Scripps Networks Interactive (SNI) Kenneth Wayne Lowe on Q2 2016 Results - Earnings Call Transcript

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Scripps Networks Interactive, Inc. (NYSE:SNI)

Q2 2016 Earnings Call

August 09, 2016 10:00 am ET

Executives

Dylan Jones - Chief Communications Officer & Executive VP

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Burton Jablin - Chief Operating Officer

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Jim Samples - President, International

Analysts

Anthony DiClemente - Nomura Securities International, Inc.

Vasily Karasyov - CLSA Americas LLC

Michael B. Nathanson - MoffettNathanson LLC

Michael Morris - Guggenheim Securities LLC

Laura Martin - Needham & Co. LLC

John Janedis - Jefferies LLC

Todd Juenger - Sanford C. Bernstein & Co. LLC

Doug Mitchelson - UBS Securities LLC

Ryan Fiftal - Morgan Stanley & Co. LLC

Tim Nollen - Macquarie Capital (NYSE:USA), Inc.

Steven Cahall - RBC Capital Markets LLC

David Joyce - Evercore Group LLC

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Scripps Networks Interactive Second Quarter Earnings Call. At this time, all lines are in a listen-only mode. Later, there'll be an opportunity for your questions and instructions will be given at that time.

I will now turn the conference over to Chief Communications Officer, Dylan Jones. Please go ahead, sir.

Dylan Jones - Chief Communications Officer & Executive VP

Thanks, Cathy. Good morning, everyone. On the call with us this morning is Ken Lowe, our Chairman, President and CEO; Burton Jablin, Chief Operating Officer; Lori Hickok, Chief Financial Officer; and Jim Samples, President of International, who's on the line from Warsaw. We'll start the conference call with prepared remarks that should take about 20 minutes, then we'll open it up for questions.

Let me remind you, if you prefer to listen in via the internet, go to our website, click on the Investors button and find the microphone icon on the landing page. Additionally, on the page under the microphone icon you'll find our second quarter earnings presentation materials that we'll be referencing during the prepared remarks portion of our call. An audio archive will be available on the site later today, and we'll leave it there for two weeks so you can access it at your convenience.

During the Q&A this morning, please limit yourselves to one question and one follow-up so that we can accommodate as many people as time allows. Let me remind you that our discussion this morning will contain certain forward-looking statements. Actual results may differ from those predicted. And some of the factors that may cause results to differ are set forth in our publicly filed documents including our Form 10-K.

With that, I'll turn it over to Ken.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

All right. Thank you, Dylan, and good morning, everyone. Very happy you're able to join us today. Scripps Networks Interactive again delivered another quarter of strong operating performance. I could not be prouder of the great work our entire organization has produced so far this year. Just a quick review on the second quarter of 2016, total operating revenues grew 22%. Consolidated advertising revenues grew 29%. Advertising revenues for the U.S. networks increased 9% and surpassed $0.5 billion this quarter for the first time ever. Consolidated adjusted segment profit increased 14%, and we closed a record broadcast upfront that puts the company in a great position for 2017.

Now Burton and Lori will go into details on the quarter in just a few minutes, but first I want to highlight some of the results delivered by our strong brands. HGTV sustained its strong ratings performance and achieved the highest rated second quarter in network history among all the key demographics. The strategy that we've implemented at Travel Channel continues to deliver sustained success with the network's third consecutive quarter of primetime ratings growth. Travel Channel is a powerful brand with great growth potential, and we have exciting plans in place to build on this momentum. And TVN Group delivered another solid quarter, with total market share up 3% over last year, solidifying their position as the leading network group in Poland.

Our family of networks leads the way in lifestyle programming in the United States and around the world. They're really unmatched in the industry for the savvy, well-informed, upscale audiences that they deliver. The record advertising performance we reported today and the record upfront we just closed speak to our leadership in using lifestyle content to connect advertisers with consumers. In the midst of ever changing and expanded viewer options, our networks remain essential to distributors and deliver consistent performance and high quality audiences that our distribution partners seek. The unique nature of our networks and the audiences they attract means that both our ratings and our impressions remain robust.

We're active in the virtual MVPD space, talking with new and prospective entrants as we continue to expand our engagement with audiences on non-traditional linear services. We're also actively extending the reach of our popular TV content as well, with short form originals on the various digital and mobile platforms. Burton will share some of the recent successes we've achieved with Scripps Lifestyle Studios in just a few moments.

On the advertising side, as I mentioned, we recently concluded our upfront negotiations and we're delighted with the results. I just want to say thanks to Steve Gigliotti, John Steinlauf and everyone in our sales organization for the incredible job they're doing. Advertisers are lining up like never before to secure their place in our entertaining and family-friendly programming. And that has resulted in a record-breaking year for that team.

Our International segment continues to deliver impressive results. The teams are hard at work assessing and delivering on the wealth of opportunities available to our Lifestyle brands around the world. Over the past several months, we've expanded our footprint in key markets across South America, Europe and Asia-Pacific. For example, we've taken important steps toward the global rollout of HGTV, a key priority for Scripps Networks. In June, HGTV launched in New Zealand. Additionally, we believe there is substantial opportunity for HGTV in Europe. And I'll look forward to us making more announcements on that front in the coming months.

TVN group, Holland's leading multi-platform media business, continues to exceed even our own high expectations. Audience levels are climbing steadily and revenues continues to grow. TVN has proven to be a transformative acquisition, converting our International Network segment into a growing and profitable endeavor as it continues to break new ground developing and monetizing compelling original content for Polish audiences. Today, our international networks, including our TVN portfolio, are distributed in more than 175 countries and territories around the world and broadcast in 29 languages, all on our way to 300 million cumulative subscribers.

Scripps Networks Interactive continues to reach new heights. Couldn't be prouder of all we've accomplished so far in 2016, both at our networks in the United States and at our international networks. And we're really about the prospects for the remainder of the year, and the year ahead are just as positive. And we're very confident in the path ahead. Again, I want to thank you for your interest in Scripps Networks Interactive.

And with that, let me turn it over to Burton who has additional details on second quarter results. Burton?

