Versant Media Group Q3 2026 Earnings Call Transcript

Versant Media Group (NASDAQ:VSNT) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Versant Media Group reported a 4% decline in Q3 revenue to $1.59 billion, attributed to secular changes in pay TV, but saw a 10% increase in platform revenue, excluding certain acquisitions and divestitures.

The company completed major distribution renewals this year, securing 75% of network subscribers under contract until 2028 and beyond, indicating strong future visibility.

Strategic initiatives included launching digital platforms such as MSNow and Fandango Streaming, with plans for CNBC direct-to-consumer early next year, as part of a multi-year journey to evolve the business model.

Versant Media Group acquired Full Swing in Q3, with integration efforts progressing well, leveraging Golf Channel and GolfNow for marketing and sales, focusing mainly on revenue synergies.

The company affirmed its 2026 full-year revenue outlook of $6.2 to $6.45 billion and adjusted EBITDA between $1.9 and $2.05 billion, with free cash flow expected to exceed previous estimates.

Management highlighted strong performances of MSNow and CNBC in cable rankings, growth in sports viewership with Bundesliga and WNBA, and success of new entertainment content like Antipigeon becoming the most-watched new cable series.

Versant Media Group returned $457 million to shareholders through share repurchases and dividends, and announced an additional $100 million accelerated share repurchase (ASR) plan for Q4.

Full Transcript

OPERATOR

Greetings. Welcome to Versant Media Group’s third quarter 2026 operating and financial results conference call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. I’ll now turn the conference over to Wiley Collins, Executive Vice President, Investor Relations and Treasury.

Thank you. You may now begin.

Wiley Collins (Executive Vice President, Investor Relations and Treasury)

Thank you and good morning, everyone. Welcome to Versant Media Group’s third quarter 2026 operating and financial results conference call. Joining us today are Mark Lazarus, Chief Executive Officer, and Anand Kinney, Chief Financial Officer and Chief Operating Officer. Also with us are Jordan Fassbender, General Counsel, and Natalie Candela, Vice President of Investor Relations. Before we begin, I’d like to remind you that certain statements made during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a discussion of these risks and uncertainties, please refer to Versant Media Group’s filings with the SEC and today’s earnings release.

All forward-looking statements are made as of today, November 3, 2026, and we undertake no obligation to update them. In addition, we may refer to certain non-GAAP financial measures. Information and reconciliations to the most directly comparable GAAP measures are included in today’s earnings release and in the materials posted in the Investor Relations section of our website during today’s call. All comparisons to the prior year are against stand-alone adjusted figures, which represent our estimated 2025 results as if Versant Media Group were already a separate independent company.

And with that, I’ll turn the call over to Mark.

Mark Lazarus (Chief Executive Officer)

Thanks, Wiley, and good morning. I’m going to start by reflecting on our progress relative to the strategy we outlined at the time of the spin. This strategy has two core principles. First, while we are subject to pay TV’s secular changes, our network portfolio, heavy on news and sports, with big brands that people care about, will continue to succeed. Second, that we’re able to extend outside of pay TV through digital offerings to evolve and grow our business.

We believe we have unique advantages in each of our four markets: large, loyal audiences; powerful brands; a proven track record, especially in golf. We have dedicated capital and a strong management team. We’re making good progress across both of these principles and it’s only been 10 months. With our networks, we’ve now completed all of our major distribution renewals this year on favorable terms—four deals in all. We understood the questions raised at the time of the spin about our ability to secure attractive carriage renewals. We’ve now answered that question. 75% of our network subscribers are now under contract into 2028 and beyond, so we have clear visibility going forward.

Furthermore, we’re generating strong ratings, engagement and advertising results. This all points to the strength and power of our portfolio for distributors, marketers and audiences. And while our pay TV business isn’t a growth engine, it will remain resilient and highly profitable for a very long time. Similarly, we are making meaningful progress with our digital platforms and revenue is up double digits year to date. We’ve launched several new initiatives including MSNow direct-to-consumer and Fandango Streaming, both delivering solid results. The CNBC direct-to-consumer will follow early next year. Our initial investment for these new products is measured as we are scaling existing infrastructure and resources. We’re learning what product features resonate the most with consumers and focusing our investment on these areas to drive growth.

