Good day, ladies and gentlemen. This call is not for media representatives or BofA Securities investment bankers or commercial bankers, including corporate and commercial FX. All such individuals are instructed to disconnect now. A replay will be available for BofA Securities investment bankers and commercial bankers, including corporate and commercial FX. The replay is not available to the media. Thank you. Good day, and welcome to the conference call with Gunnar Wiedenfels, CFO of Discovery. Today's call is being recorded. At this time, I turn the conference over to Jessica Reif Ehrlich. Please go ahead.
Thank you. Thank you all for joining us today for a conversation with Gunnar Wiedenfels, the CFO of Discovery. Gunnar, I know you are in a quiet period, but there's just so much going on in the industry. There are things I know that you can't discuss, but we really do appreciate your time and your availability to go over some stuff. There's just so much within the industry and then other things that are going on with the company specifically. Before we get started, I just want to tell the audience if you have questions, please email me at jessica.reif@bofa.com. We won't be opening up the lines today, but I will be checking for email as we continue the conversation. Gunnar, let's just start.
There's so much news in the last few days, but there were reports out earlier this week that Discovery renewed its Sky deal, and it seems like this may be a different type of renewal than in the past. Can you discuss the nuances of the deal?
For sure. First of all, thank you, Jessica, for hosting us this morning, and good morning, everyone. Hope everyone's well and holding up. To your question, the Sky deal indeed was announced earlier this week. We've been working on this for a while. It's a very interesting deal. It's obviously an important affiliate partner of ours in the international space. I'm really glad about our joint ability to build on the existing partnership and actually grow that partnership. It's a new form of the deal. We're increasing our cooperation on the ad sales side. Sky is now on the back of this deal also sort of fully vested in being a great distribution partner for us in the direct-to-consumer space.
We're working together in the promotion of our existing D2C products, Eurosport Player, MotorTrend, et cetera, and then whatever else might be coming down the pike in the future. It's also obviously the core of the affiliate relationship in the traditional space that we renewed. I think a great example top to bottom of how in an evolving ecosystem that we're able to find very attractive mutually beneficial deals with our existing and new affiliates and partners.
Is there anything unusual?
So big-
Sorry.
Go ahead.
Just wondering, is there anything unusual or anything different about the length of the contract or the pricing?
No. Really what's different here is structure of the contract with more of an ad sales focus, more of a partnership focus from the perspective of driving our direct-to-consumer products. It also has the core traditional linear affiliate deal included. Really nothing fundamentally different from that perspective, but just sort of a great platform for future growth in the years to come here.
Great. Before we come to domestic, are there any other significant deals outside of the U.S. that were recently done or are coming up?
Well, clearly, Sky is one that sticks out, not only from the coverage of territories but also the size of the relationship, of course. Remember, we're in more than 200 territories globally. We have a number of deals constantly under negotiation. That's part of our business. This one, again, is slightly different in nature, could maybe be a template for future deals as well. We usually don't disclose those discussions on an individual deal level. As we said before, when we closed the Scripps transaction, we obviously inherited a number of deals as well. We've been going through a couple more renewals and discussions than before the merger, not only in the international footprint, but also domestically, we've been able to close a couple of deals and recently renewed.
Let's talk about domestic. On your first quarter conference call, there was commentary about several domestic distribution deals being completed. Your prior guidance, meaning before you pulled it following the COVID-19 pandemic, your prior guidance was for low single-digit affiliate fee growth. Given the 4%-5% sub losses in the universe, this implies pricing of roughly 6% or 7%. What color can you provide on how you obtained these pretty considerable price increases? Can you talk about some of the other key deal points that we should be aware of, like distribution across the board through your networks? Is there anything different there or any other key deal points that we should think about?
Well, let's take a step back. We have been convinced all along that we have a wonderful portfolio of networks, absolutely fascinating content, and the value of this content has just been underpinned again by the performance of our networks through the ongoing COVID crisis. We've always been very clear about the fact that this portfolio content has tremendous value for our affiliates as well. That's why we have always had a lot of confidence in our ability to renew those deals at very attractive terms. We don't comment on individual deals every time we close one. Since the beginning of the year, we've worked through a renewal with Cox, one with Charter, one with Comcast. Those are all done, and rest assured that they're all done at mutually beneficial, very attractive economics for us.
