Ladies and gentlemen, thank you for your standing by. Welcome to Fox Corporation Third Quarter of 2020 Earnings Conference Call. At this time, all participation phone lines are in a listen-only mode. And later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded.

I'll now turn the conference over to Chief Investor Relations Officer and Executive Vice President of Corporate Initiatives, Mr. Joe Dorrego. Please go ahead, sir..

Thank you, operator. Hello, and welcome to our Third Quarter Fiscal 2020 Earnings Conference Call. Joining me on the call today are Lachlan Murdoch, Executive Chairman and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer.

First, Lachlan and Steve will give some prepared remarks on the most recent quarter, and then we'll take questions from the investment community. Please note that this call may include forward-looking statements regarding Fox Corporation's financial performance and operating results.

These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings. Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA, as we refer to it on this call.

Reconciliations of non-GAAP financial measures are included in our earnings release and our SEC filings, which are both available in the Investor Relations section of our website. And with that, I'm pleased to turn the call over to Lachlan..

Lone Star, Prodigal Son and Lego Masters for mid-season launch dates. Given the uncertainty that our advertisers are facing in their own businesses, along with the potential variability in our programming schedule, you'll have noted the cancellation of our advertising Upfront, which would otherwise have taken place next Monday.

Although, we will not be hosting this traditional event this year, we remain in constant dialogue with our advertising partners to ensure that we provide them with the flexibility needed to navigate these unprecedented times.

Fox executives have been front and center with our clients, hosting video conferences to speak about the marketplace and the impact on their businesses.

While the flexibility that we provide our partners will certainly be reflected in reduced advertising revenues in the current quarter, it is our priority to preserve these long-term relationships and do what we can to ensure the health and sustainability of their businesses and brands.

Finally, as for distribution, we are pleased with increased viewing that we're delivering for our partners' video offerings and for our FOX-affiliated stations across the country. As it relates to pay TV subscribers, it's unclear so far of the impact of COVID-19 will materially alter recent trends.

We know that a few major distributors have publicly expressed a bearish outlook for their video subs. And there will no doubt be recessionary economic pressures across a significant number of pay-TV households in the near term. These factors alone would likely exacerbate the recent trends in subscriber declines.

But we also know from Nielsen Ratings that more people are consuming TV right now, particularly in the news category. And we know there is strong pent-up demand for live and event programming that is the cornerstone of our portfolio brands, beginning, for example, with the return of NASCAR in just 11 days.

While the bias would have to lean toward near-term pressure on subscriber levels, how all of these factors interact and get reflected in subscriber numbers will become more clear as the year progresses. I'll wrap up my comments where I started. Fox is in a strong position to weather this turmoil.

Our outsized exposure to news, a genre that should be less impacted than others and the timing of the sports that we broadcast has curbed the immediate impact on us so far. We entered this crisis in a position of financial strength and we remain well capitalized and highly liquid.

Our steadfastly conservative financial management and our strong free cash flow profile underpin the company's balance sheet even with the uncertainty around the shape and pace of the economic recovery in the United States.

As we emerge, Fox's focused collection of brands skewed heavily towards live and event programming will be even more in demand by advertisers and audiences alike.

I am confident that we'll come out of this crisis as a stronger, more efficient and more agile company positioned for the future toward our continued goal of maximizing long-term shareholder value. And now, I'll turn the call over to Steve..

Thanks, Lachlan, and good afternoon. Let me start with a brief summary of our third quarter results, before going on to discuss current trading conditions. As Lachlan mentioned earlier, Q3 was a clear demonstration of Fox's financial strength.

The company reported total revenues of $3.44 billion, up 25% over the comparative period in fiscal 2019, reflecting revenue growth across all operating segments.

Total company advertising revenues increased 44%, led by the broadcast of Super Bowl 54, while total company affiliate revenues increased 10%, demonstrating the strength of our brands and our focused portfolio of channels. We achieved double-digit affiliate revenue growth despite the rate of net subscriber declines of just over 5%.