We believe this test-and-learn approach mitigates financial risk. We’ve also acquired several exciting new businesses, most notably Full Swing, which closed during the third quarter. Integration efforts are progressing well and we’re seeing early success in using Golf Channel and GolfNow as effective sales and marketing tools for Full Swing, delivering incremental value. I’ve mentioned before that evolving our business model through the growth of our digital platforms is a multi-year journey. This will require some patience, but I’m pleased that we’re off to such a strong start. Now some highlights for the quarter that demonstrate the progress we’re making. MSNow was the second most watched network in all of cable in the third quarter, with total viewership up 20% year over year. MSNow has grown its audience year over year for 11 straight months and was the only cable news network to grow in September.

MSNow’s reach extends well beyond pay television, ranking as the number one news organization on YouTube during the third quarter. Feedback on the MSNow direct-to-consumer offering has been very positive, with the community experience really resonating with members. MSNow also continues to draw large and enthusiastic audiences at live events, with our Together in Texas event in Dallas last month having nearly 5,000 attendees and many more who streamed the day long.

Eventually, CNBC continues to rank among the top 10 cable networks during market hours. Now, for eight straight months in the third quarter, CNBC remained the destination for CEOs and business leaders to share their perspectives on the issues shaping the markets and the economy. This is where CNBC has a sizable advantage, gaining access to the most prominent market leaders while serving a broad audience across pay TV and digital. In sports and entertainment, we added Bundesliga to our portfolio, which we began airing in August. We have 300 matches per season with approximately 30 on USA Network and the remainder streaming on Fandango. In its first month on USA, viewership was up 55% versus last year’s airings on other networks. This is a great example of how we approach sports—building a diverse portfolio with broad appeal that translates into strong economics for us. We will remain selective and the returns must be compelling.

Bundesliga cleared that bar and we’re glad the league is part of the Versant Media Group and USA Sports portfolio. We’re also very pleased with our first WNBA season on USA and CNBC. We aired the most national games of any broadcaster and regular season cable viewership was up 25% compared to last year. And just on Saturday we crowned the WNBA champion as Game 7 aired on USA Network with a preliminary number of 3.3 million viewers. A great success.

On the entertainment side, our new series Antipigeon became the most watched new cable original series for the year, while Golden Life premiered on E just a few weeks ago. As mentioned, platforms delivered double-digit growth in the quarter driven by both Fandango and GolfNow. Fandango was particularly strong this quarter with ticket sales reaching the highest they’ve been since the pandemic, and Fandango One is continuing to grow. Just as we’re expanding the audiences of MSNow and CNBC, we’re taking the same approach with Fandango and Golf.

The Fandango AVOD service was launched in July and, while still very early, we’re encouraged by the initial response. As we continue to add content, the platform is well positioned in the growing AVOD market. We also recently expanded our FAST channel lineup, launching four new channels featuring content from CNBC, E and Oxygen. All four will be available on Prime Video and The Roku Channel, further extending the reach of our brands and creating additional opportunities for advertising revenue.

At Full Swing, we’ve expanded sales and marketing support and recently announced an expanded partnership with Troon, the world’s largest golf and golf-related hospitality management company. Before I turn to Anand, I want to leave you with a broader thought. While there are more options for consumers than ever before, audiences are placing the most value on the content and the brands they trust—and this plays right into Versant Media Group’s advantage. Our pay TV business keeps delivering large audiences and strong profitability, allowing us to invest in what comes next. We’re building on strong relationships we already have with consumers, advertisers and distributors while finding new ways to reach and serve those audiences.

We have the brands, the financial strength and the people to execute this transition successfully. We’ve made meaningful progress in a short period of time and I’m confident in the direction we’re heading. With that, let me hand it over to Anand to talk through some of the financials.

Anand

Thanks, Mark, and good morning, everyone. Our third quarter results reflect strong execution against our strategic financial and growth objectives. Based on results to date and expectations for the balance of the year, we are affirming our previously communicated 2026 full year outlook for revenue of 6.2 to 6.45 billion and for adjusted EBITDA of 1.9 to 2.05 billion. We expect full year free cash flow to finish above our 1 to 1.2 billion outlook.