Burton Jablin - Chief Operating Officer

All right. Thanks, Ken, and good morning, everyone. We continue to perform at a high level and reached some significant milestones in the second quarter. Total day ratings for adults 25 to 54 improved at every one of our six U.S. networks during the quarter. In addition, sales prime ratings were up at five of the six networks. This success story is built on strong consistent networks that deliver on their promise to audiences, day in and day out. This is not a hits driven business, although we have plenty of those, too. Our networks keep viewers watching at a high level through all day parts, and as a result, provide a must-have service to distributors and a must-spend environment to advertisers.

At HGTV it was the highest rated second quarter ever among all key demographics and the third highest-rated quarter ever for sales prime. HGTV extended its leadership position as the number one network for upscale women 25 to 54 in sales prime for nearly 10 consecutive years. In addition, viewership among the key millennials' demographic grew 6% compared with 2015, driven by popular shows like Flip or Flop and Brother vs. Brother. At Food Network, our co-viewing strategy continues to deliver. Co-viewership reached its highest level in over five years with shows like Cake Wars, Kids BBQ Championship and Chopped Junior, appealing to adults and kids alike.

In addition, total day ratings for adults 25 to 54 were up 4% at Food Network in the quarter, thanks to a strategic shift in daytime program scheduling. Coupled with new premieres like Cooks vs. Cons, over time we expect this to help boost primetime viewership, too. Travel Channel is gaining momentum and reported its third consecutive quarter of year-over-year growth. Sales prime ratings were up an impressive 11% among adults 25 to 54. Ratings grew in six out of seven nights of the week, four of them by more than 20%.

Additionally, time spent viewing on Travel Channel increased by more than 10 minutes, a testament to the moves we've made over the last few months. And our Dive Into Summer programming, which concluded this past Sunday, was an absolute hit with viewers. The stunt helped drive double-digit increases in Sunday prime ratings over the full quarter. Travel Channel represents one of the most significant growth opportunities for the company, and its recent progress reinforces management view that we're advancing the network in the right direction.

DIY Network had another very strong showing, delivering its most watched quarter ever in sales prime among adults 25 to 54. Barnwood Builders and Vanilla Ice Project led the way with strong ratings. Cooking Channel also scored the highest rated and most watched quarter in its history for sales prime among adults and women 25 to 54. The network also set a new record for time spent viewing. Finally, Great American Country had its best quarter in almost nine years, growing ratings by more than 50%.

Our new Scripps Lifestyle Studios continues to pave the digital path for our company, and we saw many successes in the second quarter, including almost 20% growth in U.S. digital revenues. Total digital subscribers on Facebook, Pinterest, YouTube, Instagram and Snapchat have grown 20% since January, while video views on our Facebook pages have increased 123%.

Food Network continues to show strong growth and demand in its online platforms, where it currently has more than 10 million fans on Facebook and more than 1 million subscribers on its Snapchat Discover channel. In addition, HGTV hit a milestone in June, reaching 5 million fans on Facebook and 1 million followers on Instagram. Now during the quarter, we shifted some organizational responsibilities in the digital group, and brought all content, digital and linear, under the oversight of Chief Content Officer Kathleen Finch as we seek to build audiences across all platforms.

At our international networks, the last several quarters have been especially exciting as the company grows outside the United States. In Poland, TVN had another successful quarter. TVN's family of networks saw revenue growth in the mid-single digits in local currency compared with the prior year. As Ken mentioned, for the second quarter, TVN Group saw its total commercial audience share increase 3%. Also, TVN the broadcast channel strengthened its number one position in its key demographic, reaching 15% market share. TVN 24 has maintained its leadership in Poland among news channels, while thematic networks, TTV and TVN's Fabula, have substantially increased market share over the last six months. TVN is a great fit for our international portfolio. We couldn't be more pleased with the impressive results we've realized to-date.

We're also expanding into new markets. We recently announced the upcoming launch of HGTV for the first time in the EMEA region. The channel will debut in the Middle East and North Africa in November. And late last month, we announced our intent to introduce Food Network and Travel Channel to audiences in Israel for the first time beginning in September. In the second quarter, UKTV achieved a 10% share of commercial impacts for the first time in its history, and was the fastest-growing network group in the UK.

2016 continues to set new records for the company. As we grow, we're redoubling our efforts to create an ever deeper connection with our consumers across all of our brands.

And now I'll turn it over to Lori, who will review the company's financial performance.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Thanks, Burton, and good morning, everyone. Since you've seen our results, I'll highlight the consolidated numbers, discuss our segment performance and then open it up for Q&A. Consolidated revenues in the second quarter totaled $893 million, an increase of 22% compared with the prior year. The growth was primarily driven by the strength of the U.S. advertising market, coupled with ratings improvement and the expansion of our international business through the acquisition of TVN last year.

Consolidated adjusted segment profit increased 14%, fueled by the strong revenue growth during the second quarter and the inclusion of TVN. Consolidated adjusted diluted earnings per share grew 8% compared with the prior year. The improvement in adjusted EPS was primarily due to the improved operating performance, which was partially offset by an increase in interest expense associated with the financing for the acquisition of TVN, as well as the assumed debt of TVN and lower equity and earnings of affiliates driven by the sale of our investment in Fox Sports South in the first quarter of 2016.

At our U.S. network segment, revenues increased 5%, driven by strong advertising demand for our lifestyle network, partially offset by a decline in distribution revenues. For advertising revenues, increases in CPM pricing, coupled with ratings improvements, drove a 9% year-over-year increase in the second quarter. Scatter pricing was strong during the quarter, with CPMs up mid- to high-teens year-over-year and up mid to high 20% over the broadcast upfront. Our top five advertising categories during the quarter were food, retail, automotive, home improvement and consumer packaged goods. These categories are consistent with the historical performance of the second quarter.

As Ken mentioned earlier, our ad sales team achieved a record-setting upfront. We drove both rate and volume without using any additional inventory. We expect to achieve low-double digit price increases on the same amount of inventory as last year. The strength of scatter market has continued into the third quarter. Scatter versus scatter CPM pricing is up mid- to high-teens year-over-year, and up high 20%s over the calendar upfront.

