00:00In the context of the 7%, 8% drop we're seeing in the shares, obviously the big asterisk that this
00:05stock rallied about 40% over the past eight weeks.
00:08What jumped out to you?
00:10Right. So clearly the sell on the news is what's being exhibited right now because the first quarter, while slightly
00:16ahead of their guidance, was below our estimates and street estimates.
00:19And the second quarter guide is also below our estimates and the street estimates, possibly because the U.S. price
00:27increases are being instituted maybe a little bit later than people put in their models.
00:31But I think the thing that still gives us some comfort is that they kept the full year revenue and
00:39even operating income estimates.
00:41So this could be an opportunity, I think, for investors who, after they took their profits, maybe to get back
00:47in a little bit lower because it's going to be, well, I'll tell you, is another data point.
00:51Is this, as you see it right now, David, a growth company, a growth stock?
00:57Yes, it is. I mean, they're still going to be growing top line in the low double digits.
01:01They've exhibited margin expansion, even though they've been investing more in eventized sports rights and there could be more on
01:08the horizon.
01:08But they're also finding new ways to engage with the consumer in place-based entertainment related to some of their
01:15brands, looking more into video gaming.
01:18So I think it is still a core holding in the sector as well as one that has the growth
01:24characteristics, and that's where the market wants to focus.
01:27So I think that this is more of a timing issue, meaning it's more of a back half-weighted revenue
01:36and growth set of drivers.
01:39So I would not be scared off from this report.
01:42And, David, I want to talk about margins a little bit here, because when it comes to the second quarter
01:46forecast, they see operating margin at about 32.6 percent.
01:51That is below the estimate.
01:53They still see their full-year operating margin at 31.5 percent, also slightly below estimates.
01:59When you're thinking about margins, how might that interact or influence what they're doing in sports?
02:06So that is really a factor of timing.
02:08The back half of the year, especially the fourth quarter, is when you've got some of the special NFL games.
02:13You know, they've had a couple games on Christmas Day, and now with the NFL seeking to redo its rights,
02:19they might carve out another four games, including Thanksgiving Eve, for example.
02:24So it's a combination of increasing sports rights costs and the need to be in that, as well as programming.
02:34I mean, they do place some of their more important entertainment programming on in the fourth quarter, which tends to
02:40be more expensive, and therefore there's greater costs.
02:43So you're always going to have these ebbs and flows on the margins, but I think that largely explains it.
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