Turning to the results, total revenue for the quarter was 1.59 billion, a decline of 4%, consistent with trends in the second quarter and reflecting the secular changes in pay TV, partially offset by robust growth in platforms, which remains a key priority for us. Breaking down the components of revenue, linear distribution revenue decreased 6% over the prior year to $935 million, with subscriber declines partially offset by contractual rate increases.

These trends are similar to what we have seen in prior quarters. Advertising revenue was $373 million, down 5%, impacted by the comparison to the 2025 Ryder Cup, which takes place every other year. The advertising environment remains positive, supported by continued favorable ratings trends across our networks and strong demand. Platforms revenue was $245 million, up 10% year over year and, excluding the SportsEngine divestiture and Full Swing acquisition, up 17%.

Fandango delivered significant growth in ticketing, while home entertainment sales and Fandango One also contributed meaningfully to its third quarter performance. Content, licensing and other revenue was $41 million, down 24%. As we have discussed previously, this category can fluctuate quarterly based on the timing of licensing agreements. Turning to adjusted EBITDA, adjusted EBITDA was $353 million, down 7% versus the prior year. The decline reflects lower pay TV revenue, partially offset by growth in platforms and disciplined expense management. As we’ve mentioned previously, the decline in Q3 adjusted EBITDA compared to the growth earlier this year reflects the timing of sports rights, which are weighted towards the second half. To put it in perspective, cumulative adjusted EBITDA for the first nine months was 1.68 billion, up 1% year over year.

We expect Q4 adjusted EBITDA, as reflected in our outlook, to be impacted by four additional NASCAR races compared to 2025, resulting in meaningfully higher programming costs. We do not expect similar changes in race counts going forward, and so this will be a one-off impact. While I’ve mentioned the timing impacts on our Q3 and Q4 results this year, sports remain an integral part of our strategy, generating significant value for viewers, distributors and marketers.

In fact, we’re home to some of sports’ most important events, including crowning the NASCAR Cup Series champion this upcoming weekend. Transitioning now to expenses, we remain focused on managing costs while investing in our strategic priorities. Programming and production costs were $736 million, down 1% versus the prior year due to operating efficiencies largely in entertainment and news, partially offset by an increase in sports rights costs. As just mentioned, other cost of revenue was $142 million, up 10% versus the prior year, reflecting higher transaction volumes associated with platforms revenue growth.

Cost of revenue, representing the sum of programming and production costs and other cost of revenue, was $879 million, up 1% versus the prior year. Selling, general and administrative expenses decreased 12% to $362 million. As discussed last quarter, we expect nominal SG&A costs to increase modestly from recent levels due to our investments in growth initiatives, including the Fandango AVOD and the MSNow and CNBC direct-to-consumer offerings. Across our cost base, we are focused on driving efficiencies while continuing to deliver high-quality premium consumer experiences.

We are currently identifying opportunities to deploy AI and other technologies to streamline workflows, enhance automation and improve productivity in 2027 and beyond. As part of this initiative, we are modernizing our infrastructure across almost every function in the business. While cost efficiency is clearly a focus, these new capabilities will also enhance our decision-making, speed to market and overall company culture. Finally, with regard to cash generation, liquidity and capital allocation, free cash flow totaled $302 million in the quarter. Our business model continues to deliver strong cash conversion and, as I mentioned, we now expect full year free cash flow to finish above our prior outlook. We maintain a healthy liquidity profile with approximately $1 billion in cash at quarter end and an undrawn $750 million revolving credit facility, giving us significant flexibility to execute our strategic priorities on investments.

We follow a disciplined approach, focusing on opportunities with clear value creation and attractive returns, particularly in platforms and initiatives that deepen our relationships with audiences. Reflective of our capital allocation approach, to date we have returned $457 million to shareholders, including $300 million in share repurchases and $157 million in dividends. Today we also declared our quarterly dividend and announced plans to commence an additional $100 million ASR in the fourth quarter.

Taken together, our year-to-date performance demonstrates disciplined execution as we invest behind our growth priorities and deliver strong capital returns to shareholders. And with that, I’ll turn it back to the operator for Q&A.

OPERATOR

Thank you. We’ll now be conducting a question and answer session. If you’d like to ask a question, please press star one from your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. And our first question comes from the line of Sean Difley with Morgan Stanley.