Based on the guidance that we have given at the beginning of the year, which we've now retracted, of course, given the environment, I think you can sort of deduct some of our thinking about sort of sub losses and rate increases. You mentioned the point about other factors in those deals. One thing that I think is really great is the fact that we've not only maintained carriage for our whole portfolio in these renewals, in some cases, we've even expanded distribution for individual networks. Again, I think all this shows that there's a lot of value in this ecosystem for both sides. I think that gives me a lot of confidence looking forward over the next couple of years. We also, as you know, have always valued flexibility. We own all our content. We're not renters.
There were a lot of great businesses built in renting, it's a little more difficult now. We've always been, or at least for many years, been in the camp of owning our content, really from the perspective of maximizing flexibility. We've also always paid a lot of attention to having that flexibility in our affiliate agreements. We've made that more of a priority in the discussions over the past 12 months or so. That way, I really do feel that we've got a powerful vantage point here as we look forward over this certainly changing ecosystem. Again, I think this shows that we're great partners to our affiliates. Whatever we're working on in the D2C space is always going to be with a sort of win-win partnership with our affiliates in mind. Frankly, I think we're well positioned.
Right. The sharp declines in the traditional bundle have been alarming to investors for the last few years. What are your plans to address this segment, the non-pay TV bundle universe? Maybe this is what you mean by flexibility. Is there a way to provide content to the segment that doesn't subscribe to traditional bundles, but could be interested in whether it's Food Network or ID or OWN, HGTV? Is there a way to address that universe without cannibalizing your 60% margin traditional business?
Yeah. That's obviously the big objective, Jessica. To some extent, in the traditional ecosystem, we're taking whatever market trend from a subscriber perspective. We're optimizing our relationships with affiliates, and we're ensuring as much as we can the best possible carriage for our networks at fair prices. Again, I think we've been successful with that. The virtual MVPD growth has been a positive contributor. There's no doubt there's a growing segment of households in the U.S. that currently doesn't have full access to our content or, in many cases, any access to our content. That's why David has been talking about this for a while. We're looking into opportunities to serve that segment. If you look at our GO apps as one indicator, we're seeing a lot of traction there, a lot of traffic on that platform.
A lot of people are downloading and checking in with us. There is a lot of interest in our content, and we will continue to work on a way to make this great content available to that growing part of the population, especially here in the U.S. As I said before, I'm pretty confident that we'll be able to find a way that we can deliver that in a partnership approach with our great partners in the traditional ecosystem. Stay tuned, but certainly, it's one of our priorities to be able to put something out that allows these people that don't subscribe to cable anymore to still be able to enjoy our content, which is performing on a level that's just outstanding.
Right. Your ratings have been really good. There was an article today on Amazon, and it suggested that they're looking for licensing deals for live linear channels. It was based on job listings, job postings.
Yeah.
Would Discovery be willing to license channels to someone like Amazon on an à la carte basis?
It's a bit of a difficult question at this point because as you say, all I've seen so far is just speculation on the basis of job listings, right? Generally speaking, we obviously make it one of our priorities to distribute our content as broadly as possible, but it obviously needs to fit the overall business model. Again, this is speculation right now. An à la carte offering with individual channels in our portfolio is very unlikely. Again, we're speculating here. It's really unclear what they're going after. Certainly, we will entertain discussions and see if there's a deal that gives us adequate value for our full portfolio of networks. I think we'll have to see when this becomes a real announcement or when they firm up their plans. So far, I think it's speculation or rumors.
Right. Okay, maybe switching gears a little bit, another recent piece of news from the company, and this is not even a week old, I think it was Friday afternoon, there was an announcement that Peter Faricy is leaving Discovery. It was surprising because he had a year left on his contract. Can you provide any color on this specific management change?