Quarterly EBITDA was $920 million, and notwithstanding the comparison to carve out financials in the prior year period still represented growth of 20% led by increases of the television and cable network programming segment, partially offset by the impact of corporate expenses at the other segment.

The increase in these expenses reflects the full costs of Fox operating as a standalone public company in the current year versus the presentation of carve-out financial statement in the prior year quarter.

From a bottom-line perspective, net income attributable to stockholders of $78 million or $0.13 a share was lower than the $529 million or $0.85 per share in the prior year quarter. This decline was primarily due to the change in fair value of the company's investments recognized in other net.

Most notably, the book loss incurred following the sale of our stake in Roku in March.

From an economic perspective, the Roku sale, which equated to nine times our initial investment, delivered a post-tax gain relative to initial cash investment of approximately $300 million and strategically allowed us to convert a minority shareholding into the full ownership of leading AVOD player Tubi.

Excluding this impact and other non-core items, adjusted EPS of $0.93 was up significantly compared to last year's $0.76 per share, reflecting the growth in EBITDA, partially offset by higher net interest expense, which as we have flagged in the past, primarily reflects interest on the standalone debt structure of Fox versus the carve-out presentation in the prior year quarter.

So now turning to the performance of our operating segments for the quarter, where cable EBITDA of $792 million was up 7% on revenue growth of 6%.

As expected, we saw growth in cable affiliate revenues accelerate to 4%, as the impact of new distribution agreements and higher average rates across essentially all of our brands, was partially offset by the net decrease in pay television subscribers. This growth also reflects the launch of FOX News and Fox Business on Sling late last year.

Cable advertising revenues increased 10%, led by results at FOX News Media, including the impact of higher ratings and continued strength in our digital sales, partially offset by high preemptions associated with breaking news coverage.

Segment advertising growth was also impacted by fewer live NASCAR events at Fox Sports 1, due to the postponement of early season races as a result of COVID-19. Other cable revenues grew by $18 million, driven by contractual sports sublicensing revenues, primarily associated with college basketball content in the quarter.

EBITDA at our cable segment increased 7% over the prior year, reflecting these higher revenues, partially offset by higher expenses.

FOX News Media costs were up in the quarter, due to coverage of the presidential primaries and continued digital investment in FOX Nation, which were partially offset in the segment by lower programming rights amortization of Fox Sports 1 from fewer live NASCAR events.

The quarter also included one-time costs at FOX Sports and FOX News Media related to the production of shoulder programming leading up to the broadcast of Super Bowl 54. The Television segment reported EBITDA of $224 million, an increase of $125 million over the prior year quarter on revenue growth of 41%.

The revenue growth was led by a 56% increase in television advertising revenues, including the impact across our network and stations from Super Bowl Sunday.

Excluding the impact of the Super Bowl and the impact of one less NFL divisional playoff game compared to the prior year, advertising revenues would have been up 1%, primarily due to strong CPM growth for FOX Network and higher political advertising revenues at the Fox Television Stations.

These were partially offset by the impact of COVID-19 on our local stations during the closing weeks of the quarter. Television affiliate revenues increased 22% in the period, reflecting double-digit increases for both our programming fees from non-owned station affiliates and direct retransmission revenues at our owned and operated stations.

EBITDA at our Television segment increased $125 million over the prior year, reflecting these higher revenues, partially offset by higher expenses.

The increase in expenses was driven by programming rights amortization and production and costs associated with the broadcast of Super Bowl 54, partially offset by the impact of the rotating NFL divisional playoff game and prior year programming write-downs.

Similar to our second quarter, we continued to make investments in programming, which included our first year of WWE content, the expansion of original entertainment programming and our participation in coproduction arrangements with third-party studios.

Finally, from a P&L perspective, the net EBITDA loss in our other segment amounted to $96 million, which reflects the full quarter of stand-alone cost, as opposed to the carve-out basis of presentation in the corresponding quarter of the prior year.

