Versant Media Group, Inc. ($VSNT)

Okay. Thanks, everyone, for joining us here. So I'm excited to announce Anand Kini, who's the Chief Operating Officer and Chief Financial Officer of Versant. Welcome, Anand.

Thank you. Thanks for having me.

So maybe just start off with some high-level questions. I think at your Investor Day, Versant was described as unleashed to grow further beyond the bundle. Maybe you could start by just recapping the core thesis for Versant as an independent company, how it differs from its prior role at Comcast? And where do you see Versant in, say, 3 to 5 years?

Sure. So we're a leading media company. And the way we look at ourselves is we've got kind of big brands in 4 large dynamic markets. Personal finance and business news, political news and opinion, golf and then genre entertainment and sports. So we start within Pay TV, these brands are CNBC, MS NOW, USA Golf Channel, exceptionally strong, and these brands are in really live. So we have about 60% of our audience is live news and live sports. That's exactly what marketers want, what distributors want and what advertisers want. So we start with a very strong position in Pay TV, a very profitable business for us, and we have a really good runway with those businesses. And then you combine the fact that those brands that also command very large audiences, things like MS NOW is kind of the perennial #2 rated network in all of cable, not just in news, and they're very similarly like golf has, the Golf Channel has more hours of golf on it than all other television networks combined. You take the audience strength and the brands, and that enables us to extend these businesses outside of Pay TV. And we're already kind of doing that. We have a platform business that includes GolfNow at Tee Times reservation business as well as Fandango movie ticketing business. That is about $850 million in revenue. We're supplementing that with new services like a D2C service for CNBC and MS NOW, AVOD for Fandango. And that's what we're going to be growing significantly. And one metric we use is our percentage of our revenue comes from Pay TV and comes from non-Pay TV, that's a big metric that as we continue to grow these others. Today, we're like 81% Pay TV and 19% not. And we're going to kind of evolve that over time to like 33% over the next 3 to 5 years, non-Pay-TV and then 50-50. So that's -- it's a little bit of our trajectory going forward and kind of how we're thinking of the business. And really it's about strongly profitable and then evolving the business model. In terms of then how we're kind of different than where we were before and I come from NBC Universal and Comcast, I think -- and we have a great deal of respect for the -- for our previous parent. I think a couple of things. We obviously have our own capital allocation. and our own capital. So in the old -- in my old job at NBCU, our priorities might have been Peacock or it might have been the film studio or it might have been kind of theme parks. And these businesses were frankly not invested and that cash flow was harnessed for those. Now we're kind of have these businesses to pursue the strategy, I just talked about extending these brands into new audiences and evolving the business. And then also, we're a smaller company, we're more nimble, more flexible, we're faster from an execution perspective, like we're more efficient, and that's -- that's not any merch on Comcast just given our size as a spin, we're able to do that and our trajectory, as I just mentioned, is kind of to evolve this business and kind of drive profitability and to kind of grow the business over time as we extend its reach. And while we're doing that, maintain a healthy balance sheet and deliver a lot of value to shareholders, both in terms of dividends, share buybacks and obviously, stock appreciation.

If you look at the 4 key verticals, business news, politics, news, golf athletics and entertainment. In your view, which of these verticals represent the most significant near-term value creation opportunity? And which one requires the most investment and transformation in order to realize that potential?