Industry subscriber declines and the previously disclosed one-time rate equalization of certain distributor agreements related to consolidations drove a 4% decrease in U.S. networks distribution revenues. The declines in rates and subscribers were partially offset by previously negotiated rate increases and new distribution related to over-the-top broadband providers.

During the second quarter, we finalized a long-term agreement with one of our biggest distributors, which resulted in a one-time true-up during the quarter. This does not impact our full year revenue outlook. Overall, we are extremely pleased with how the negotiations concluded. Looking forward, this deal in combination with other previously negotiated deals sets the company up for mid-to-high single-digit rate growth in the future. On the expense side, cost of services for the U.S. networks increased 18%, as planned, in the second quarter as a result of our continued investment in the quality and variety of programming on our networks.

We noted last quarter that we shifted some marketing and promotional expenses to later quarters. Due to the continued advertising strength and ratings improvements, we were once again able to defer marketing expenses out of the second quarter. We still expect to spend these marketing dollars, but it will be later in the year. Reflecting the increase in advertising revenues, mostly offset by increases in programming-related expenses, adjusted segment profit for the U.S. networks increased 1%.

International networks revenues increased significantly to $147 million from $22 million due to the inclusion of TVN in the second quarter of 2016. TVN revenues grew by mid-single digits in local currency compared with the same time a year ago. International adjusted segment profit was $37 million, compared with an adjusted segment loss of $10 million in the second quarter of 2015. This $47 million improvement is primarily due to the inclusion of TVN. As a reminder, TVN historically operates at higher margins in the second and fourth quarters, and at lower margins in the first and third quarters.

In addition to our consolidated results, we have international operations reported in our equity earnings. In total, equity and earnings of affiliates was $22 million, down 20% compared with the prior year. The decline is primarily related to the sale of our investment in Fox Sports South earlier this year.

On the balance sheet I'd like to touch on a couple of items. We finished the second quarter at approximately 2.9 times growth leverage, down from 3.2 times at the end of 2015. Also, our capital allocation priorities remain unchanged. We plan to use operating cash flow to fund organic growth, reduce our leverage and invest in M&A both domestically and internationally. Given those goals, we do not buy back any shares during the quarter.

Now for our 2016 full year guidance which is based on consolidated company results. Grounded in the results we have seen to date, we are reiterating all of our previously issued guidance.

And with that, we are ready for your questions.

Question-and-Answer Session

Operator

Thank you. Our first question will come from Anthony DiClemente with Nomura. Please go ahead, sir.

Anthony DiClemente - Nomura Securities International, Inc.

Thanks, and good morning. Thanks for taking my questions. I have one for Lori – or a couple related for Lori and then maybe a follow-up for Burton. So Lori, just wanted to ask about the 4% decline in U.S. distribution revenue. If you exclude the one-time rate equalization that you cited, what would affiliate rate growth have been in the 2Q? And then relatedly in the past, and I think just now in your prepared remarks you said that you expect distribution revenue growth to revert to mid- to high-single digit growth I think in the future. So I'm wondering if you could bridge for us the 4% decline in the 2Q with the expectation for mid- to high-single digit growth in the future. For example, what's the expectation for distribution revenue for the balance of the year? So why don't we start with those, and then I have a quick follow-up. Thanks.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Okay, Anthony. Quite a few questions embedded into one big question, I think. But generally, what we're looking at – and I'll remind you that we were not surprised by this rate equalization impact this year. Just as we finalize agreements, you'll see some lumpiness in how we record things but I think I would point again to our full year guidance. We're still on track. And as we look at the back half, I think it would be fair to say as we continue to see the impact from equalizations, that we would see maybe low single digit declines as we go out of 2016.

So as we look into 2017 we are quite encouraged based on the deals that we've done. And again, that's what I was referring to is that with the agreements we've done including the one that we just concluded, that we expect mid to high single digit price CAGRs for the foreseeable future. And these are fairly long contracts so we think that our carriage has been secured, as well as that we've gotten great price increases that are representative of the brands and the product that we bring to distributors' bundles. And again, I think I would point to – we've had a great year, and I think the resounding success we've had in driving impressions is seen by distributors as well as they look at what to put in their bundles.

Anthony DiClemente - Nomura Securities International, Inc.

Okay.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

So again, we've been calling. It's going to be a little bit of a choppy 2016...

Anthony DiClemente - Nomura Securities International, Inc.

Right.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

...but we're feeling very good based on the agreements that we've struck looking as we lap those in 2017 and beyond.

Anthony DiClemente - Nomura Securities International, Inc.

Okay. Thanks, Lori.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Again, Anthony, I would – and I would refer to our full year guidance to keep you kind of in the guard rails.

Anthony DiClemente - Nomura Securities International, Inc.

Got it. Okay. And then just maybe another one. Switching gears a second, there's been a lot in the press about your aggressive counter programming strategy to the Olympics programming. I know I think it's less than a week of Olympics here, but maybe for Burton and/or Lori, just wanted to get an early kind of update on how that strategy has gone. I know – has it gone as planned? I mean, do you have any early data points? What has been the impact of the Olympics on your ratings so far? Has it been kind of in line with your expectations for the 3Q impact? Thank you. Thank you, both.

Burton Jablin - Chief Operating Officer

Hi, Anthony. It's Burton. Yeah, we do program during the Olympics. We have viewers who expect us to provide the same kind of content for the two weeks of the Olympics that we do all the time and we do that for them. Really, it's so early, at least from a ratings standpoint. We only have seen one night of ratings from the opening ceremonies.

Anthony DiClemente - Nomura Securities International, Inc.

Right.

Burton Jablin - Chief Operating Officer

Just because the way Nielsen comes out with weekend ratings that – I can't give you any kind of assessment of how we're doing against the Olympics. But as you said, we program with our viewers in mind and we hope it comes out okay. That said, there are some events at the Olympics that do very well, swimming, gymnastics. So from night to night there'll probably be some variations but overall, we think we'll come through just fine.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Hey, Anthony. It's Ken...