We still expect the net EBITDA loss in our other segment to be in the mid to high $300 million range for the full fiscal year. Turning now to cash flow.

As expected, our free cash flow generation in the quarter of more than $1.5 billion was strong, supported by the collection of advertising revenues from our fall programming and the fact that our sports rights payments were concentrated in prior quarters.

As a reminder, we calculate free cash flow as net cash used in operating activity, plus cash invested in property, plant and equipment. As part of our balanced approach to capital allocation, in March, we closed on the previously announced Nexstar Television stations transaction at a net purchase price of approximately $300 million.

We also generated net proceeds of approximately $340 million from the sale of our stake in Roku, which was earmarked from the acquisition of Tubi for approximately $445 million in net cash consideration at closing last month. During the quarter, we purchased 3.9 million Class A and 2.9 million Class B shares for $173 million.

Against our buyback authorization of $2 billion, we have now cumulatively repurchased $600 million, representing nearly 3% of our total shares outstanding since the launch of the buyback program in November. Given the current uncertain economic conditions, we have not bought back shares since the onset of the crisis.

From a balance sheet perspective, we ended the quarter with $3.2 billion in cash and $6.8 billion in debt. Since then, out of an abundance of caution, we took the opportunity to add to our already strong liquidity position by raising $1.2 billion of five-year and 10-year notes in April, which was significantly oversubscribed.

The weighted average cost of this new issuance was approximately 3.3%, thereby making it attractive from a cost perspective to essentially prefund our $750 million maturity due in January 2022.

So with the combined benefits of strong free cash flow and liquidity, moderate leverage and the absence of any debt maturity for almost two years, we face the challenges of COVID-19 from a position of financial strength.

As Lachlan mentioned, while we are very proud of the operational and the financial results that we have achieved, we're acutely aware of the impact of COVID-19 and the challenges it presents to all of our businesses and all of our stakeholders.

We note that there are a number of moving variables, among them the outlook for the gradual reopening of the economy, the timing in the return of sporting events and the evolution of the upfront advertising cycle that make it difficult to forecast our business beyond the very short term.

As such, our commentary today will focus only on our fiscal fourth quarter and only on advertising revenues, which is where we are seeing the most significant impact to our business.

The most immediate impact has been on advertising revenue at our local television stations, where inventory is sold essentially on a spot basis and many of our advertising partners operate in sectors most displaced by COVID-19.

If pacing continues at current levels, we would expect our local advertising to be down by approximately 50% as against prior year. Meanwhile, our News and Entertainment businesses are expected to be more insulated in the immediate term.

News is being supported by strong ratings, the growth of its digital properties, the category mix of its core advertisers, along with the new advertising clients it is attracting that help partially offset decline from the legacy advertising base.

At Entertainment, we are already substantially through the broadcast season with our advertising revenues well supported by inventory that was sold during last year's upfront and until recently, a strong scatter market.

So before we get to our Sports business, the collective Q4 impact of weaker advertising demand at our local TV stations, national news, and Entertainment businesses is anticipated to be around $200 million to $240 million or 25% to 30% compared to prior year.

Across these businesses, we do not anticipate COVID-19 having a meaningful impact on Q4 costs. Now turning to our Sports business, where uncertainty around schedule makes it impossible to forecast top line impact.

However, it is worth pointing out that we typically amortize the associated rights fees and production expenses on our P&L when the games or events actually air on our networks. So from a bottom line perspective, advertising revenues from events being postponed is often offset by the P&L expense benefit of not having the rights cost.

Although these uncertainties make it challenging for us to estimate the future performance of our businesses, as Lachlan mentioned in his our financial results to illustrate, the company entered this crisis in a position of operating and financial strength.

We will continue to manage our business and balance sheet in a disciplined and conservative manner so that we emerge as well positioned as possible to take advantage of opportunities during the recovery. And with that, I'd now like to turn the call back to Joe..

Thank you, Steve. And now we'd be happy to take questions from the investment community..

