen changes due to migration over the last few years. These shifts are affecting our visibility on where spending will occur given the top races this year. I also pointed out the competitive Senate races, where we are particularly strong this year. We expect and are already seeing substantial spending in Montana early this year and are laying a solid foundation for the latter half of the year.

Steven Cahall, Analyst

Thank you.

Operator, Operator

We'll now go to the line of Craig Huber with Huber Research Partners. Please go ahead.

Craig Huber, Analyst

Thank you. My first question is about costs. Can someone, maybe Jason, share how you feel about your cost base this year? You mentioned a $40 million cost savings plan that should be fully reflected in the numbers by mid-year. Are you anticipating the need for additional cost-cutting measures, or are you comfortable with your current costs as you consider your advertising revenue trends?

Jason Combs, Chief Financial Officer

I think that from a cost perspective, we have been aggressive with the restructure. We will have more than $40 million in sort of run rate annualized savings by the middle of this year. And I think the focal area will be just continuing to manage things as efficiently as possible. We have things this year when you talk about political, when you talk about some of the green shoots that Lisa is talking about in terms of the national ad marketplace that should be great benefits to the bottom line in addition to our tight expense management. But I think you'll see us continue to manage things really tightly throughout the rest of the year.

Craig Huber, Analyst

And Jason, a housekeeping question, please. Your retrans subs, what was the decline year-over-year that goes into your retrans revenue number that you had in the fourth quarter, please?

Jason Combs, Chief Financial Officer

We were down mid-single digits, which is consistent with where we've been for a while. It actually was a slight improvement versus the prior quarter but still in that mid-single digits net percent range.

Craig Huber, Analyst

Okay. Good. Can you help us understand how to think about your other revenue line in EBITDA and revenue for the full year? What are you budgeting for that?

Jason Combs, Chief Financial Officer

Yes. And so that other roll-up includes a bunch of different things, including Tablo, which Adam talked about, where we're continuing to invest as we launched that. So we guided to a loss of about $7 million in the first quarter. I would say, in general, that will likely be somewhere between $7 million to $10 million each quarter this year, revenue growing as the year moves forward.

Craig Huber, Analyst

Okay, very good. That’s all I have for right now. Thank you.

Operator, Operator

We'll now go to the line of Jeff Peskind with Phoenix. Please go ahead.

Jeffrey Peskind, Analyst

Yes, thank you for your time here. Just one quick question. It sounds like you're going to defer the Berkshire preferred payout. What's the plans for reducing the bank debt and pushing those out? And is there a plan for also going out past 2027?

Jason Combs, Chief Financial Officer

Yes. So the decision to defer the Berkshire dividend, that's a decision that we make sort of on a quarterly basis. We did elect this quarter to defer that payment to really allow us to focus on maximizing the paydown of our traditional bank debt. And it really gives us more perspective, more flexibility in terms of debt paydown and refinancing our upcoming maturities. We also are very focused on the fact that we do have a maturity coming up in 2026 that we're keeping a very close eye on the debt markets right now, which have improved over the last couple of months to determine at what point in time we want to go ahead and take action and look to refinance that debt, which the goal would be to have that refinanced at least 18 months in advance of maturity.

Jeffrey Peskind, Analyst

Great. Thank you.

Operator, Operator

We'll go to the line of Michael Kupinski with NOBLE Capital Markets. Please go ahead.

Michael Kupinski, Analyst

Thank you. Thanks for taking my question. Just a quick one. It seems like the Network business, the OTA business is getting more competition. A couple of your peers have indicated that they're crossing certain hurdles in terms of distribution across the country. And I know that you're seeing some improving trends there. But I was just wondering if you can kind of give us a taste of what advertisers are seeing in terms of maybe shifting some dollars to some of the competition that's out there and whether or not you're hearing anything like that and if you could just kind of give us a state of just the business in general for the OTA market.

Lisa Knutson, Chief Operating Officer

Yes, Mike, it's Lisa. We are not encountering significant competition from the expanding OTA multicast networks. In fact, our direct response ad rates are showing strength, along with the demand for direct response advertising. Typically, when those other networks launch OTA, they focus mainly on direct response advertising, which tends to be low-quality. Our networks offer premium programming, and we are competing effectively in both hybrid direct response and premium direct response ad rates. Therefore, we are not concerned about that competition.

Michael Kupinski, Analyst

Got you. Are you noticing any significant differences between local and national advertising at the core level, excluding political advertising?

Lisa Knutson, Chief Operating Officer

Yes, I believe the trends we are observing at the local level, which I mentioned in my prepared remarks, show that some categories are increasing year-over-year. We have various categories in both the national and local ad marketplaces. However, I would say that the momentum is consistent across both segments.

Michael Kupinski, Analyst

Got you. Okay, that’s all I had. Thank you.

Operator, Operator

Thank you. We will return to the line of Craig Huber with Huber Research Partners. Please go ahead.

Craig Huber, Analyst

Thank you. For auto advertising, I'd be curious to hear your updated thoughts there, both on a national level and local for auto advertising outlook there, please.

Lisa Knutson, Chief Operating Officer

Yes, I will provide an overview of the fourth quarter, the full year, and some insights going into Q1. In the fourth quarter, automotive sales increased by 9% compared to the fourth quarter of 2022. For the full year 2023, automotive sales rose by 10%, which is quite strong. This represents the sixth consecutive quarter of growth, and we experienced solid growth in every quarter last year. In Q1 of 2024, as of January, we noted a 3% increase and are on track for a potential 7% increase in February. However, it is too early to make a prediction for March. We are seeing this momentum persist. Domestic dealer auto groups showed a year-over-year increase last year, while foreign dealer groups had a slight uptick of just 1%. Additionally, domestic manufacturers experienced a year-over-year decline of 9%, whereas foreign manufacturers saw an increase of about 24%. Overall, the automotive sector had a great year last year, and we are continuing that momentum into 2024.

Craig Huber, Analyst

Then also, Jason, how you calculate it or your banks, your net debt-to-EBITDA ratio at trailing 8-quarter basis, what was that at the end of the year we just finished? And what do you project it to be at the end of this year, please?

Jason Combs, Chief Financial Officer

Yes. It was 5.7 at the end of last year. As I mentioned in my prepared remarks, we are focused on reducing debt and deleveraging. We are not providing a year-end leverage target at this time due to the wide range of potential outcomes, such as the political guidance we provided, which can significantly affect that figure, as well as some uncertainty regarding the timing of the advertising recovery, which can also influence that number. Therefore, we will not give a specific forecast. However, as I said, our priority this year is on deleveraging and utilizing the cash flow we expect to generate during the political cycle, continued growth in connected TV, and the advantages of our expense restructuring to reduce as much debt as possible.

Craig Huber, Analyst

My final question, if I could ask, on the CapEx side, you mentioned a one-time project or two. If you take that out, what would your underlying CapEx be for the year, please? More the maintenance-type level trying to get to.

Jason Combs, Chief Financial Officer

It would be around $60 million. We're guiding for $70 million to $80 million.

Operator, Operator

And with that, we have no further questions in queue at this time. Please continue.

Carolyn Micheli, Executive Vice President of Investor Relations

Thank you very much, Rich. Thanks to everyone for joining us today. Have a great day.

Operator, Operator

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