I know it's going to sound a little like cop out admittedly. But in these 4 verticals, we view them all as very attractive. So put a fine-tooth on it, like if I take CNBC, which probably in this audience, people are very familiar with. It is this brand that resonates very, very deeply, particularly for the retail investor. And so as we're thinking about a new digital and consumer service oriented to the retail investor, providing them information to make smart investment decisions. We've surveyed our consumers. They really want this offering. There's -- it's a fragmented market in terms of where they get this advice today, and it's not coming from a brand that they trust or has the information that only CNBC can provide. Similarly, if you take MS NOW, as I mentioned, like the #2 by audience network in all of cable, and yet other than having a text-based kind of website and an app, we've never had a digital video service and ability for this business that people want more and more of. It's one of the -- not only audience, but it has one of the highest engagements, meaning the average viewer watches 9 hours a week, they want to interact more significantly with it. They want to have like opportunities to kind of virtually meet, say, some of the talent, Rachel Maddow, et cetera. We've never done that before. That's a big opportunity. Similarly in golf, like we've already established a significant big successful business there digitally. But we've only scratched the surface. Like I said, we're synonymous with golf and the golf market is growing, and we can provide more and more Tee Times bookings more consumer technology services. And then similarly on Fandango on the entertainment side, we're very bullish on our AVOD service for Fandango we've announced. We already have a big business in ticketing and in home entertainment. This is a natural extension now for consumers who want to watch stuff for free with ads. And I should say on all of these, like the investment profile is kind of -- and it's moderate in that we have a lot of synergies. These are businesses that already have an existing -- and we have an existing audience, so the cost per customer acquisition is really efficient from that perspective because of our audience scale. We already have existing technology and video infrastructure that we can harness and we have these brands that resonate. So we're able to do it in a very cost-effective way to kind of evolve the business.

You had your first earnings call a week ago. I just want to give you the opportunity to share with investors what makes Versant different and what might be underappreciated in the stock.

So I think a couple of things. If I was to kind of list out what I think really makes a difference, let's have some of the things that come top of mind. There's a lot. But, a, I've mentioned before, the strength of our brands. B, is kind of live, the live news, live sports. Third is the size of our audience. Fourth is kind of our existing success already, and we're building on it in digital and then 5 is probably our -- the health and the strength of our financial model and our capital structure. And again, to go a little further on a few of them. So on the brands, again, these -- our brands resonate. They're universally known. They instill kind of deep emotions in folks, even a brand like MS NOW, which some people love, some people don't like, but it's a brand that matters to people when it kind of stirs emotions. And I think those brands and you combine. And then with live kind of the second component I mentioned producing live events is hard. It is like -- and a lot of other companies have tried and they're not always good at it. We've developed a real expertise. You have to have the on-air talent, you have to have the production capabilities. And in sports, you obviously have to have the sports rights, and we have all of that. And then you combine that then with the audience size that we already talked about, and we have -- we're big in terms of really almost -- really all of our networks. And that -- those things that enable us to build those platforms and I think and build a digital business. And while there's a lot of companies that want to do this in terms of transitioning from Pay TV and kind of taking these audiences and migrating them, I think you have to have those 3 things live brands that kind of can migrate as well as big audiences that you can harness to bring over and we uniquely have it. And we've already kind of demonstrated it, and this platform business already exists and it's kind of scaling very nicely. And then the final aspect that I said that business financial strength kind of provides us the capital to be able to execute that while at the same time delivering value to our shareholders in the near term and the long term and maintaining a healthy balance sheet. So I think -- those are kind of all the components, I think, that make us very different.

Yes. That's helpful. Maybe we could talk about the 2026 outlook a bit. I think you're projecting a continued but moderating decline in revenue and EBITDA. Can you just help us understand what the key drivers of that are? And maybe if you could talk about when you expect the company to return to growth and what the key factors are for getting to that point?

Sure. So the revenue and EBITDA, the starting kind of revenue where 2026 guidance. We have a really good visibility. For example, if you look at our revenue in general, linear distribution, which is obviously our Pay TV subscriber fees. The vast majority of our deals are not up until past -- the majority are not up to '28 and beyond. So we have about 16% that are up in 2026 for renewal. So that's only a small percentage. Those are obviously important renewals, but the vast majority are not. And our assumption here is that -- and you could definitely take a more bullish case than we've taken, and we'll see is that the pace of the secular challenges in terms of cord cutting, we're assuming kind of stay as they have been, kind of high single digits, offset them by contractual rate increases. There are some indications, obviously, that over the last quarter or so that things have gotten a little bit better. I know Charter gained video subs last quarter. We hadn't seen that in a while. To the extent that's better than what we think that would obviously be kind of a tailwind to us. But we factored kind of that in. The advertising market is healthy. We feel pretty good about that. And then on the rest of revenue on platforms revenue, we're bullish. We've stated on the earnings call that we're expecting kind of high single-digit kind of revenue growth organically in platforms. And so you kind of put that all in and kind of leads to the revenue guidance that we gave. And then on EBITDA, we factored in the expenditures for those new initiatives I just mentioned, whether it's the D2C initiatives on CNBC, MS NOW, Fandango. And those are all kind of baked in then to a number that we think still reflects really strong profitability, significant cash flow generation of over $1 billion. So we're kind of both driving profitability and evolving the business at the same time. As you then kind of look past that, our model after '26 is really drive profitability, evolve the business. That's going to lead to stabilization of the top line in the medium term. And then in the long term, really to drive growth both on the top and the bottom line and really create Versant as a platform for growth over time. And that's kind of the entire trajectory and how we're running the business.

Okay. Maybe we could talk just about the revenue mix. You've outlined this long-term goal to shift to basically revenue mix to parity. So half of it coming from outside of Pay TV, half of it coming from pay TV that number from non-Pay TV was 17%, '24, 19% in '25. What are the key milestones for narrowing that gap getting to 50% and also getting to that medium-term 33% goal?

I think a couple in terms of the things to look at how we manage the business, one will be I'd mentioned this platform's revenue, which is really consists of GolfNow, Fandango Sports engine and some of our CNBC D2C initiatives. That's the one where we're expecting high single-digit growth for '26. That's the -- that business we think has -- or that area has a lot of growth, not just in '26, but going forward. So continued strong growth there will be one big hallmark of it. Another part of kind of this mix of non Pay TV will be on advertising. Our advertising today has a healthy amount of digital advertising that is not associated with Pay TV. Some of the initiatives like the AVOD on Fandango. We have this business free TV networks we acquired, which is an over-the-air business that has entertainment programming that will drive that area. So we're we expect that the advertising trajectory will improve, particularly as we kind of evolve it and to have more from non-pay TV sources driving that advertising. And then in general, the other -- we are going to be regularly updating everybody on this mix percentage that you mentioned was 17% and 19% for '24 and '25. So we will keep investors informed of that trajectory. But like I think I said those 2 areas of looking at platforms revenue and advertising and the other one, too, will be we have an area that's not huge today, but it's several hundred million dollars of content licensing. And we own a bunch of our content, like we announced a few weeks ago, we sold the Kardashians franchise to Hulu. That was a very good deal for us. We own a lot of content in True Crime -- we have like a franchise called Snaps with 700 episodes. That has a lot of demand, both internationally as well as domestically. So that will be another area you could expect, while it's a little chunky just given the accounting of content licensing, where it won't be a linear increase necessarily every year, that will be also a source where something that kind of look at as we continue to kind of drive towards that 33% mix and then 50% over time.

On your earnings call, you talked about platform revenue growth in the high single-digit range for this year. Can you talk about what comprises the platform business and the drivers behind that growth? And do you expect acceleration in platform revenue growth in 2027 and beyond as these digital initiatives really gain momentum?