[Operator Instructions] It looks like our first question comes from the line of Jessica Reif Ehrlich of Bank of America..

Great. Thank you. So my multipart, one question. I've always said you're a super nimble company, very entrepreneurial. And out of all of this, maybe there's some opportunity.

I'm just wondering if you're thinking about longer-term changes in your business where you can find more efficiencies? And then more immediately, what can you say in terms of sports? Well, I mean, WWE is still on.

Can you talk about what the ratings have been and what the advertising has been? I'm just wondering sports without fans, does it change the demand in advertising? NFL is supposed to announce their schedule tomorrow. Do you think that will impact the advertising demand? Thank you..

Yes. Thanks, Jessica. Let me answer both of those questions. Thank you. There were two questions, I think. There are variations of one, but I'll answer them both, and I appreciate them both.

So in terms of efficiencies, I think what we have -- because we are in such a strong position, we haven't looked at how we drive efficiencies in terms of a specific COVID-19 impact. Our employees are fully engaged in running each of their businesses. Our businesses are all fully operational.

And as you know, when we separated from Disney, we went through a process at that time of really creating what we felt was a very efficient platform from which to go forward. Having said that, we've looked at how we produce sports, how we produce news, how we operate as a team, many of our corporate functions.

And we've learned the lessons from telecommuting, working in more flexible and more innovative ways. And we think, absolutely, going forward, there are significant ways we can be more efficient and more agile as a company, as I mentioned in my earlier comments. So there is a process we're working through.

It's a process we're working through before COVID-19. And we certainly see that there's opportunities there. From a sports perspective, look we're very pleased, obviously, with the return of NASCAR on May 17. We've seen a very strong demand from our clients to be associated with and to market within that race and within future races.

So we're very pleased with what we see from an advertiser demand. We have worked, I should say, with our clients over the last six weeks -- incredibly closely, engaged through -- not physically closely, but digitally closely, engaged in literally hundreds of teleconferences.

We're taking them through the marketplace, having us understand the impact of COVID-19 on their businesses and how we can help them as we come out of this health crisis going forward. That process is now evolving where we can now have much more specific conversations with them, particularly about the fall.

We're pleased that the NFL will be releasing their schedule 8 o’clock tomorrow night Eastern Time. That obviously gives us a trigger to be much more specific in our conversations with our clients. But we are seeing tremendous pent-up demand for sports programming and live event programming. As for the WWE, I have to give a shout out to the WWE.

They have done a tremendous job delivering us live content, week in, week out, under very difficult circumstances. And we're very appreciative of them for it. So thank you, Jessica..

Operator, we can go to the next question..

Next in queue is the line of Ben Swinburne, Morgan Stanley. Your line is open. .

Thank you. Good afternoon. It's -- I think it was a year ago you had your Investor Day, which feels like 10 years ago at this point. But I wanted to ask you about a couple of things that you guys focused on then. One was the outlook for retransmission revenues, which is obviously a key driver of growth for the business.

And I was curious, just given how much the ecosystem has evolved since then, if you continue to be confident you can deliver on those expectations, realizing that the world has changed quite a bit.

And then secondly, I can't remember, John, how you phrased it, but something to the effect of, we're going to be cautious with buybacks and conservative with our balance sheet, sort of, for a rainy day or for a change in the cycle and be opportunistic. And we've certainly arrived at that point, I think you would agree.

I'm just curious how you think about using your balance sheet, which is a strategic advantage in times like this to continue to sort of reinvent the company as you look out over time..

So Ben, let me address the first part of the question, and John and Steve can address the second question. From a retransmission perspective, we remain 100% confident that we can achieve our goal, which we announced at the Investor Day, which you're right, does feel like 10 years ago. I'm sure we all have a few more gray hairs.

And to remind people, I think, everyone was there, but that goal was to achieve an additional $1 billion in affiliate revenue by calendar 2022. And we are -- we believe we are on track to achieve that goal. John, I'll pass it over to you for the second question..