Anthony DiClemente - Nomura Securities International, Inc.

Okay. Yeah.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

I'd like to just one quick follow up because I think there's been a lot of emphasis on "countering Olympic programming". When actually, in all fairness to Kathleen and her team, they're looking at an overall full year schedule now that I think it's more aggressive for us across the board, across all of our networks. So Olympics aside, I think part of the reason you're seeing the type of rating improvement and increases you are across all of our networks is a little bit more of a full year strategy, including what we're doing in the summer and some of the summer impacted programming and targeted programming. So I don't want to give Kathleen and her team not enough credit for the fact that we got Olympics here for two and a half weeks when this is more of a year-round strategy.

Anthony DiClemente - Nomura Securities International, Inc.

Understood. Thanks.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Okay? Thank you, Anthony.

Operator

Thank you. Our next question will come from Vasily Karasyov with CLSA. Please go ahead.

Vasily Karasyov - CLSA Americas LLC

Thank you. Good morning. Lori, I think my question is for you. You guys in the prepared remarks pointed out how good the revenue trends look for the next year at the U.S. networks. So – and if we couple that with what you said early about decelerating spending on Travel Channel programming, where do you expect the margin to go in the best case scenario for U.S. networks?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, Vasily, we've already said – again, it's a little early for us to be predicting 2017, but I think you've highlighted the trends that look really good. I think on the ad front, based on our impressions growth, looking at how well we've done in the upfront, feeling very confident with advertising. And in fact, I think, based on what's going on in the industry we're well positioned with our alliance that we had on driving advertising revenue.

Again, I just spoke that we're going to lap these rate equalizations. So again, on the price front we're feeling very strong. We continue to secure new subscribers and new shelf space across the landscape, as well as look at what we can do on the Lifestyle Studios.

As far as margins, we've been talking about programming. We've been moderating that. We saw some increases over the past few years as we ramped up our spending for Travel Channel. What we've always said is that has moderated. We have looked across the portfolio. But if Kathleen and her team find something that's working and driving investment on the top line, we would make investment at that because it is the best investment we can make overall as a company.

But at that point on the U.S., I think we're very good stewards of our capital and of our expenses. So again, I think it's going be a very good year and we'll give you more on margins as we look at coming out of our budget cycle. But I don't see any big speed bumps looking forward.

Vasily Karasyov - CLSA Americas LLC

Yeah, okay. And a quick...

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

(25:33)

Vasily Karasyov - CLSA Americas LLC

Yeah, sorry.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

This is Ken. I have to underscore – I sound like a broken record but it's important. Because we own the majority of our content and we have a long and very successful track record in not only controlling that spend, but hopefully showing the most efficient ROI in the business on content. It gives us a lot of confidence going forward in the fact that we don't have some of the unknown increases, the sports rights that you maybe have in other type of programming, scripted, et cetera. So that fact continues, I think, to give us great confidence in going forward in our business model.

Vasily Karasyov - CLSA Americas LLC

Quick follow up, then. The repackaging, when a cost of subscriber moves from U-verse to DirecTV, say, and you lose some subscriber count because of retiering. Does that affect your advertising revenue, too?

Burton Jablin - Chief Operating Officer

I can address that, Vasily. Our impressions continue to grow so the advertising is based on the impressions. And we've got a great impression story. In fact, I don't think I'm bragging to say it's the best in the industry right now outside of what's going on with news and coverage of the political campaigns. So basically, the answer is no. Whatever's happening in the subscriber universe, we'll continue to push ahead with growth and impressions through our great programming, and that's how we're paid by advertising.

Vasily Karasyov - CLSA Americas LLC

Thank you very much.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Yeah. And Vasily, if I could just add also as well – and you've heard us talk about this before. As an industry, we're seeing some of this choppiness, but because we're targeted more to a 35-plus audience, we tend to be less impacted by some of the churn, some of the shaving, cord cutting that's possibly going on with the millennial audience which doesn't impact impressions, to Burton's point, as much as you see some of the variations in sub-numbers. So kind of steady as it goes above the water. We're underneath, it's a little choppy. But right now – and I think the best example I can give you is what Lori cited as a record upfront. We continue to deliver that very strong engaged upscale audience. And as Burton says, as long as impressions are growing, we feel very confident about our position.

Vasily Karasyov - CLSA Americas LLC

Thank you very much.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Sure. Thank you.

Operator

Thank you. We now have a question from Michael Nathanson with MoffettNathanson. Go ahead, please.

Michael B. Nathanson - MoffettNathanson LLC

Thanks. I have three pretty quick ones for Lori. Lori, when you said a one-time settlement that means one year, not one quarter, right? So when you say it's lasting, it may be one time but it's over the course of the year, not a quarter? Is that the correct interpretation?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

They're both true. It is impacting us over the entire year. We make estimates that as we finalize agreements you might see a little choppiness as you adjust your estimates. So we might have seen a slightly outsized impact in Q2, but it is a full year that we'll continue to see the impact.

Michael B. Nathanson - MoffettNathanson LLC

Okay. And there were two big consolidations in the industry and your outlook now takes into account the impact from both of those deals, or is there still another deal that has to be put into the numbers?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

I would say our revenue guidance takes into account all of the consolidation and the impact on our results. This is the choppy year for us and as we get past this year, we're going be set up quite nicely. I think, as I said, based on just looking at those mid to high-single digit price increases. So we continue to take that all into account, and we're looking forward to 2017 on the distribution front.

Michael B. Nathanson - MoffettNathanson LLC

Okay. And then lastly, I think Vasily asked this question too, was there a change in the net subscribers from 1Q to 2Q? Discovery said there was a change and Turner said there wasn't, and I wonder is it more about their bundles versus reality. So what was the impact in the change in subscriber growth from 1Q to 2Q?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, I'd say across the portfolio it probably was consistent with industry trends, maybe slightly better. We're seeing probably a little more impact on our digital networks than we are on the fully distributed, and I think that gets to some of the migration as these consolidations happen and other thing as they look at different bundles. But I think when we look at it, in as much like we've talked about that our fully distributed networks continue to retain carriage depending on what bundle they select, and then the digital ones are more of a second tier. So I think you're probably as familiar as we are as to what's going on with the tiering that Vasily mentioned. And that is having some impact when you look beneath the surface. But overall, I would say we might be faring a little better at our bigger networks than some of the others.