So what's in there is, again, that the biggest businesses there are GolfNow and Fandango, are the 2 biggest ones today. And so -- and both of those businesses from a share perspective, have a lot of room to grow. So let's say, GolfNow. It is the leading way online way to book Tee Times for those -- if you're a golfer, but still it's less than 10% share time. And it doesn't really have a notable digital competitor. The biggest competitor is actually a telephone. And so it's a far better way to book Tee Times than any other way. And we've seen this in other businesses that open table for restaurants, for example, I mean, it's become the preferred way to make a restaurant reservation for the most part. For us, this is about adding more sales capabilities. This is an area where in the old -- when we were owned by NBC Universal, we didn't necessarily have the capital to deploy to get more feet on the street to sell it into more courses kind of grab more share there. And that will be a big driver as we continue to go forward on platforms growth. Similarly, and this is true with Fandango, too, which is 10% of the tickets sold there's room to grow on that because, again, it's an advantaged way of going to the theater, you get a reserved seat. In addition, on both of them, there's a lot of adjacent markets right next to us of where we are today that we think are going to be very fruitful to drive more growth. For example, on GolfNow, for those of you who are golfers, there's a tremendous amount of consumer technology, whether it's simulator or range finders or so forth.. We have -- we talk to golfers better than not argue about any other company, given our golf channel and our GolfNow business. So you'll see that continue to expand and extend and again, leveraging the low cost per customer acquisition and in Fandango, we did the same thing with buying Indy Cinema. We have an existing relationship with exhibitors that are -- we're providing their ticketing services. Now we're going to provide operating software opportunities for them as well. And then the CNBC D2C will be a component of that, too, which we're very bullish about servicing the retail investors. So we expect that, that growth profile that I mentioned is going to be very strong for many years to come and that there's a lot of runway here.

Yes. You mentioned the direct-to-consumer investments, including the membership community for MS NOW and CNBC for retail investors. How do you view the profitability profile of these ventures? Are these going to be managed as sort of loss leaders early on to build a user funnel? Or do you expect them to be accretive to the P&L in the near term? And maybe if you could just help to frame how much incremental costs are associated with the launches of these services.

Sure. So the initial investment is relatively modest. So I think a lot of folks are used to kind of the media D2C services and it's a very significant investment early. And again, I come from NBC, so we were part of it with Peacock. This is very different. We're not going -- very purposely are not doing a Versant D2C service. Rather, we're doing D2C services bespoke to each brand. And I think the reason that's important is that you can then very much harness the synergies that you have with each brand. So I mentioned, for example, on CNBC, the spending -- the cost per customer acquisition given we already have a television audience and a big brand that people have very positive disposition to, retail investors are already with us to kind of get them now to subscribe to this service. is significantly more efficient than if you're trying to do -- trying to approach this in a very different way. So the investment and also technology wise, we have a lot of it already in-house. Like we have video infrastructure. We have a couple of CNBC B2C services how video playback. We have the Fandango infrastructure. We have a lot of commerce infrastructure at Golf Now. So we're using what we have. And sure, there's some investment on like the user interface or some investment in marketing. But it is much more modest than really what I think a lot of folks would expect. It's embedded in our 2026 guidance. So I would not -- in general, that's the approach, relatively modest levels of investment. And then the payback in any of these services, the payback is not instantaneous. There is going to be some moderate initial investment and then the paybacks measured over years, but this is also not the model where you're expecting payback 5 years from now, it's pretty quick. So it's measured in -- we expect positive contribution to the P&L in the near term.

You mentioned the low share of the Fandango and GolfNow both have less than 10%. What's the target market share for each of these businesses? Where do you think you can get to? And what are the kind of the critical steps to realizing that share potential?

Yes. I mean we haven't publicly stated that we're trying to target x share or y. And even for us, we know there's a lot of room to grow, and we're going to pursue that growth. And really, it's a lot about, again, executing on sales initiatives, it's execution fundamentally. I mean, like on GolfNow, it's about just making sure the awareness of the offering continues to increase, make sure we're in more golf courses public golf courses, so people can avail themselves of the service. And so we can debate what the ceiling of the opportunity is, but I think most people would agree that if it's 10% for these there's a lot of room on the upside for this to be significantly more. And again, we also think about kind of share not only in the specific verticals that they're in today, like Tee Time reservation or software or propane but it's -- these are brands that one services the golf for Fandango services kind of the entertainment consumer. We look at it almost in a broader sense about what's the kind of wallet share timeshare for that entire ecosystem. So that's one of the reasons that AVOD makes a lot of sense. And you could imagine we're going to extend these brands into other kind of adjacent areas that we think will enable them to continue to be significantly larger than where they are today.

I wanted to ask you about the Free TV acquisition and the planned launch of Fandango, AVOD service. They signal a significant push into the ad-supported non-Pay TV space. How are you going to differentiate these AVOD offerings in a crowded market with incumbents like Tubi and Pluto and the Roku Channel, et cetera?

Sure. And look, we have a lot of respect for those competitors. They've done very well, Tubi in particular, and Fox has been very vocal about it. And as I said, I mean, I think it's an impressive what they've done. We view Fandango as having some of its own unique advantages in the space. And I'll start by saying this is a growing market on free. So it's pretty clear that there's some consumer subscription fatigue, both with SVOD as well as with TV. And so what you're seeing is from a market share standpoint, 3 offerings, fast, free platforms are continuing to grow. And it's both in terms of streaming as well as on over the air. One of the reasons we bought, as you said, the kind of free TV network. So we see significant kind of just a market tailwind across the board, and we think that's going to continue for a while. In terms of Fandango and some of the advantages it has, well, one is it's a known brand that people have a very positive kind of disposition towards, it's kind of known for all things entertainment. The recognition of the brand for all the work we've done is amongst the highest of entertainment brands. Two, it has an existing distribution footprint. We're in just about every single connected TV platform. As you think about making sure that consumers are going to be able to access this free AVOD service, that's often a pretty big hurdle about how do you make sure you're in those platforms. We already are. And then three, we have consumer data because we're already there, and it's one of the biggest, most popular ways people are renting and buying movies and TV series today as well as getting tickets we kind of know things on a PIA compliant basis about what do you like to watch, what have you watched in the past. We have credit card information. That's relevant both on a recommendation perspective, so we can make sure we get the right programming in front of you. And also from an ad monetization angle because we can go with a more targeted ad load, which makes the viewing experience better, makes the marketing and the advertising more effective. A lot of our competitors, the viewership is on an unauthenticated basis so they don't have that benefit at all. And then finally on Fandango, we have a lot of existing studio relationships because we're serving the studio through exhibitors. We're also serving the studios directly because we're selling their films and TV series for purchase. And so for us to be able to secure content for the AVOD based on the existing studio relationships where we have an advantage there as well. So I think we're walking in with some significant advantages in this space that we're very bullish on.

Yes, it sounds like -- maybe we can shift a little bit and talk about distribution. I think you noted that over half of your Pay TV subscribers are covered by agreements extending through '28 and beyond with only 16% up for renewal this year. Can you discuss the renewal cadence for the rest of your affiliate contracts, are there any significant renewals on the horizon over the next, say, 2 to 3 years? Do you foresee the renewal process? How do you see the renewal process going without the support of NBC Broadcast, which obviously you had for your previous renewal.