Thanks, Lachlan. And thanks, Ben. The -- no, you're right. We've always viewed and have particularly viewed, with the birth of Fox Corporation, our balance sheet to be a true strategic asset of the company. But the balance sheet really reflects -- the strength of the balance sheet reflects the strength of the operations of the company.

And I think, fundamentally, that's what you have to look at first is how strong the businesses are. It does give us optionality as we look longer term. But I think all the comments Lachlan made and Steve made in the near-term, with the amount of uncertainty around, we're really just focused on the strength -- the operating strength of the business.

As Steve said, we paused the buyback once the pandemic hit. And I think we're just going to be cautious here for a little while and know that we have this strategic asset to continue to build the company..

Operator, next question please..

Comes from the line of Michael Nathanson of MoffettNathanson. Please go ahead. .

Thanks. I have two. So one is on Tubi. I was just interested in the rationale for you guys to do it. And where do you think you can add the most value? It seems like -- there's a lot of library content on there, and you guys are mostly a live-producing company. So I'd love to hear about where you see you can create value for Tubi.

And then secondly, I think, Lachlan, on the last call you mentioned that you guys were still -- were talking to the NFL about a new renewal from next contract.

I wonder if those discussions continue and if any of the data points you see of the quarter to come maybe give you some pause to hold on and to doing the deal until you see maybe light at the end of the tunnel in terms of what trends will emerge post-COVID? Thanks..

Thanks, Michael. So two good questions, and we could talk about them for hours. But on Tubi, Tubi gives us tremendous reach. And we've talked before about our direct-to-consumer strategy. We were very pleased with both our kind of authenticated strategy through FOX NOW.

It's obviously an authenticated platform for our product but also with the strength and the growth in FOX Nation. I should say FOX Nation has had I think April was the second-strongest month for FOX Nation, and it continues, which is interesting as it gets bigger, to achieve an over-80% conversion rate from free trialists into paying subscribers.

So, the consumers of FOX Nation are absolutely enjoying and paying for that product as it grows. So -- and we've talked before about Fox Bet and Credible as a part of our direct-to-consumer strategy. But as far as Tubi goes, we feel that we are not getting back into the entertainment production -- original production business through Tubi.

We see our existing slate of brands as being very important to the growth of Tubi. What we can do both through the entertainment network and its content, you can see today. The number one television show on Tubi is The Marked Singer and is driving a lot of important viewership and advertising impressions.

And what we can do with sports and news and our local stations in the future, we think, is very exciting. So, Tubi is a great business. It's grown 150% year-on-year in terms of video hours viewed, but we can make it an even greater business. And we're getting to know the team, and we like them a lot. We think they're going to do great things.

So -- but it is important that it's our brands, and Tubi's distribution, I think, is going to really be very exciting. On the NFL, obviously, COVID-19, we haven't been able to sit down across the table with the NFL to discuss their future plans and the renewal of our deals.

We have been in contact with the NFL every day about a whole range of other things. So we remain very close to them. There's nothing that we see in the marketplace today that makes us feel any differently about the value of our partnership with the NFL. They've been a tremendous partner of ours for over 25 years.

And we've built our business as they've built theirs, and we look forward to that continuing for many years to come..

Next we have the line of Alexia Quadrani of JPMorgan. Your line is open..

Thank you, very much. I just want to follow up on your comments about the upfront market. I understand the process is very different this year, and there's a tremendous amount of flexibility.

But do you believe there will be some upfront markets that will occur, meaning that advertisers will be willing to make commitments for the fall and for next year? And I guess when you look at Fox's portfolio, sports being such a big component of it, do you feel that they will remain on the sidelines until you do get better visibility on that front? I know you mentioned having the line of games coming out soon will be helpful, but is it enough to sort of get them to kind of make these commitments?.

Thanks, Alexia. So, as I mentioned before, I think with Jessica's question, we've been fully engaged with our clients and ad agencies over the last six weeks. We don't see that changing. We don't see a virtual singular upfront as the right thing to do today because all of our clients are affected by COVID-19 in different ways.