Michael B. Nathanson - MoffettNathanson LLC

Yeah, thanks.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thanks, Michael.

Operator

Thank you. Our next question is from Michael Morris with Guggenheim Securities. Go ahead, please.

Michael Morris - Guggenheim Securities LLC

Thank you. Good morning, guys. Two questions. First and maybe this is a follow-up just to make sure I understand, but when you talk about the new distribution agreements that give you the potential for that mid- to high-digit pricing CAGRs, does that include any additional flexibility in those new agreements, whether it's flexibility on tiering or out of home rights or video on demand? Is there anything new embedded in those agreements relative to what you had before?

My second question's for Ken. Clearly we're seeing some financial impact on you and your peer network groups from this consolidation on the distributor side. Does that impact how you think about the potential for consolidation on the network side in order to maintain or grow your negotiating leverage? Thanks.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, to your first question, we really don't get into the details of packaging and what goes on there. I would just say that we're well positioned as we look at what we've been able to secure. Again, our theme being that the fully distributed networks, we like to get those on the most widely distributed network and the others we look at how those drive probably another tier. And of course, when Henry and his team can, we like to get that on the fully distributed package. But we are pretty realistic about focusing on those big three, getting them in the best position as possible. But we don't get into the specific details.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Yeah, Michael, second part of your question, and you've heard me say this before, it's our preference to have quality over quantity. I like the position we have with our six networks. I like the family friendly. I like the ratings we deliver. I like the audience we deliver. So when we're sitting across the table from our distribution partners, we have a very strong hand. To increase that hand with more networks that might not be as strong does not necessarily give you a stronger position at the distribution table and in negotiations.

And thus far, I mean if you look at our 20-year history considering where we started, Food was 10 years free if you will. We've fully climbed our way up, I think, to where we're getting to the point where we're getting a little closer to the value that we think we give to our distribution partners. So I think of all of the cable groups, we still come to the table with one of the stronger hands. So consolidation on the content side is not something we spend a lot of time on thinking about.

Michael Morris - Guggenheim Securities LLC

Great. Thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Yeah. Thank you, Michael.

Operator

Thank you. Our next question is from Laura Martin with Needham. Go ahead, please.

Laura Martin - Needham & Co. LLC

Hey. So I was noticing in your prepared remarks that you said that millennials were up 6% at one of the networks, and then you gave a lot of stats on social metrics and I'm curious as to whether you think those two things are linked? And what do you think the social is bringing to you because I don't think that you're getting a lot of money from the social experimentation you're doing. So do you think what it's doing is driving – I'm interested in the economic impact of all those social metrics you gave us. So do you think it's driving millennial growth? Is that the economic upside from that, do you think?

Burton Jablin - Chief Operating Officer

Well hi, Laura. This is Burton. Thanks for asking that question because we do think about that a lot. The quick answer is yes, we do think there's a connection. That's part of the reason that we, as I said, recently brought our linear and content teams together under the leadership of Kathleen Finch so that we can think about the environment holistically. And you're correct in saying that we're not – while we saw very nice digital revenue growth in the U.S. of that 20% this past quarter from a year ago, you're right that some of what's going on in social isn't being monetized to the extent that we think it can. But what it is doing is creating a greater connection with our audience, particularly the younger audience.

And we do believe, and we do research in this so we have some degree of evidence, that we are driving younger viewers in particular to be more connected to our television programming as well. In addition, just the kinds of shows that are being put on in particular outside of HGTV, Flip or Flop and Brother vs. Brother, certain kinds of programming attracts the millennial audience better than others. And so we tend to focus on that for some of our social convergent content as well. But you're right. It's a holistic approach, that's why we restructured ourselves in terms of our organization this past year to take advantage of that. And we'll forge ahead to make more connections across more platforms in every way we possibly can and then monetize them in every way we can.

Laura Martin - Needham & Co. LLC

Very helpful. And then my follow-up will be on the upfront. You guys had a record upfront. A lot of your other incumbents had a lot – I'm wondering where you guys think that money is coming from? Like is it just that the economy's coming back so this is new money that brands are spending, or is money coming back from digital? There's about $1 billion that got added to this year's upfront compared to prior years, and I'm just curious as to where you guys think that $1 billion is coming from into the upfront market for television? Thanks.

Burton Jablin - Chief Operating Officer

Yeah, well, I'll try to start on that and then others can chime in. From what our ad fills team is telling us, it's a number of the things you cited. First of all, our networks are performing very well in an environment where that's not always the case. And so the quality of our audience combined with our actual performance is bringing a lot of advertisers to the table for us just because of the basic facts of how we're doing. So that's a good thing. You did cite digital. I think it would be fair to say that there is some sense that some of the issues related to digital in terms of real audience versus bots, viewability, all of those things have brought some money back to television where there's a long track record of proof of performance in terms of driving sales.

Our networks tend to do even better at driving sales than other networks so I think we're benefiting from that as well. And so I think you're just seeing some degree of a safe harbor when it comes to our family of networks, whether it's other television networks or the digital space. And that's paying off nicely for us in this upfront.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Hey, Laura, it's Ken. Just one comment. I think it's somewhat ironic that we're talking as we always do on these quarterly calls about linear television and where the industry is trending. At the end of the day here we sit with record ratings in all of our six networks, impression growth, a record breaking upfront, and the reason is TV advertising still works. Our advertisers have never had more data in research at their disposal. And guess what, they're putting more money back into television. It says something because that's where the rubber meets the road. So that's important us. That's the metric we look. That's our north star. And it continues to drive our company as it has for years, and I think it's positioned us incredibly well for the future ahead.

Laura Martin - Needham & Co. LLC

Okay.

Operator

Thank you. Our next question will come from John Janedis with Jefferies. Please go ahead.

John Janedis - Jefferies LLC

Thank you. One for Ken and one for Lori. Ken, you talked a little bit about this but as you know, there's been some discussion around skinny bundles and to what extent you'll be participating. And I know you're in a lot of discussions but can you talk about your confidence level in terms of having your key networks as part of any new offerings? And then separately, Lori, can you remind us what percent of your subs renew in 2017? I think there's a fair amount coming up over the next year or so. Thanks.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Yeah. Thank you, John, for your question. Look, I'll just keep it at a high level because as you know we don't get into discussions about negotiations. But as far as level of confidence, incredibly high. As you know, and we've said repeatedly, there's really not "a skinny bundle" that we're not included in. And last week was another example with DISH's latest announcement. We're must-have networks, especially if you plan on delivering an upscale women audience. I don't know how you start with any business plan and say we're not going to.

The fact – we've talked about this on the calls many times. It's a two-edged sword, our distribution economics are where they are. We're an easy group of networks to be included in skinny bundles for all the obvious reasons. So my confidence couldn't be higher as we continue to have discussions, which we mentioned in our comments, even in the MVPD world. If anything, I'm probably more confident than I've ever been about the position of our networks. In going forward, I do think – as Lori alluded to, I think some of the smaller networks across the industry are going to be under a little bit more pressure.

But the good news for us is both DIY and Cooking are actually extensions of our big brands and bring some very important advertising slots to our distribution partners as well. So I think generally, we're going to do very well, and there'll probably be pressure across the industry on the smaller digital networks that we'll just have to weather.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

And John, on your other question about what percentage of our subscriber base is up for renewal. Again, we're come to the conclusion of, I think, the latest round of negotiations. But there's right around 20%, probably, in 2017. That's probably a good proxy.

John Janedis - Jefferies LLC

Thanks a lot. Maybe one quickie for Burton if I could squeeze it in. Appreciated the comment around annual programming. Will original hours be down for the quarter on the Olympics?

Burton Jablin - Chief Operating Officer

Well, as Ken said, no. We're just continuing on our strategy – so it's a year-long strategy. I think what's being called aggressive programming during the Olympics really just means you're not going into heavy reruns. We're never in heavy reruns. We have 2,500 hours of original content across all of our networks and we spread it out throughout the year. So basically it's steady as she goes.

John Janedis - Jefferies LLC

Thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thanks, John.

Operator

Thank you. We'll go next to Todd Juenger with Sanford Bernstein. Please go ahead.

Todd Juenger - Sanford C. Bernstein & Co. LLC

Oh, hi. Thanks. I'll just keep it to one, I suspect, probably for Lori or anybody else who wants to comment. I wanted to look back at domestic advertising if I could and just see if you could help us as outsiders and what we can learn from progression from Q1 to Q2. I think it's interesting to look, if you look back at your Q1, I think scatter pricing was healthy but low double-digits is what you've cited. And in Q2, you just cited mid- to high-teens scatter over scatter. So pricing actually better in Q2 than it was in Q1.

Per our numbers, it looked like your audiences were up about the same amount in both Q1 and Q2 year-over-year, low-single digit number. And yet your domestic ad revenue was higher in Q1, like 14% growth versus 9% growth in Q2. So just something else must be going on if you had higher pricing, the same audiences but lower revenue growth. What are we missing? Is it mix? Is it something just about the mix Q2 versus Q1? Something about sellout percentage? Any help you could give us would be greatly appreciated. Thank you.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, Todd, I think you answered your own question. I think it's predominantly related to two things. It's mix, which always has an impact, the scatter's only a part of what we sell but it's doing very well. So you'd have to go back a year ago and remember what we did in the upfront market, so you have to factor that in. And also, this year we've been talking about even though it continues to perform really well, last year we saw sequential improvement. So each quarter the comps got tougher and tougher. So back half being especially stronger. So I think it's really just a function of mix and the pricing that you get in the different markets.

Todd Juenger - Sanford C. Bernstein & Co. LLC

Okay, thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thanks, Todd.

Operator

Thank you. Our next question is from Doug Mitchelson with UBS. Please go ahead.

Doug Mitchelson - UBS Securities LLC

Thanks so much. A couple questions. Quickest one – Burton, can you give us a sense of your sellouts this year, and can you remind us what your sellouts were in last year's upfront?

Burton Jablin - Chief Operating Officer

Generally, we're about the same from year to year, and that's been true for a number of years. So about the same amount of inventory this year. And of course, Lori gave you the figures of the kinds of increases we got.

Doug Mitchelson - UBS Securities LLC

And I'm sorry, in case I missed it in Lori's comments, are you willing to give us sort of the percentage sellout level you're generally around? Is it around 50%?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Again, I don't have the specific numbers in front of me, but we're generally right around that 50% on the portfolio mark.

Doug Mitchelson - UBS Securities LLC

And then...

Lori A. Hickok - Chief Financial Officer & Executive Vice President

So that's (43:44)

Doug Mitchelson - UBS Securities LLC

Okay. Thank you. And then I'm trying to think of a way to sort of be constructive on the distribution renewal because you've already commented on it a few times. And then one thing I just wanted to sort of approach was sort of AMC, Fox, you and Viacom sort of had the biggest sort of negative adjustment over the last couple quarters in terms of affiliate growth year-over-year. But you were a bit worse than those other three. And I'm trying to understand, did you do something innovative or different with your renewal relative to some of the industry consolidation that we had that would make your growth rate a little bit different over the last couple of quarters than peers?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

So I really can't comment on what we would've done differently. All I can speak to is that the consolidation's going have an impact. We can look at our renewal cycles and all of those factors have an impact on timing, and then us making the best estimates we can based on how those negotiations will play out. But I can't speak to how we relate to others. It's really – we've called out since – we provided guidance in the fourth quarter earnings call that we expected rate equalization have an impact. It's just having a little bit bigger of an impact just based on timing in the second quarter but our full year guidance remains intact. I almost have to keep pointing back to the full year because there might be some choppiness from quarter to quarter, but it was really a matter of how we thought the year was going to end, which is pretty much in line with our expectations as we go through that.