Sure. So to get the numbers out there, we've got 16%, as we mentioned this year and, call it, about 1/4 next year in '27 and then most of the balance in '28 and beyond. So we do have a few coming up this year itself. We feel very good about the renewal a couple of reasons why. So a, there was a bunch of renewals done at the very end of '25 at the end of last year. And they were -- on one hand, yes, they were done together with NBC. But the counterparties, and we were public on many of them, like, say, YouTube TV that was done at the end of the year. And the counterparties obviously knew we were spinning. So in many ways, those deals were done almost on a basis where the spin was happening, they could use that information as part of the negotiation. And we were very satisfied where we came out. So to be very specific, like on YouTube, which they have introduced new packaging constructs. So on their news and sports package, our news and sports networks, very specifically Golf USA NBC, MS NOW, they're in that construct. And we got the rates that we're pleased with, too. So we think we have kind of a case study that these deals went successfully, demonstrating the power of our portfolio. And at the end of the day, we have big audience networks that people really care about in, again, news and sports, which is what distributors want. So we think we're set up very well. And then other couple of aspects that also make us very bullish is, a, our content very uniquely has a heavy amount of exclusivity within the Pay TV ecosystem. So if you look at a lot of the renewals industry-wide, I think one of the things that's complicated them for some of the other media companies is there some leakage where a lot of the programming that are being offered to the MVPDs is also being offered direct-to-consumer, often at price points that if you're a distributor, you view as kind of internally cannibalistic to what you're offering on a wholesale basis. We don't really do that. Our sports are really exclusive to the Pay TV platform. And that carries a lot of weight. So I think from a distributor value proposition perspective, we're reinforcing that value to them in ways that some of our peers are not. And also, we don't have -- like we're benefiting sure we don't have NBC with us and would anybody would love to have the power of football behind them, obviously. I'm not going to say that's not the case. But you also don't have the streaming issue. You don't have a distributor. You're not distributing a Peacock or another big streamer on a direct-to-consumer basis that has some of the same content. So there are some of those specifics of how this is structured, we think are very beneficial to us.

And you've got this 2-year partnership with NBC Universal for ad sales. What happens after that second year? Should we expect Versant to build out its own independent sales for us in infrastructure -- and how would you manage that transition? How do you think having your own sales independent from Comcast impact your financials?

So we're going to have a few different options. As you mentioned, it's a couple of year deal. So we have some time. I think -- and really 3 ways we could see this evolving. One is we may renew and that's both parties would have to agree to that, meaning NBC as well as Versant. Recall that we did this deal really for a couple of reasons initially. One, there was just a speed. We're trying to get the spin done and to stand up our own sales force at that time would have been hard. But very importantly also, we think it was the right thing for both companies, even independent of speed. This has been a proven go-to-market kind of winning approach. NBC as when we were part of NBC, kind of very typically led the upfront in terms of volume was one of the leaders in pricing as well, has effectively sold and scatter and driven yield. And so proven ability to bundle this inventory and sell it. And again, in the benefit that we bring to NBC is that we're addressing unique audiences so they can go to agencies and kind of make sure that those agencies and the marketers are able to kind of deliver different types of audience reach. And also the pricing is different. I mean clearly, NFL inventory is priced at one level. Our inventory is still premium priced, but not at the same level, and there's a little bit of dollar cost averaging to the agencies and the marketers about getting reach on a cost-effective basis that we uniquely can deliver. So we're -- so there's a real chance that we decide that mutually this is an advantageous relationship and we extend. Path 2, and we had a lot of this even before we set up this arrangement with NBC. There's a lot of other parties that were interested in potentially selling for us. We decided not to pursue them this go around, but that will be there. Again, there's a bunch of folks that kind of see the value NBC has with -- having us and they would like to participate as well. So we think there will be a pretty active market of third-party sellers. And then three, we could do our own sales force. We're not starting at 0, meaning we do have our own salespeople today on digital. So NBC sells most of our -- almost all of our TV inventory. Some of our digital inventory, a good chunk of our digital inventory, we actually have our own sales force that's selling it. and digital continues to grow, that will become a bigger part of the overall sales. And we could launch our own initiative, our own sales organization if we wanted to. So we feel like there's a lot of options here. We're going to pick the one that kind of value maximizes in the short and the long term, and we think we're really well positioned for that.

On the digital inventory that you're selling yourself, how much of that is programmatic versus manual?

We do it it's a blend in terms of we do both. I think you'll see our programmatic go up over time, like as I think as we're looking at, for example, at the AVOD offering that we're going to, you'll see more and more of it. So today, a bunch of it is direct -- but I think we're seeing that shift that we will lead into programmatic increasingly as we add more and more digital sources.

Another partnership you have with NBCU is for the Olympics, and I think that goes through the 28 games in L.A. Beyond the Olympics and that ad sales partnership, are there any other ongoing operational or technological arrangements with Comcast that are material to the company we should be thinking about?

Yes, not from a material. The biggest material interrelationship between the company is, in fact, ad sales one we just talked about. The Olympics, and just to be very clear on how the Olympics work. It is -- we love having the Olympics. There's -- it provides, obviously, healthy ratings for us. It's a good promotional platform. economically, NBC buys the time on our networks. And economically, it's not a -- like not having the Olympics will not kind of cause any economic impact on us directly. And we'll see what happens after '28. Other than those, like we -- of course, we have some transition service agreements on technology that are not material financially that we will migrate off of relatively quickly. There's an existing transition service agreement on some sports production. And again, we'll migrate off of that relatively quickly, not a huge economic impact for us. And then there's a brand license on CNBC that is a -- that's a 5-year license between the 2 companies. And that's pretty much pretty much it. So there's not a lot of kind of dependency or connectivity in a negative sense, I should say, between the 2. And of course, we have our Comcast Cable carriage deal, which is done at arm's length and when that comes up for renewal, well, we're very optimistic that we'll renew that on favorable terms.

Maybe we can talk about costs, especially given some of the top line pressures despite more adoption of skinny and genre-based bundles, the cable networks face these secular pressures. How do you manage costs to offset the top line pressure? And what are the areas of the cost structure that have the most opportunity to actually save?

Yes. So about 70% our cost base is kind of addressable in the short term. The way to think of our costs are using round numbers, a little more than half of our costs are programming and of programming, about half of programming is sports right. So once you take that out, basically, that math will work about 70%-ish is not sports rights, which those are more fixed. Everything else, whether it's entertainment, news programming, SG&A, of course, those are all kind of pretty addressable and variable in the short term. In terms of then our opportunity on costs. So we will flex costs appropriately. If revenue does not materialize the way we think we will pull those levers to kind of help mitigate the impact on the bottom line. The other thing in terms of where the opportunity is, because of the need to kind of execute the spin within a quick time frame, we had to replicate a lot of the NBCU infrastructure technology-wise. We set up the org to be efficient. So we're all shared services everywhere other than programming for the brands. Everything else is we don't have brand-specific resources. That being said, technology-wise, in terms of enabling us to say, take advantage of automation, take advantage of some of the AI capabilities like in the back office, finance, HR and increasingly even the front office, so to speak, like in production. We need to have a more modern infrastructure, which we are actually developing right now. It's a big priority for '26 to enable us to unlock those savings, probably first starting in the back office an increasing up and down the value chain. -- that will -- that is going to be an area, frankly, we're going to do that whether it's not in response to any kind of revenue pressure. We're going to do that regardless because it's the right thing to do to maximize profitability. But I think there's a material opportunity there for incremental.

Let's talk about sports. So many of your competitors are obviously focused on NFL rights. What can Versant do to capitalize on the other sports rights that might come to the market over the next couple of years? Any particular sports that you've got your eye on at this point?

So we're very happy with our sports portfolio. For those of you who aren't familiar, it's like anchored by NASCAR, PGA Tour, USA, which is the U.S. Open. We just extended our deal with the PGA of America for the Ryder Cup and we have Premier League and WWE list goes on. And we've built a very -- position we're very proud of a women's sports that we think is a big growth opportunity with WNBA, which is new to us, we're one of the biggest kind of media partners of the WNBA as well as League One Volleyball, Women's Volleyball League, which is also -- the ratings have been quite strong, and then we have the PGA. So we don't have to expand into more sports -- so it will be opportunistic based on where there's clear value, value in terms of distribution, value in terms of helping us evolve the business model in advertising I think the -- and Mark mentioned this on the earnings call we had, NFL looks like it's going to be kind of trying to renew their deals, we can argue on timing, but one would presume that's going to have a pretty significant rights reset for the existing media partners. Presumably, that could result in some of the existing media partners, either taking a different view on -- and the -- for those of NBA, that's a long-term deal. Those rights are set. On other sports, they may -- whether a sublicensing opportunities or whether that is not maybe engaging in renewals. So again, we'll look at that. We think, again, we're very unlikely to be in the NFL and NBA business. We don't think that really makes sense for us. But those other sports, there may be real opportunities for us. Those sports want linear distribution on kind of popular networks like we have like on the U.S.A., but it's going to have to make sense for us economically. We're not going to do it just to add to the sports portfolio.

Okay. As you navigate was a competitive market for sports rights, how do you plan to manage that cost inflation while at the same time you're investing in new content to drive growth?

Yes, we'll be very disciplined here. Like I think to the extent we are going to add sports, we'll find to offset elsewhere. Like again, part of, I think, the economic calculus where is going to have to make sense, will be okay, if we're going to do this because it's going to add, say, distribution value we're going to look at the overall programming lineup that we have and say, where are we spending elsewhere. And I think we're going to make those trade-offs there. So we're not -- we wouldn't envision this to be adding to the cost structure with the kind of with the hope that we're going to have a business model to come. The business model is going to have to be established upfront and we'd make those tradeoffs.

Okay. Got it. Let's move to capital allocation. You've laid out a clear capital allocation framework -- maybe you could walk us through how you're prioritizing uses of cash, particularly trade-offs between M&A, organic investment and shareholder returns.

So -- we're in a, I think, a very privileged position that we're happy for. We have a very cash-generative business, and we have a very healthy balance -- and we're thankful that Comcast enable us to have this opening a healthy balance sheet. We're a 1x net leverage today. We set our targets 1.25. And then we've guided for '26 of over $1 billion of free cash flow. I mentioned that because when it comes to kind of capital allocation, we have 3 priorities that we can execute concurrently. So rather than being an or, it's an -- and those 3 are we're going to maintain a healthy balance sheet. As I mentioned, that 1 to 5 net leverages are North Star. We're going to invest in growth organically and with a high bar inorganically and we're going to return capital to shareholders. We've announced the $1.50 annualized dividend. We've announced the Board authorization of a $1 billion share buyback. So we're going to do all 3 of them. I think a lot of our peers can't because of different financial constraints they may have. And we're in a position where we're not necessarily like we can do and we're able to execute all 3. And that's and we view them all an equal priority. So we're going to execute all 3 together.

Okay. And just on the M&A side, it seems like your strategy appears to be focused on smaller targeted deals like Indy Cinema, Free TV, things and free TV. Things that are highly aligned with the company's strategy. Is it fair to say that large-scale transformative M&A is off the table for the foreseeable future as you kind of focus on these other initiatives?

I wouldn't say anything is kind of off the table. I think part of our job kind of fiduciary wise is to look at everything and see what is going to accrete the most value for shareholders, and we will look at everything. Clearly, as I mentioned, part of our capital allocation kind of priorities are that healthy balance sheet. So the -- and getting back to that North Star of 1.25 leverage. And so that's going to be a consideration in terms of transaction size is our confidence in the ability to get back to those levels kind of quickly. That being said, like we will -- I think if I was looking at M&A priorities, kind of the principles we have is -- we mostly are focused or largely, we expect to be focused on the 4 markets we're in that I mentioned before. We want to have things that evolve our business to that. I was talking about the evolving to a healthy -- a bigger mix from non-Pay TV over time, getting that 50% longer term. And then we really want to make sure these obviously transactions generate significant value with clear synergies that we can kind of bank on and the bolt-ons make a lot of sense. We've done them. Could there be something that's bigger and transformative? I mean I think it would depend on the circumstances and the bar will be very high to make sure that it hits every one of those criteria I just mentioned. All right.

Great. We'll wrap up there. Thanks so much.

Thank you. Appreciate it.