Please proceed with your questions. Hi, Sean. Please go ahead with your questions. Ladies and gentlemen, we seem to have lost Sean. Moving on to Michael Ng from Goldman Sachs. Please proceed with your question, sir.

Michael Ng (Analyst at Goldman Sachs)

Hi, good morning. I just have two. First, encouraging that you’ve completed all the carriage agreements in 2026. As you head into ’27 and ’28, could you talk a little bit more about some of the content investments that you’re making to strengthen your position? And how will DTC products like MSNow DTC and the upcoming CNBC DTC play a role, if at all? Thank you.

Mark Lazarus (Chief Executive Officer)

Great. Thanks, Michael. So sports and news are obviously working really well for us in terms of having value for distributors, for advertisers, for audiences. We will continue to be best in class in news. We believe MSNow and CNBC are incredibly valuable brands, have very valuable audiences, and reach the most influential people that audiences want to see each and every day. As it relates to sports, our sports deals go long term. I mean, I think that’s where we sit.

We did add Bundesliga, we’ve added Pac-12. We’ve extended our USGA golf deal. But long into the 2030s, we have valuable NASCAR, valuable PGA Tour rights. The WWE goes late into the ’20s, and Premier League goes through the 2028 season. So we feel very secure. We will continue to look at sports properties in a very disciplined way. So sports and news are really the centerpiece. In addition to that, we have a very disciplined approach to original series where we create both scripted and unscripted series. We’ve had a lot of success, as we talked about earlier in the call with Anna Pigeon, the number one cable show of the year. We had Everything on the Menu for USA Network, an unscripted show, and Golden Life, which just launched. One of the things we look at is that we want to make sure that we are disciplined, that we get good value, create great product, but also have an ability to monetize the back end of these shows.

And I think that’s evident in the fact that we recently announced that Golden Life will be on Hulu a couple of weeks after we launched it on the E network. And that helps us both mitigate cost, serves as a marketing tool, and we’ve got great partnerships across many of the streamers to work with us on creating programming and back-end value. As far as the DTC products, we will work with the partners, with the MVPDs. We’ll work with them and, as you’ve seen many programmers do, we won’t be any different. We want to make sure our products are available to those who are already paying for it. But our products are also going to be quite different than just video streaming. We’re not creating streamers; we’re creating direct-to-consumer interactive products. So we’re doing it with the MVPD and vMVPD community, not to them.

Michael Ng (Analyst at Goldman Sachs)

Wonderful. And then for my follow-up, I just wanted to ask about platform revenue. Organic growth was up 17%, the fastest quarterly growth rate this year. Was the acceleration primarily driven by the improvement in the box office and Fandango online ticket sales? You called out the indie cinema piece as well. So I was just wondering if you could also touch on the momentum there. Thank you.

Mark Lazarus (Chief Executive Officer)

Yeah, I think it’s a combination. I mean, certainly Fandango and the box office was a big contributor, but not only that — just that box office was up, but our share of box is up and we’re growing where we are in the space and creating a wider playing field for ourselves. Golf also showed growth. GolfNow in the tee time business, and then indie cinema, which, you know, eventually we’ll all get to calling, including ourselves, Fandango One, which is its new name, is creating new revenue opportunities as we’re able to sell that technology into theater chains and theater operators across the globe.

So I think you hit it on the head with the largest contributor was Fandango, but every piece of the platform business contributed.

Anand

Great. Thank you, Mark. Mike, just one other thing just to kind of add on. I think what we’ve seen every quarter is both businesses — the big businesses, Fandango and GolfNow — are contributing every quarter. It might be one might be a little bit more than the other. But we’re very proud that, kind of across the portfolio, those growth businesses with big opportunities, market leaders with room to grow share, are in fact doing so.

Michael Ng (Analyst at Goldman Sachs)

That’s very clear. Thank you, Anand.

OPERATOR

Thank you. Our next question is from the line of Sean Difley with Morgan Stanley. Please receive your questions.

Sean Difley (Analyst at Morgan Stanley)

Great. Thanks, guys. Can you hear me?

OPERATOR

Yep, we have you, Sean.

Sean Difley (Analyst at Morgan Stanley)

All right. Sorry about that. So yesterday Fox called out some viewership fatigue on news leading up to the midterms. I’m curious how you would describe what you’re seeing most recently on MSNow. It sounds like pretty good, but do you expect any tapering in viewership post-election? And then, Mark, I wanted to get your latest high-level thinking on sports rights in the next few years. We have some big-ticket items coming up — obviously World Cup, you know, more near term, MLB and NFL.

There’s been some reporting that the NFL Sunday Ticket verdict last week could open up some out-of-market games. I’m curious if that could be of interest to you and just your overall lens for how you assess the rights landscape. Thank you.

Mark Lazarus (Chief Executive Officer)

Great. So as it relates to news, we’re not currently seeing any fatigue with our audiences. Our audiences are active and vibrant and growing for MS Now and, for that matter, with CNBC. I think it’s a testament to the quality of our product, to the voices that we have on there, and to the trust that our viewers have in our brands and in our talent. We’re showing growth and we have for many quarters in a row, many months in a row on MS Now, and that’s encouraging.

You know, this is an important time. To use your sports analogy, today’s the Super Bowl for the news organization in terms of the midterm elections, and we believe that we will continue to grow audiences for MS Now. That’s our singular goal: How do we get more people to watch us? And that’s going to be by having a variety of voices there, having a tone that’s welcoming, and being interesting and informative. I think that our producers and our talent are doing that.

So we’re not seeing any of that viewer fatigue. In fact, I think some of the viewership is leaving other places and trying us and spending some more time with us because I think they’re seeing the value in what we’re providing. As it relates to sports, you’re right, it’s an interesting time. The World Cup’s coming up, baseball, NFL, the NHL is not far behind. I think what’s going to happen—the big stuff, really NFL and World Cup—will find homes at quite high rates. I think there’s going to have to be some rationalization of portfolios from some of our colleagues across various media companies, and people like us who are interested in finding the right quantity of sports at the right price that serves our distribution and advertiser needs—that there will be opportunity for that.

Sunday Ticket, out-of-market games—we’re not likely to be investing in the NFL business in terms of the size of our company today, but I think it’s an interesting ruling and I’m looking forward to seeing how it shakes out.

OPERATOR

Thank you. Our next question is from the line of Rich Greenfield with LightShed Partners. Please proceed with your question.

Rich Greenfield (Analyst at LightShed Partners)

Thanks for taking the question. You know, yesterday, just following up on some of the comments that Fox made, they talked about Fox One having grown subscribers actually more than enough to offset all of their linear declines. And while I don’t know if that continues in perpetuity, it certainly is pretty interesting given your launch of MS Now as direct to consumer, especially given that Fox said that it was pretty evenly split engagement-wise between sports and news.

I guess the question is, as you look at MS Now—and I realize it’s only several weeks old—you’re pricing it at $7.99. Why is that the right price? How are you thinking about pricing? And as you think about the next couple of years, Mark, could this be something that meaningfully impacts the subscriber declines you’re seeing? I realize getting too positive might be ambitious for news, but how are you thinking about the ultimate potential of the MS Now platform?

And then just a related question on ingestion—there’s a lot of discussion of streamers ingesting other streamers. Essentially, people want to be platforms. Disney’s now ingesting Channel 4 in the UK, Netflix, TF1 in France, and now YouTube in January is going to do Peacock. Do you expect to be ingested, or do you think MS Now is set to be ingested by other companies over the course? And I know you’re going to launch CNBC, so it’s a related question.

How are you thinking about ingestion?

Mark Lazarus (Chief Executive Officer)

To the broad question of, are we going to be able to mitigate sub declines? That’s our goal. That’s what we’re trying to do—to take all of these direct-to-consumer and mitigate as much sub decline, or all of the sub decline, as possible. And that’s why we’re launching these products plus the Fandango streaming product and creating other growth businesses like buying Full Swing and indie cinema and other properties. So we’re a slightly different company, obviously, than what Fox is, and they’ve essentially been streaming their two services, Fox News and Fox One.

I think we’re a little bit different than they are. We have our own brands, we have the same goal: we want deep customer relationships, we want to make sure we extend our reach, we want to find as many non–pay TV homes as possible. $7.99, through testing and other areas, felt and turned out to be the right price. We’re seeing people sign up. We’re trying to reduce friction for sign-ups so that we can grow as fast as possible. But we’re not just streaming our network—that’s part of it—but we’re much more than just our existing video. We are a membership service. So the MS Now membership program; Fandango AVOD will be similar—that’s free, there is no price. GolfNow is a direct-to-consumer transactional business, and CNBC will be more like MS Now.