As we said in the release, Peter would've had to move to New York, and I think he's been thinking about that, and that was not his preference any longer. We respect that decision. If you take a step back here and look at it from the Discovery perspective, I think, my view is Peter has done a phenomenal job in really laying a fantastic foundation for our D2C efforts. If you look at our platform that was put in place, over a period of two years, he's really taken that to the next level. We've got a much better technology footprint, much better speed to market, app store ratings, data analytics overall, et cetera. He's put in place a couple of great products and put us on a good track with the upcoming products that are still in the hopper, such as Magnolia.
At the same time, he has maybe been most successful in also building out a phenomenal team. The list of people that we brought in to Peter Faricy's leadership team is just a very positive development over the past two years. We have a firmly established direct consumer leadership group now. To some extent, you could look at it as phase 2 with those leaders that used to report to Peter Faricy now reporting more directly to David Zaslav. I think we're in very good shape to take it to the next level now, even without Peter Faricy. We may even be able to get to some decisions a little faster, et cetera, with a leaner organization. Great achievements, great position. Some of the people that we have been talking about, Avi Saxena, who continues to globally drive that entire technology footprint.
A great leader, great success with us over the past 18 months. Karen Leever, who's been with us for a while and has driven a tremendously successful story for our TV Everywhere products, Discovery GO. As we've pointed out many times, GO has been contributing very nicely to our advertising sales growth over the past eight quarters or so. That obviously is technology and product that we will be leveraging going forward. Karen Leever is now reporting directly to David Zaslav as well. Lisa Holme, who joined us from Hulu, has made great contributions already. On the international side, the JV is going to get a lot more involved in our key products like Dplay, and the other smaller direct-to-consumer offerings. I think a great structure that can be very efficient for us, and positions us very well for the next two years.
Okay. Peter Faricy was also very involved with the launch of Food Network Kitchen and its integration with Amazon. Is there anything that we should interpret from his departure as a signal of reduced opportunity in that regard?
No. Please don't. The Amazon partnership is very exciting. Again, it's early days, we have been excited about that partnership. Great traction. It's a great funnel into our product. The Food Network Kitchen has so many opportunities for us, really, as we've discussed many times before, this idea of combining ad sales, subscriptions, and commerce into one product. Keep in mind, it is still early days. We're working through those different features that are required to make that formula work. There's more product features coming online. We've got a quarterly milestone plan, we're still in the process of figuring it out. We got a lot of engagement and certainly the deal with Amazon shows the excitement on their side about this product and let's stay tuned.
Okay. Your investment in general in direct to consumer is climbing, but again, you're going back to your old guidance, your pre-COVID-19 guidance, of roughly, I think $600 million investment versus roughly $300 million.
Yeah.
Should we expect any strategy shifts or timing of future launches with the management change? Will you change spending plans? Will you change rollout plans for Food Network Kitchen, MotorTrend and Magnolia? I mean, what will change? What won't change?
Well, number one, as you know, we've pulled our guidance, and I don't want to put out any new guidance, but just a couple of building blocks for you guys to think through. Number one, clearly, COVID has had an impact here in multiple dimensions. Number one, regarding our sports-focused products, Eurosport Player, GolfTV, but also some premium sports tiers on Dplay, et cetera, obviously, has seen a hit. We're not charging people in the cases where events are not on, et cetera. Certainly, we haven't seen the growth that we originally planned. Number two, we've also, given challenges with content availability, hiring, et cetera, we've pushed back some launch dates, for example, for Magnolia. That's another point. Other than that, we have continued investing. We've continued to hire people to the extent possible. We've further built out the team.
These are the strategic priorities that shouldn't be impacted, or these decisions shouldn't be impacted by a hopefully temporary health and macroeconomic crisis. We remain committed. We have continued to invest. Again, as I said, obviously, the top line has gotten a little bit of a beating as well as many other parts of the economy. We remain committed to these investments.
Then, I guess.
If you remember, the guidance that I gave on the last earnings call was that we're managing expenses so that we're expecting them to come in flat for the consolidated group, and whereby we continue to shift budgets from the traditional business into the D2C business.