And they will all emerge from their COVID-19 impacts in different ways. So for example, our retail clients or our auto clients will emerge from COVID-19 in a very different way from, say, our financial services or insurance clients. Entertainment will be very different from telecom or professional services.

And so it's important for us as we've engaged with them to understand what their needs are and to tailor our partnership with them in very unique and specific ways, and that will continue. Obviously, there are triggers to those conversations, such as the NFL schedule being released, such as NASCAR being back on air, on the track.

And those are exciting milestones. But we'll continue to work closely with each of our clients and work to their specific needs to work them into our schedule.

I think one of the key things to remember, Alexia, is, aside from the sports schedule, which is starting to take shape, our entertainment schedule in the fall looks incredibly stable, really thanks to a large amount of our programming already being filmed and edited and phrase in the can.

The only open question in our fall entertainment schedule is whether we get Masked Singer back into production in time for a fall schedule or for a mid-season schedule.

The rest of our schedule and by the way, I should mention, I think I did in my earlier comments, the fact that animation is virtually -- the production schedule of our animation is virtually untouched, knock on wood, by COVID-19 has been a great boon to us. So we are very confident and pleased that we have a strong entertainment schedule in the fall.

Now this, of course, the elephant in the room is the tremendous ratings of news. Our news ratings are the strongest they've ever been. The demographics within those ratings within that viewership is younger and as attractive as it's ever been, and we're very pleased with that.

So it's not just about sports, sports coming back, but it's about news and entertainment that we are very confident, and we'll have a strong quarter..

Operator, we can go to the next question..

Thank you. Next we have a question from the line of Doug Mitchelson, Credit Suisse. Please go ahead..

Thanks very much. I guess the first question is jump ball. Has this environment impacted making any new investments in entertainment programming? And how does the accounting work for the programs that you're bringing back? I believe you booked them on a cash basis last year when you made the investments.

Now that they're returning for second seasons and they've been successful, does that have any implications for downstream revenues that you start to book or cash you start to receive? And the second question, Lachlan, I was going to ask, it seems like you have an idiosyncratic mix of acquisitions to-date, and what should we expect next in terms of M&A? And it's interesting because you strung three together as part of a direct-to-consumer strategy.

So either way, whether it's an idiosyncratic mix or whether it's actually targeted to a specific strategy, any thoughts on what's next for M&A would be helpful. Thank you..

Doug, let me start with the first half of your first question, and then I can go to your second question. I'll let Steve answer the accounting of it, but the impact of any new investments in entertainment in terms of how we look at -- as I mentioned, the production today is effectively shut down globally.

How we plan for new seasons and new shows, which we are excited about, whether for really for the fall sorry, not for the fall, for mid-season or for next year, there's been no sort of disruption in how -- in our development cycle in terms of new shows and new IP.

One thing that's been occurring behind the scenes all the time is virtual riders rooms and virtual development where people don't have to be on an expensive movie studio a lot. For example, all of that work is continuing behind the scenes, which has been positive to see..

Yes. And Doug, just picking up on the accounting and just, we called out -- just going back to the Investor Day, again, we called out $200 million to $250 million of programming investments, and we're on pace to be in that range for the full year.

So I think we'll spend close to sort of $170 million of that so far in the first three quarters of the year. So we're still on pace, and as Lachlan mentioned, continue to look at how we invest in that going forward.

The accounting won't change for us in terms of the amort of entertainment programming, which we generally sort of go through on first run. So there'll be no changes on amortization..

And then as to the idiosyncratic investment or M&A, the -- look, I think you can put it into two different categories. One is expanding our existing strength on our existing base.

So for example, if I look at Tubi and I think of the digital video impressions that they garner us, we can both strengthen Tubi from a content point of view, and we can strengthen them from an ad sales point of view. They benefit tremendously from the association with us. We think it's a tremendous acquisition that really plays to Fox strengths.