We’ll have the ability to stream the service, but existing video will only be a part of what the value for our fans and customers will be. We’re going to build community, we’re going to have a lot of exclusive content, insights from our talent and other experts. Information access will be important. As you said, it’s very new, Rich, but this is a multi-year journey. We’re going to have to be patient. We’re confident, but it’s really early on the ingestion.

Anand

Oh, sure. Just a couple quick things. Mark mentioned earlier, Rich, about test-and-learn, and so the products as they are today—we’re obviously going to look at what’s working, and that’ll also then dictate pricing and so forth as we go over time and how we evolve that to continue to deliver consumer value. We think that approach makes a lot of sense for us. It mitigates some of the financial risk and enables us to evolve the products as we get user feedback.

On your question on platforms and aggregation with third parties, we’ve mentioned in the past that we’re going to do what’s right in terms of value. We’re open and are in conversations with parties to figure out whatever is the right path to scale these services, and we’re open to different business models. This was one of the areas when we got spun, frankly, that gives us the liberty and flexibility to pursue those type deals. And as you would expect, we’re actively engaged in them for our services.

Mark Lazarus (Chief Executive Officer)

I think our distribution partners—and the message we’re sending when we’re talking to them—is that we want to be flexible and we want to be one of your most creative partners in finding the right thing for our collective customers. And I think that, as Anand pointed out, that was part of the premise of the spin and allowing us not to have a variety of corporate constituencies inside of our own building.

OPERATOR

Thank you. The next question is from the line of David Karnofsky with J.P. Morgan. Please proceed with your question.

David Karnofsky (Analyst at J.P. Morgan)

Good morning. When you think about your strategy of leading in specific verticals, are there categories outside of news or golf where you would consider building or buying into, and how do you think about M&A for cable networks as an avenue to accomplish that?

Mark Lazarus (Chief Executive Officer)

I’m sorry, could we repeat? I think it’s hard to hear. It might be the speakerphone.

David Karnofsky (Analyst at J.P. Morgan)

Yeah. When you think about your strategy of being in specific verticals, are there categories outside of news or golf where you would consider building or buying into, and how do you think about M&A for cable networks as an avenue to accomplish that?

Mark Lazarus (Chief Executive Officer)

Okay, great. So, obviously news and golf are two of our important verticals. And in news we have two verticals: business news and personal finance; and news and political opinion. Those are two separate verticals. Golf is a third vertical, and the fourth would be entertainment, really centered around sports and entertainment content, with Fandango as a central hub in that. Certainly there could be other verticals if something were to become available that we believe we could build significant adjacencies around, whether it had a television network or not.

There are opportunities to do that. To the M&A question, we’re not out there necessarily looking to buy more cable networks. We’re not looking for horizontal scale. We believe you all expect us to transition towards growth initiatives. While buying more scale on cable networks would add to our scale—and I’ve said previously, I think it would prolong our life—it doesn’t make our life much better. So we would like to continue to look into vertical sectors. Could we go into fifth or sixth verticals?

Certainly, but we would need a center or a rallying point around that. It could be some form of media project, but it also could be outside of media.

Anand

David, the only thing I’d add to what Mark said—and completely up the line here with Mark about could we look at other verticals—sure. But I think it’s important in that answer: we really believe in the four we’re in, and there’s a lot of growth opportunity, and that’s where we’re focused today. I think our results, if you look at the underlying platform group, is 17%. We’re encouraged, as Mark mentioned earlier, by the MS Now D2C launch. We’re launching CNBC D2C early next year.

These are big markets. We have big brands that a lot of people really love and are looking forward to these new offerings. So that is our focus. Anything in terms of growing outside of that, we’ll obviously look at, but in those four areas we have big advantages and we think we’re right to win, and there’s a ton of opportunity there. So that is our focus right now.

David Karnofsky (Analyst at J.P. Morgan)

Thank you very much.

OPERATOR

Our next question is from the line of Peter Supino with Wolfe Research. Please proceed with your question.

Peter Supino (Analyst at Wolfe Research)

Hi, good morning. I wondered if you could talk about the advertising environment and your partnership with NBC, whether that’s meeting your expectations. It’s obviously an unusual situation to have somebody else selling your ad inventory. And then a second question, following up on this topic of M&A. I think your GolfNow acquisition is really interesting and synergistic with the reservations business you have, and frequently investors don’t understand what the thesis is.

So I wonder if you could lay that out for us. Thank you.

Mark Lazarus (Chief Executive Officer)

Sure. So on advertising over the fullness of time, there have been rep deals that people have repped others. So it’s a little bit unique in the way we’re set up because we were one and now we’re two. But there is some history of that. It is going exceptionally well. They have been great partners. They’ve delivered on everything that we’ve discussed with them. They’re collaborative, they understand our goals and they have done a wonderful job representing us and it’s going well.

And I think that’s evident in the numbers that we’re delivering. And we were delivering best-of-industry numbers in terms of advertising. So going well over time, they and we collectively will decide what the right path forward is. But that’s a little bit out into the future. But as of right now, it’s going extremely well and I think it’s working well for both parties. Then the Full Swing is also going well. You know, it’s new. We just closed not long ago. What we really believe is that in order to continue the transition and diversifying revenues from pay television to other forms into other sectors in our verticals, that Full Swing as a golf technology company was a very good addition.

What it allows us to utilize is the strength of our linear network Golf Channel and the strength of our GolfNow relationships with 9,000 golf courses around the world and the sales force that works with those golf courses to put more Full Swing product into the market and sell more Full Swing product and then over time create more and more integration opportunities. And I think if you watch any of our networks now, you’ll see Full Swing being marketed quite effectively.

And we’re seeing the results of both the marketing power of Golf Channel and the sales power of the GolfNow sales team in helping accelerate the revenue opportunity with Full Swing.

OPERATOR

Thank you. The next question is from the line of David Joyce with Seaport Research Partners. Please proceed with your question.

David Joyce (Analyst at Seaport Research Partners)

Thank you. I was hoping you could drill down a bit more on your cost of revenues. You’ve added a lot of sports rights, WNBA, Bundesliga, additional NASCAR rights, and more entertainment programming. Yet your overall cost line was flattish year over year. Where are you trimming and how should we think about this trending going forward given you’re also launching these DTC services? Thanks.

Anand

Hi David. It’s Anand, and thanks for the question. So you’re right. Look, we have talked about being disciplined in how we manage expenses and to make sure the expenses, the cost that we have are kind of tied to revenue. So we look at the entire portfolio. We did add, as you mentioned, sports that—and again the sports that we added, like talk about Bundesliga, we’ve mentioned before, that was an opportunistic deal for us that we saw an opportunity to get some marquee content, you know, 300 matches, some on USA, some on Fandango, at what we thought was a very attractive price point that drove value.

So it’s those kind of deals where we can, you know, fit them within our programming budget, make trade-offs elsewhere. And again, just kind of looking at how we are programming and, you know, different types of content, what’s working the best and it kind of also goes back to what Mark mentioned earlier. Take Entertainment, where, you know, we talked a little bit about The Golden Lights and the type of show that we think has very attractive economics. When we greenlight it, we greenlight it not only for what it’s going to do on E, but a lot of confidence it’s going to have a back end as well, which we were able to secure. And so we’re kind of managing the entire portfolio that way. And you’re seeing it in the numbers and we mentioned that the total programming spend in Q3 and then in Q4 will be timing-wise impacted by some of the—particularly in Q4 by NASCAR.

But that general philosophy is how we’re managing spend in total. And then on SG&A we’re also looking, as you can see—we talked about, or I mentioned before, an initiative to kind of make sure we’re harnessing AI and technology to drive efficiency and drive productivity and also make the company a better and better place kind of culturally and for the employees. So you’re going to see the impacts of that really starting in ’27 and beyond. And then the final thing I’ll just kind of flag is we’re very focused on making sure as much of a percentage of our cost base is variable as it can be.

So, you know, roughly about 70% of the cost base is variable. Other than sports rights, everything else is flexible in the short to medium term. And you’re seeing us kind of execute against that based on the revenue picture, kind of flexing the cost base to make sure we’re delivering great margin profitability.

David Joyce (Analyst at Seaport Research Partners)

Appreciate it. Thank you.

OPERATOR

Thank you. Our last and final question is from the line of Brent Pinter with Raymond James. Please proceed with your questions.

Brent Pinter (Analyst at Raymond James)

Good morning everyone. Thanks for taking the questions. A couple from me. First, I appreciate the color on Full Swing revenue in the trending schedule. What can you tell us about the margins on that business, even directionally? And you talked quite a bit about the strategic rationale and revenue growth opportunity. Are you seeing cost synergies in that business as well?

Anand

I can jump, yeah. I’ll start and pass it over to Mark. So on margins, look, this is a good margin business. We’ve mentioned before that Full Swing is profitable. We bought it as a profitable enterprise and we’re expecting that profitability to obviously increase based on some of the synergies that Mark mentioned as the strategic rationale for buying it that we’re already implementing. On the cost synergy side, there’s a little here and there, but just to be clear, like this is mostly a revenue synergy story for us.

This is a high-growth business. Of course, the cost synergies we’re realizing are where you would expect them—some things on the back office and so forth is, you know, where it’s clearly the right thing to do. But we really here on Full Swing are focused on driving the top line. And that’s where our focus and those revenue synergies are starting to see them materialize.

Mark Lazarus (Chief Executive Officer)

Yeah, on the revenue side, I mean, we’re able to—again, we have a large sales force with GolfNow. They had a relatively small sales force at Full Swing. So we can really add to that whole sales process without any additional cost. And the same on the marketing side with what we’re running across our variety of networks and very well-targeted networks. Obviously Golf Channel is highly targeted towards someone who has a high proclivity to buy something in the golf space.

But CNBC also has a huge overlap with that audience and with the group that would be likely buyers for our products. And the cost is opportunity cost. We will market this instead of maybe something else in our portfolio. So there’s no incremental dollar outlay to us. It’s just a shift in priority. So the revenue opportunity or the revenue synergy is larger than the cost synergy. But both working together is what helped lead us to saying this is the right deal for us.

Brent Pinter (Analyst at Raymond James)

Understood. Great. And then to kind of take that bigger picture, you all are obviously making lots of investments inorganically as well as organically in the platforms business. So just what generally defines success for platforms investments? As you think about allocating any given dollar of capital, you’re returning a lot of capital to shareholders. But as you weigh your different options, what about something like Full Swing makes it unique? And how do you kind of define the returns and success of those platform investments?

Mark Lazarus (Chief Executive Officer)

I think broadly and strategically, the ability to utilize the strength of what already exists in our verticals. And I think Full Swing does that. As we talked about the sales force and the marketing and our ability to work in the broad scope of the golf community. Working with the PGA Tour—they’re already a sponsor of the PGA Tour. So that was sort of the thesis behind Full Swing. The investment into indie cinema allowed us to—we already work with all of the theater chains or many theater chains on ticket transactional sales.

This allows us to work with them and create a much more integrated solution of technology and sales. It’s a formula that we followed with GolfNow, where we also have an enterprise software business that helps create our relationships with the golf courses and makes our ability to have financial relationships with the golf courses multifaceted. It’s whether we sell them the technology and then have transaction deals on the tee times, or whether we have a more favorable relationship—they don’t maybe pay us as much for the technology, but we get a larger cut on tee times.

So it just allows us a lot more flexibility. So the filter of being part of one of our verticals already allows us to take advantage of both cost and revenue synergy.

Anand

And just from a financial lens perspective, we’ve talked—you’ve heard us talk in the past about our capital allocation principles, which are kind of threefold, and doing them all together: maintaining a healthy balance sheet, returning capital to shareholders, and investing in growth. I think that last one, in investing in growth—just to be clear, we don’t view investing in growth as like a default. Every kind of initiative we have, whether it’s organic or inorganic, we have a very strict financial lens and discipline about it has to generate returns, it has to generate value to shareholders, you know, on a kind of a bankable basis.

And so we put everything through that mechanism and we look at a lot more things than what we actually do just to kind of see that in motion. And we’re confident because the returns on Full Swing, as we looked at it, look very, very favorable. And it’s early days, but we’re encouraged.

Brent Pinter (Analyst at Raymond James)

Got it. Thanks, guys.

OPERATOR

Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. Please disconnect your lines at this time and have a wonderful day.

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