Then just to round out, look, you mentioned Dplay. In areas where Europe is just starting to open up, sports is starting to come back, have you seen any notable changes in the last couple of weeks as Europe begins to reopen?
Yes, we have. Maybe less so for Dplay. I mean, Dplay had seen some very nice subscriber growth over the entire period of the lockdown, as you would imagine. There's not a huge change there. The area where we're seeing those changes is really in ad sales. David spoke about it last week. In countries where we've seen governments reopen, we've also seen ad sales come back. Again, overall, ad sales have been very much correlated with the news flow and the overall sentiment. We have seen significant improvements in individual countries. At the same time, I just want to be clear and caveat, even in countries where we've seen governments open up, it's still down, but much less so than previously. Then if we go through region by region, obviously.
Oh, actually, sorry. Sorry to interrupt you.
Go ahead.
I'm getting questions, like people are questions. Just to stick to, we'll just get to advertising in a second. I'm really sorry to interrupt you.
Okay.
Just to finish the whole direct-to-consumer, there just seems to be a lot of interest in this topic. Somebody's also asking for color on, I guess, you did a recent deal in Italy with WWE. Can you talk about just the financial impact and the opportunity for that? I just want to leave this topic and get to advertising, because we'll never get back to it.
Yeah. If we want to talk about the European portfolio for a second, clearly the number one product here is Dplay. We've got the joint ventures, one that's already fully established in Germany with our partner, ProSieben, Joyn. We're working on something in Poland with Polsat that is in the process of being finalized. We're obviously looking into further roll-outs in other territories. From a general strategy perspective, you can expect us to go it alone where we have significant market positions and to partner with others where we think that that is helpful for a compelling consumer value proposition. We will continue to drive for partnerships, as discussed at the very beginning of this call, with our new Sky deal. Talking about content, to the core of your question here, you will see us continue to shift budgets.
Specifically, a lot of that has already happened in the Nordics, where there's a lot of dedicated Dplay content budget. Obviously, with a windowing strategy tied to it, a lot of it goes on the direct-to-consumer product first going forward. We're in the process of ramping that up as we build out the subscriber base. You will see us add those budgets and try out new content investments on top of that.
Right. I mean, it's a completely evolving area. Really, again, I apologize for cutting you off, but there seems to be a lot of interest in the investment and what you're doing in D2C.
Sure.
It's a pivot for the company. Let's go back to advertising, which is the bulk of what was a good portion of your revenue right now. As you alluded to, David did say last week, he seemed pretty upbeat on sequential advertising trends. Maybe just start domestically and then we'll move. Well, actually, wherever you want to go. You sort of say, I guess Europe would be a better indicator-
Yeah
since it is starting to open up. Maybe we should start there.
Well, yeah. Again, in essentially every territory, we've seen the same pattern that with countries opening up, we saw a part of the ad sales coming back. Again, I do want to be cautious here. I'm also carefully looking at the COVID case numbers, et cetera. As I said in the past, a lot of the ad sales activity has been very sentiment-driven and news flow-driven. I found that encouraging to see in those countries where we've seen opening up, Poland, as an example, and we're looking at a completely different level post-opening than previously. Again, I do want to be cautious here. We have very limited visibility, I took that as a positive data point. Clearly, as we said, in other territories or Latin American business, as you would imagine, with the news flow there, probably hasn't seen the bottom yet.
We're keeping a close eye on that as well. Then in the U.S., as we said on our first quarter earnings call, we did expect May and June to come in better than April. That still seems to be the case, actually, even more so. Again, I want to be a little bit cautious if we look forward to the third quarter. There are a couple of other factors in play. We obviously had a little bit more risk from a top-down perspective regarding upfront cancellations, we also will have to see how our ratings trends develop coming out of the lockdown situation. Far, I think both are mild positives. I do think we've seen a little less cancellations than maybe originally expected.
From a ratings perspective as well, we have really benefited from the focus on our stay-at-home content and our content genres in general. We're not seeing, obviously, the pop level increases anymore that we enjoyed in the months of April, May, maybe to some extent. We have still come out of this much, much better than many of our competitors. Many of our networks are doing very well. We've got some real juggernauts. If you look at the "90 Day" franchise, pulling 4.5 ratings in the female demo right now. There's a lot of stuff that's going very well. Food Network, HGTV, DIY, sort of on an individual network level as well, have benefited from the COVID situation.
Right
hopefully we can continue that into the third quarter. Again, we don't have a ton of visibility.
Can I just backtrack for a second, though? You mentioned the cancellations, when this crisis hit, when the pandemic hit, the cancellation period for the second quarter had already passed, which is just kind of a lucky timing issue. The third quarter, our understanding is that cancellations could be really significant. The options could be 50% or more of commitments. Where did it come in? You said it was better than it could have been, but can you-
Well, yeah. Certainly much better than that. Much better than that. Again, those were some of the scenarios that obviously we were expecting initially, and I think a lot of players in the market as well. It's coming a lot better than that. Again, I don't want to get into guidance here, certainly we're not seeing that scenario play out. The other thing as well is scatter pricing has been holding up very well. There's not a sort of race for the cheapest dollar here. To some extent, initial cancellations of upfront dollars are coming back in scatter at better prices. Again, by no means a strong ad market overall, but significantly better than what we originally feared might be the case. Again, it's also early days. We're watching how this COVID situation unfolds.
I feel a lot better about this right now than I did four, let alone eight weeks ago. Yeah.
Right. What are you seeing from an inventory standpoint? What's going on with that?
Yeah. Obviously, we, not unlike others, have taken down some of our ad inventory and have used that opportunity to add promotion to our networks, which, so far, I think seems to have a positive impact as well. We'll see how that evolves. We've taken down capacity a little bit for the benefit of the viewer experience here, and I think others have as well. We'll see how that unfolds over the rest of the year and next year.
In the markets that have opened up domestically, are you noticing any big changes? Can you tell?
No. As I said, overall, we've seen a bit of a better trend since some of the restrictions have been eased. I don't want to comment on sort of individual local markets.
Right
which are not that important for us anyway.
Right. I'm not sure you could even tell.
Yeah.
Right. One more thing. The loss of the Olympics hurts you guys in Europe, at least from a revenue standpoint, but it actually should help the summer in the U.S. I mean, it's just less competition because when the Olympics would've been on. Do you expect U.S. advertising to perform better without that competition from the Olympics? How-
Well, listen, again, I don't want to speculate, but if you just take a step back and then we're on. That's the learning for me here and then counting my blessings from that perspective. We have not missed a beat on the programming side. We're going to be looking at a fall season with a lot of repeats on other networks. All the scripted stuff isn't going to be available. Sports, to your point, Olympics missing, lots of other sports for a period of time missing. We have not missed a beat on the programming side, and we're going into the fourth quarter with a pretty robust pipeline. Number one, we had already put up a lot of replacement content, partially shot at home, partially acquired, partially remakes, et cetera, and all that has worked very well for us. We're also starting to ramp our production back up.
It's slowly but steadily starting. We've probably in the U.S. footprint restarted roughly 20% of the productions that were put on hold. We're going into the fall and into the fourth quarter with a robust pipeline of content. I think that's going to continue to differentiate us. Our content has resonated very well. We've got much shorter production cycles. It's more efficient anyway, so it's a huge differentiator right now. Not only domestically, but also internationally. I mean, we're growing ratings in all of the key markets. I do think we're set up well for further outperformance in the remainder of the year, just because we didn't have to deal with any disruptive impact of the supply chain.
Okay. Just to talk about the Olympics for you specifically, you now will have, hopefully, you'll have summer in 2021, surely followed by Winter Olympics, I guess early 2022 in Europe.
Yeah.
Can you talk about the pros and cons of airing these major events in the shortest window probably ever?
Yeah. Let's see. Obviously, we were ready with our planning and done and everything for this year, but it is what it is. To your point of potential opportunity, yes. Maybe, hopefully, you could see advertisers who normally wouldn't invest think about this from the perspective of being able to cover the topic for a period of nine months, three quarters of non-stop sort of Olympics buzz. I do think that that is a benefit. Clearly, the second angle or the second lens through which we look at this is really also with the acceleration of our direct-to-consumer pivot and from that perspective, clearly, having that long building up to the first games and then building up to the Winter Games and for those, that's definitely going to be helpful. Yeah, the teams are on it.
remember in many of the European markets, we're still building out the Olympics as an advertising product. I feel very good about our position now, and hopefully, yes, we can get some benefits out of that timing for the Eurosport Player, for our linear portfolio than for a premium Dplay tier.
I know since you mentioned Eurosport Player. As sports, like just say the here and now, so away from the Olympics, can you give us color on what the impact is of sports starting up in Europe for Eurosport and GolfTV? What is the ramp for you, and how do you begin charging again? You said you weren't charging when there were no sports. Are you beginning to sell advertising already? Can you just give us a state of where you are?
Yeah. Maybe two different levels here. One is on the subscription side. Clearly, we're not charging our subscribers in the period when there's no sports available, and that's obviously going to change immediately as soon as events are coming back. So that's why to some extent, our sports-focused products have been in a little bit of a hiatus from the top-line side, but also from the perspective of performance marketing, et cetera. That's going to turn around once those events come back. Overall, regardless of what platform we're talking about, clearly the products are a part of our advertising sales strategy, and we will start selling as soon as we have the visibility into what's coming back when.
Okay. I guess we'll switch gears again and just kind of like final topic. A conversation with you would not be complete unless we talked about the balance sheet. What do you think is the right level of debt leverage for your business in this environment?
Listen, first of all, I'm very glad with how we restructured the balance sheet here, going through the first weeks of COVID. We've paid off every maturity for 2020. We've got very small maturities coming up in the next three years, in 2021 through 2024, or four years. Even if you look a little further out, there's not a lot of debt coming due, which I think was the prudent thing to do. As you saw, we also drew down on our revolver initially to be on the safe side, paid that back in the meantime. Really, to some extent, been able to take advantage of these market conditions.
The $2 billion that we issued in May with 10-year and 30-year tenors have essentially added two and a half years to our weighted average maturity at an expense of 18 basis points of weighted average cost of debt. That was good. Puts us in a very strong position where we've got a very healthy balance sheet. To your point about the debt level, we continue to be committed to our investment-grade rating. I don't want to be better than BBB-, but certainly that rating has a lot of value for us. Given where we are right now and with the rating agencies looking at our plans and everything, I have no doubt that we will maintain that rating. Listen, the truth is we're generating cash flow even through the toughest month of the crisis here.
We did our $250 in the first quarter, then we've been pacing at roughly that range on a monthly basis now going through the crisis. Again, I think speaks to the cash flow generation capacity of this business with a very high conversion rate of our Adjusted OIBDA number. Right now, we're really building up cash. We're probably roughly around $1.5 billion in terms of cash on hand. As we work through the rest of the year, as we increase visibility and build confidence in the business, we'll make the decisions to see what we're going to be doing with this cash. The priorities are the same. We've talked about leverage. We're in the right range, in the right ballpark for our rating. We've talked about investments in the business. As Ehrlich said, we're not slowing down the direct-to-consumer investment.
That's a big part of the future of our company. We'll continue to be committed. We have been talking about M&A a lot in the past. You'll always see us involved in every process, you should also note that we're putting a very high bar to every investment opportunity, it's just not easy to find the next Scripps type of acquisition. Really nothing coming down the pipe there. The final question is capital returns. As we've said before, I thought it was the prudent thing to do to dial that back a bit. By the same rationale, as we get more confident in the remainder of the year and the beginning of next year, we will certainly start looking into that question again and decide when we inch back into buying back some of our own equity.
We continue to think that Discovery stock is very cheap, so it's a great use of capital. Requires some more visibility, though.
Chuck, on a couple things you just said, but you mentioned strong free cash flow. Historically, second half free cash flow conversion has always been higher. Will this year be any different? Are there any dynamics because of COVID that will change that?
I want to be careful here again with forward-looking statements, given where we are at the end of the year. I think one thing that's different this year is that working capital is so much more of an unknown. Both receivables, payables, small movements can have a pretty significant impact. That's one of the key factors. The second factor that we have already touched on is the sports schedule. That is likely to change the cadence a little bit here as we go through the year because obviously from a pure free cash flow perspective, we've benefited from sports rights not hitting the second quarter as events got postponed. My assumption is that a lot of that is going to come back in the third quarter, events happening and then obviously our payments coming back in as well. We'll see.
Another question is content production. As I've said before, we've been able to really navigate very well through this period here. We've replaced a lot of the content with shot-at-home content acquisitions that were a lot cheaper on a per hour basis. Clearly, though, as I said before, we do see huge value of being one of the few programmers in the market that's really able to talk to advertisers with a pretty detailed and good understanding of what the grid is going to look like in the fourth quarter. We will continue to push for the delivery of our pending content productions. That obviously might have an impact on the seasonality as well. Again, the way I look at it right now is, I don't want to guide. There is more variability in here than maybe in other years.
Just looking at what I see, I have no doubt that we will continue to be converting a very significant amount of our Adjusted OIBDA to free cash flow. We'll refine that view as we go through the year.
Great. Did you say, I want to clarify what you said a few minutes ago about the free cash flow for You said it was $250 million Q1, I thought you said that it was $250 million a month, or do you mean it's $250 million again for Q2?
Yeah. It's ballpark per month. I mean.
Okay.
Nail me on it. We're roughly, let's say, $750 million year to date, May. Again, I do not see a significant disruption of that trend right now. Again, I do want to caveat that small changes to working capital in a crisis like this, we always have to expect some slowdown in the overall cash cycle, et cetera. Those can all be meaningful impacts, but the bottom line is, so far so good.
Wow. I guess, when you mentioned kind of priorities for excess capacity, what signals are you looking for capital returns? I mean, you said something about next year, but what do you need to see to begin your buyback program again?
Well, number one, we have a pretty large liquidity cushion right now, right? We're at roughly $1.5 billion in the bank, plus $2.5 billion of undrawn revolver capacity and no maturity coming up. That's certainly a great setup to be going through this crisis. It's a little bit rich for an environment in which things look to improve. That's really the kind of signal that I'm looking at. As I said, here domestically and to some extent in some of the international markets we've seen sort of May, June sequentially be better than April. We'll keep looking at that, if we see that trend continue, that's going to give me a lot more confidence regarding our capital allocation, maybe we're bringing this cushion down at some point later in the year. Again, I mean, this is speculation.
We'll take it month by month. That's one of the main signals that we're looking at.
Right.
You keep in mind, almost half of our business is in long cycle affiliate money, that has seen very little impact. It's really about that other half and signals of that money coming back in.
Great. I mean, it sounds like all the trends are getting better. I mean, we're still in a crisis, but we really appreciate all of your time today just for clarity on some of the stuff that's been going on for the last couple of weeks. It's very helpful.
Yeah, I mean, maybe just to sum it up, if you look at it from the perspective of our IP and our affiliate relationships, I think we're in a very good place. I mean, the past couple of weeks have shown how well our content resonates, have shown the quality of our content. We're getting a much better share, even coming out of the crisis than going into it, that's not a domestic-only pattern. It's something that we see in virtually all of the key international markets. That's fantastic. We own all of that content. We continue investing in that content. Then again, from a carriage perspective, I mentioned those couple of deals that we've gone through in the first half, all of which are mutually beneficial, very attractive economics, and they have continued carriage across the entire portfolio of networks.
Very well-protected carriage, to some extent, even expanded carriage and full flexibility regarding future development. I think if you look at those two, content and affiliate position as two of the pillars of our business, then I think we're in good shape.
Right. No, this is a great update. Very clear and very specific. Thank you. Thank you so much for joining.
Yeah. Thanks for hosting us this morning.
Great. Okay. Thank you very much, everyone. Thank you, Gunnar.
All right. Be safe, everyone. Thank you.
Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.