Doug Mitchelson - UBS Securities LLC

And I appreciate that, Lori, and that's understood. And specifically where I'm trying to go as we just think about modeling 2017 and beyond, was there anything different than normal that you did with this particular contract? Would you say this is a relatively standard contract versus your other distribution contracts?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, while we don't necessarily get into the details, I don't think there's anything unusual that we would comment that would make an impact that we would need to factor into the modeling at this time. I think what's the most important thing is the point that I made was that the pricing that we're getting out of these contracts looking forward are quite good. Back to those mid- to high-single digit CAGRs. So I think that's the most important fact.

Doug Mitchelson - UBS Securities LLC

That's helpful. Then the last of my multiple follow-ups here, just curious, balance sheet flexibility and how you guys are thinking about capital deployment. I look at your gross leverage at about I think three times, correct me if I'm wrong. And you've got a couple hundred million dollars of cash and $1.15 billion of availability on your revolver including the options. So you have a lot of cash capacity, $1.35 billion. How are you thinking about capital deployment and the appropriate level of leverage for the company? And that's it for me. Thanks.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, I think the story is unchanged. We continue, and we've been doing this all year, to invest organically, which is things like the Lifestyle Studios, that's usually through – and even programming for our income statement. So we continue to do that on an ongoing basis and that's usually factored into our margins for the most part. We are focused on bringing our leverage down because we like investment grade ratings and we also like the flexibility to be in a position if something opportunistic comes along on the M&A front, specifically in both the U.S. – maybe more so digital front, but the U.S. markets as well as in the international front.

So I think I would say we like the flexibility. We'll continue to delever. We'll be in a much better position as we round out of 2016 and go into 2017. But really, we're just trying to make sure that we maintain flexibility and investment grade ratings and continue to grow the company. And we like to put dollars to work where we can grow the company. But we'll re-evaluate that as our leverage comes down, but right now – and again, you saw in the first quarter we did do some M&A transactions with the Travel Channel, buying that in because that made sense, as well. So we continue to look at that.

Doug Mitchelson - UBS Securities LLC

All right, thank you very much.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Okay, Doug. Thank you.

Operator

Thank you. And we now have a question from Ben Swinburne with Morgan Stanley. Go ahead, please.

Ryan Fiftal - Morgan Stanley & Co. LLC

Hi. It's actually Ryan Fiftal from Morgan Stanley, but thanks. And I have two quick ones. So Lori, yet another follow-up on the affiliate revs, but I think you were comping some SVOD revs last year. So did that have any impact on the rate of growth this quarter?

Lori A. Hickok - Chief Financial Officer & Executive Vice President

It did not.

Ryan Fiftal - Morgan Stanley & Co. LLC

Okay, great. And then you mentioned that your digital networks are seeing a little more volume pressure compared to the big three networks. So I guess given the trends you're seeing now and your outlook for skinny bundles, does that at all impact how you think about the concentration of your programming investments in the big three networks versus the smaller ones? Thanks.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, I'll probably just let Burton handle that. I don't know if it necessarily changes it long term because I think we've been pretty efficient and thoughtful about how we manage the portfolio of brands. But I think Burton's probably better situated to answer that.

Burton Jablin - Chief Operating Officer

Yeah. I would say my quick answer is we're seeing very nice ratings and impressions growth at all three of our digital-tiered networks. I think I said Great American Country, of course, coming off a relatively small base, is up 50%. And that's really not spending a whole lot of money on programming. And the reason for that is the audience is relatively small compared to our other two digital tiers. But we do invest in a pretty good amount of original programming. So it's all based on the reach of those audiences, our ability to turn those programming investments into actual monetization through our advertising. We do that incredibly well with DIY Network and Cooking Channel. And we're happy to see growth beginning at GAC. So it's really more about the kinds of impressions we can drive and not necessarily thinking about where we are on the tier and what impact that has on distribution.

Ryan Fiftal - Morgan Stanley & Co. LLC

Okay, thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Sure, Ryan.

Operator

Thank you. Our next question is from Tim Nollen with Macquarie. Go ahead, please.

Tim Nollen - Macquarie Capital (USA), Inc.

Hi, thank you. I wanted to come back to the upfront market again. Mentioned no increased inventory sell and you said that you've done that for many years. I wonder if there's a strategic reason why you would do that or why you would not be raising your inventory sell-through in such a strong market as this. I guess the extension of the question is, are you that confident in the scatter market? And then also relatedly, you've talked many times about live viewership of your program being about 93% of the total. Is it possible to break down the linear versus the digital revenues on advertising?

Burton Jablin - Chief Operating Officer

This is Burton. I'll try to tackle both of those, Tim. Quick answer on the latter question is no. We're really not going to break that down. Although I will observe that right now the viewing through TV Everywhere essentially is growing at a very nice pace, but it's still a very, very small percentage of the overall viewership. So even if we were to disclose those numbers, at this point they'd be relatively small. But we expect that there will be growth there and that's why we've been such big supporters of the TV Everywhere initiative.

In terms of the upfront, I guess the quick answer would be yes. We have confidence, but it's a confidence not just in the scatter market but in our own ability to drive impressions, to continue to have the best possible environment for advertisers, to attract that highly desirable audience. Basically, our ad sales team is a great partner to our programming and marketing teams. And collectively, we just believe in our strength and don't feel the need to expand the inventory that we sold in the upfront this year. And that's, as I said, been very consistent over a number of years because the performance of our networks has been so consistent.

Tim Nollen - Macquarie Capital (USA), Inc.

Okay, thanks.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thanks, Tim.

Operator

Thank you. We have a question from Steven Cahall with Royal Bank of Canada. Go ahead, please.

Steven Cahall - RBC Capital Markets LLC

Yeah. Thank you. Good morning. First question just on programming expense. I was wondering if you could touch on what the growth of programming or overall expense would've been. I think maybe excluding some one-time step-up you've had in amortization. And then also you mentioned some of the marketing spend gets pushed out a little bit. So is there any shift in the programming strategy here quarter to quarter, and what would we expect programming spend growth to look like maybe for the back half of the year? Again, also without some of the one-time step-ups.

Lori A. Hickok - Chief Financial Officer & Executive Vice President

Well, I'll talk about holistically, because I don't necessarily have the quarter to quarter. What I can tell you is that our programming spend and what you see in the amortization is probably the highest in the second quarter. So on the programming-only front, if I could see the largest impact this year – but again, we've been talking about our overall investment on the portfolio, how that's moderated. It's a little bit of a leading indicator of what you'll see on the amortization, but again the programming teams have to make the right scheduling decisions, which does have an impact. And yes, we did have an impact from changing our amort. So I think you're going to see that continue to moderate, and there'll be huge moderation when we look at the fourth quarter.

In fact, with the marketing spend and programming, I think we've highlighted that we think Q3 is going to be where we continue to invest and you're going to see a little bit of margin push there on the U.S. side, but you're going to see expansion probably on the back half related to that shifting in spending. But again, it's back to the hours. We're putting the right amount of hours. The team keeps doing it and you factor that. So I really just think you're seeing the impact of just the stewardship of Kathleen and her team managing that 2,500 hours on the U.S. side the best way they can and maximizing that with impressions growth.

And again, we've moderated on our Travel Channel hours but I would – I think I've been pretty consistent saying if Kathleen and her team start to see traction and we're driving the revenue and Steve's out there selling it, you could see those hours start to be increased. But again, too early to call that. I think we're quite comfortable. But I think you're looking at, when you look at our cost of sales, at least on the programming side, probably the largest quarter of the year was – as far as an impact, was in the second quarter. Doesn't mean we're not still spending as we continue and seeing that amortization in the back half.

Steven Cahall - RBC Capital Markets LLC

Okay. Thank you. And then maybe just a follow-up on advertising and a longer term question about virtual MVPDs. So as you've come through this upfront season and you talk about the way that impressions are monetized in a virtual world, I know you sell into something like 30 different demographics, many of those of course are going to be younger and sort of higher value. So are advertisers ready to start talking about how they're going to price an impression in a virtual versus a linear bundle? Do they look at it all differently? And how do you think about that transition of your advertising monetization?

Burton Jablin - Chief Operating Officer

Well, I'll try to tackle that one, too. I think it's an evolution right now. Obviously, we do sell digitally. We sell digital impressions. I said we had 20% growth in our advertising revenue on the digital side for the U.S. And so there is a different pricing equation when it comes to our digital impressions, whether it's for flat content or video content. If you're talking about essentially the linear feed through TV Everywhere or through a digital delivery platform, Roku, all those things, Apple TV, Amazon Fire, or our own apps or our distributors' apps. If it's the linear feed, that pricing would be the same as the television network. If it's dynamic ad insertion post day three, which we're seeing some growth in, that's priced as a digital buy and so would have a different pricing component.

So I guess the quick answer is that, yes, there is a different equation when it comes to a pure digital buy, but because this is all evolving and what we hope will be more viewing of our linear networks through digital platforms, that would be rolled up into the standard television buy within C3. So it's a little bit complicated right now, but I hope that helps give you some idea of how we're looking at it.

Steven Cahall - RBC Capital Markets LLC

Great. Thank you.

Operator

Thank you. Our next question is from David Joyce with Evercore ISI. Go ahead, please.

David Joyce - Evercore Group LLC

Thank you. Appreciate a little of the color on TVN in terms of the stronger quarters and lighter quarters on margin. Just wondering if you're starting to invest in the potential buildouts for the region, if that was part of the vision of that acquisition. Thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Hey, David. It's Ken. Because we have Jim Samples on the line actually from Warsaw as you heard in Dylan's setup, we'll turn that question to Jim Samples.

Jim Samples - President, International

Sure. So a couple of questions there, I think. In terms of the differences in the quarter, that's primarily related just to the cycles here of when there's more money in the marketplace. So it's mostly revenue driven rather than cost driven. And the growth that we've been seeing is both good demand and advertising, which is kind of following the economic growth around sort of mid-single digits. As well as strong ratings increases from expanding our primetime premieres into summer, that's given us nice momentum. In terms of expanding into the region, there's nothing imminent, but certainly being here and being in the largest economy in this part of the world gives us a bird's eye view of some of the opportunities that are out there. But certainly, immediately our focus will be on continuing to grow TVN here in Poland.

David Joyce - Evercore Group LLC

All right, thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Sure.

Operator

Thank you and our final question will come from Ben Mogil with Stifel. Go ahead, please.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Hi. Good morning. Thanks for taking my question. In terms of Europe's sort of post-Brexit and both I guess between UKTV and sort of anything else you've got – all the other channels you've got in Europe. Anything you're seeing in terms of the advertisers' sentiment changing?

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Well, I'll turn back to Jim, Ben, because he's there. He's spent a lot of time obviously in Europe. But the short answer is no. I mean, as Lori said, UKTV just delivered the strongest results, I think, in history. So we're not really seeing an impact post-Brexit. But, Jim, you might to expand on that as it relates to what you're seeing there in Poland and across Europe and internationally.

Jim Samples - President, International

No, we're not seeing much impact of it here. In the UK, there's some talk about potentially softening in advertising revenues but we've not seen evidence of that happening yet. And we've also just had particularly strong ratings so to the extent there's any small reduction on the revenue side from demand, I think we'll make up for that in the ratings. But remember also that the UKTV numbers are not consolidated here, but are reflected in equity earnings. So that's if there were any change at all, that's where we would see that. But overall, again, the biggest revenue opportunity for us continues to be growth in the Polish market, which continues to be very strong and has not shown any drawback after Brexit.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

That's great. Thank you very much.

Dylan Jones - Chief Communications Officer & Executive VP

Thanks, everyone, for listening in today. As a reminder, Mike Gallentine and Sarah Burnett will be available for follow-up calls through the rest of the day. I'll now hand it back to the operator for replay information.

Operator

Thank you. And ladies and gentlemen, this conference will be available for replay after 12:00 p.m. today through midnight, August 23. You may access the AT&T executive playback service at any time by dialing 1-800-475-6701 and entering the access code 396788. International callers, dial 320-365-3844 using the same access code 396788. And that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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