But it's doing what we do today. It's putting with new technologies and advertising video-on-demand basis, puts our content in front of new markets with greater reach and gives more opportunity for our advertisers. So it's perhaps a simple strategy, but we think one that's really very exciting for us.

So one bucket is the businesses that are in our wheelhouse. They're expanding what we already do in an exciting way. The other, which you can put Credible and Fox Bet into those categories is how do we look at businesses that -- where we can monetize our existing audiences in different ways.

So not so when you look at our revenues today, our revenue is equally split roughly between advertising and affiliate revenue to grow new revenue streams, less reliant on those two is an important goal of ours. Credible, we're incredibly excited. It's doubled in size over last year. Doubled its loan volumes and doubled its revenue.

And Fox Bet had an incredible Super Bowl. Obviously, since COVID-19, there's less sports being played. But I should say that part of that acquisition was an equity stake in TSG, which has done rather well with the merger with Flutter, which I should congratulate Peter Jackson for, which closed on Monday.

So, those businesses are really about getting -- those best strategies are really about getting into new businesses, based upon our existing audiences and serving our existing audiences in new ways..

Operator, we have time for one more question..

Our last question will come from the line of John Janedis, Wolfe Research. Please go ahead. Mr. Janedis, your line is open here for us..

Come from the line of Steven Cahall, Wells Fargo. Your line is open Sir..

Thank you. So maybe just first, you talked about the TV station pacing of around down 50%.

As we've come through the current quarter, have you seen any sequential improvement that makes you think that, that down 50% isn't going to repeat again in the next quarter? And I know, that's a bit of a call on how reopening looks but just wondering if you're seeing that down 50% start to improve as parts of the economy start to reopen at this point and then, just a quick follow-up on political..

So on the -- let me talk sort of broadly over local and national. I don't want to per plate too because they're obviously different.

But clearly, when we talk about our projections for a 50% reduction in local advertising, that's a mix of all sorts of different categories, right? The categories that you would expect are being affected significantly worse by COVID-19, they're pacing below -- or say, worse than 50% below.

So travel, entertainment, restaurants are all pacing worse than 50%. But that's ameliorated by many categories that are down significantly less than that. Professional services, insurance and some categories frankly that, are up like pharmaceutical. So, it's a real mix.

Again, as we said before, we can't really say from a local perspective, how local markets are going to recover. It will be state by state as various states and municipalities lift their shelter-at-home orders. But we are beginning to see positive signs in the pacing going forward.

Over the last two weeks -- now, I'm not talking including national, over the last couple weeks we have seen a severe lessening of requests for flexibility with advertising.

I think people -- advertisers and marketers are starting to look forward into the first quarter of next fiscal year and are beginning to think about how they market and get their products and their brands in front of our consumers again. So, we're just -- its early days, but we're just beginning to see that positive shift.

As to political advertising, despite the impact of COVID-19 in the last couple weeks of the third quarter, the third quarter still was a record political year for us -- sorry, quarter for us -- the third quarter for us.

Fourth quarter always is a trough, as the advertising start -- political advertising starts to pick up again in the first fiscal quarter of the next fiscal year. So we expect that trend to continue. We expect the political advertising to ramp up in the first quarter of the next fiscal year.

And we believe we are still on track for a record political season. The reason we say that is, if you look at our markets. Obviously, it's going to be a hard-fought election.

We have nine of our 18 markets or about half our markets are battleground states, including Arizona, Florida, Pennsylvania, Wisconsin, to some extent also Georgia, Michigan and Minnesota. Ten of our markets have U.S. Senate races. I won't list them all. And two of our markets have gubernatorial races. Of course, the House has contests in every market.

So we think, our markets are -- I wouldn't say fortuitously, but are certainly positioned well to capture, a lion's share of the political revenue really in the first quarter of the next fiscal year. Thank you..

At this point, we're out of time. But if you have any further questions, please give me or Dan Carey a call. Thank you once again for joining today's call..

And ladies and gentlemen, that does conclude your conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect..