The E.W. Scripps Company (SSP) Earnings

Management highlights

• Executing comprehensive transformation strategy, net leverage under four times. • Local media division had 7% core advertising revenue growth driven by live sports strategy, launched Script Sports Network, new affiliation agreement with ABC, and strategic asset transactions. • Scripps President and CEO Adam Simpson discussed newsroom model shift leveraging technology, sports strategy including WNBA, NWSL, and Scripps Sports Network launch, and challenges in national advertising market due to macro and Nielsen methodology changes.

Guidance

• Local media division expects low single-digit revenue growth in Q2, core advertising down low single digits without live sports benefit most of the quarter. Full year gross distribution revenue expected low single digit growth, net distribution revenue low double digit growth. • Scripps Networks Division expects revenue down about 10% in Q2, expenses up in low single digits.

Segment performance

Local media division revenue was $331 million in the first quarter, up 5.8% from first quarter 2025. Core advertising increased 7%. Local media distribution revenue increased 2% again on a same-station basis. Local media segment profit was $44 million compared to $32 million in Q1 2025. Scripps Networks Division revenue was $174 million in the first quarter, down 9.5% from Q1 2025. Connected TV revenue was up 26% from the same quarter last year. Scripps Network's segment profit was $47.5 million, compared to $66.8 million in the year-ago quarter. Other segment reported a loss of $6 million in the first quarter.

Risks & headwinds

• Macro economic conditions impacting direct response ad market. • Nielsen audience measurement change negatively impacting OTA network audience delivery. • Uncertainty in political advertising revenue and market conditions.

Analyst Q&A

• Q: Good morning. First and foremost, Jason, thanks for the recast. Super helpful on that stuff. Just want to make sure, housekeeping question, the guide that you gave for Q2, that is relative to the as reported from 2Q last year, not the recast, correct?

  A: No, that is off of the adjusted combined recast that we provided.

• Q: Adam, ScriptSports Network, super smart. You've been kind of leading the charge in CTV here. You had your upfront in late March. Obviously, you launched it before then. You've picked up PWHL, PBR, Women's PBR now. You've got a real stranglehold on kind of the women's side of the equation. Can you just give us thoughts, understand the DR market soft, we all get the macro, but as we look ahead, you know, commit what advertisers are saying, just help us think through, you know, the feedback you're getting. And you've been very clever with rights acquisition in an inexpensive manner. So, you know, sometimes there's a little bit of confusion between what you can show on streaming and what you can show on, kind of on traditional broadcasts to just help us think through kind of that equation here.

  A: Yeah, first and foremost, Dan, well, I like to think that we have embraced women's sports, not put it into a stranglehold, but I appreciate what you're getting at. We've been very intentional in the way we've been acquiring sports, both on the local side and the national side, and see our opportunity to as recognizing the value of the distribution we bring to the table. So whether it was with our initial deal with the WNBA, the NWSL, or any of these other sports deals we've done, I think we've been looking for partners who recognize that we bring to the table the opportunity to showcase their league, their games, their athletes on the most ubiquitous platform available. because ION is uniquely positioned to be available on OTA, on paid TV, and on streaming. The launch of Scripps Sports Network, I think, is a continuation of that strategy, because it not only positions certain parts of our broadcast in additional new real estate in the streaming space through simulcasts, allowing us to take some of ION's most premium streaming time periods and now simulcast them in a couple of different tiers on streaming platforms, essentially expanding the reach of those platforms or expanding the reach of those games and expanding the reach of our network. It also allows us to carefully and efficiently acquire new rights for insurgent or ascendant leagues looking at getting distribution for their games and allows us to test and learn. So as an example, right now you can watch many of the PWHL games on the Stripping Sports Network, Major League Volleyball, and then the finals end up being broadcast on ION. And our move to put all of that on ION has been all about trying to really appease the advertising environment. We see significant demand from advertisers looking to invest behind women's sports. And so we went to the marketplace knowing that there was already demand for the assets we were acquiring. And I think that's going to benefit us both in linear and it's going to benefit us in the streaming space. And I think we'll continue to be really, really careful and efficient in the way we acquire rights, but also really aggressive in the way we demonstrate the value of our distribution. Relative to the ad marketplace, there's been no let up in that demand for live sports. In fact, I would say when you look at our performance relative to like general market, cable and broadcast networks, you see the benefit of our sports strategy. And we're just now moving into the second quarter where we have that benefit going on into the summertime. We didn't see that in the first quarter. Nevertheless, there has been some softness in the national ad market. I think Jason can provide you a little bit more color on the national ad marketplace, the networks, and even maybe a longer-term or a mid-term view of what we expect from networks margins?

• Q: And our next question comes from Craig Hooper of Hooper Research Partners. Your line is open. Great. Thank you. Good morning, guys. Can you just give us an update, if you would, a little bit further on the $125 to $150 million restructuring transformation program you're working on, I guess, by 2028? Just update us, if you would, first, where you think that annualized run rate will be at the end of this year, any changes on that front.

  A: Yeah, so last quarter we gave an annualized run rate of $60 to $75 million, which as we exited this year, we adjusted that during this most recent earning cycle up to $75 million. And so I think we would say we're making good progress on it. And Adam, in a second, can give some sort of higher level thoughts on it. I'll also point out the move we had in leverage this quarter and maybe just explain that a bit. So last quarter, when we announced the large transformation initiative, and as you referenced, $125 to $150 million, we've been doing a lot of work to sort of lock down our bankable plan of initiatives expected to be implemented over the next 12 months. And per the terms of our credit agreement, we're able to reflect those sort of retroactively back into our trailing eight-quarter EBITDA for purposes of leverage calculation. And so that is the driver behind the big move you see in leverage this quarter, down to 3.9 times. And that's really tied to not all of the initiatives, but the initiatives that we think we'll have fully implemented by the end of Q1 of next year. Adam, do you want to talk a little bit more about the bigger picture on transformation? A: Yeah, I mean, you know, we're executing a comprehensive plan that's allowing us to rethink everything about how we deliver service to the customer. You know, when I think about our customer, I think about our audience and our advertiser. You know, we spent months examining the opportunity to remake the company across every corner of the business, the front office and the back office, and now we're moving into implementation. And, you know, I got a lot of comments about how confident I sounded last quarter when I said take it to the bank. I'll tell you, I'm as confident today as I sounded last quarter that we're going to improve EBITDA by more than 30% to emerge a stronger, more nimble, and more aggressive company oriented for growth. It's all about our customer, and it's all being done through the lens of the company's vision, We Create Connection. You know, a lot of it has to do with technology, the use of AI and automation. It's very much oriented towards growth. But the most important thing I think investors have to hear is we are on track to achieve exactly what we set out to do.

• Q: And our next question comes from avi steiner of jp morgan your line is open uh thank you and good morning um a couple questions here just on the environment and i apologize if i missed this a couple minutes i was off but you just refresh us on the exposure to direct response advertising and remind us maybe how quickly that came back in kind of prior down cycles. Is it leading? Is it lagging? How should we think about it?

  A: So from a DR perspective, it really varies by network, but we certainly do have a material portion of our network's revenue, which is tied to DR advertising. What you see, you know, DR advertising is very tied into broader macroeconomic trends and can both, you know, downturn quickly but also bounce back pretty quickly as well. And so we are seeing some noise right now. That's sort of part of, I know you said you missed the beginning of the call, but, you know, the guide we gave for Q2 is both tied to some of those macroeconomic and geopolitical implications on direct response as well as we're seeing on ratings tied to some recent Nielsen methodology changes? I would say from a speed perspective, it snaps around pretty darn quickly. And one good example of that is what we saw in fourth quarter. The beginning of fourth quarter, we were a little soft with DR as a result of the government shutdown, its impact on employment, and its impact on Medicare enrollment. When the government shutdown ended, it snapped back. And so, you know, I think that the bottom line here is uncertainty is not good for the American economy. Uncertainty is not good for the American consumer because they hold on to their dollars. And so the greater level of certainty that we can have, the easier things will be in the ad marketplace.

• Q: And our next question comes from Shanna Q of Barclays. Your line is open. Yeah, thanks for taking my questions. I know you touched on this a little bit earlier, but could you give us a sense of how much, you know, the Scripps Network's top line guide, the decline in 2Qs related to the overall macro an ad environment versus what you called out on the Nielsen methodology change?

  A: I don't think we're breaking it down specifically. I would say both are driving a material impact to the revenue guide that we provided. Yeah, I mean, I think it's important to recognize that on the network side, we sell impressions. And the impressions are determined by your currency. So mid-February, overnight, Nielsen's methodology change didn't impact sales execution, and it didn't impact the demand we have in the marketplace. It impacted how many impressions we had to sell. And so we're working right now with Nielsen to right that ship, but we're also not just sort of letting it go. I mean, we're doing what we can to make changes both on the marketing side as well as on the programming side to bolster the programming strategy so that we can see an increase in impressions, because we have the customer demand. We have the advertiser. We just need to see the impressions come back. I would say that's separate and aside from some of the macro stuff on the DR side, but the general marketplace has actually held up pretty nicely relative to the demand we're seeing. And that's probably as a result of our sports strategy and I think the strength of our sales execution performance.

• Q: And our next question comes from Stephen K. Hall of Wells Fargo. Your line is open. Thanks for fitting me in. Sorry, I had a little trouble getting into the queue. So, Jason, I just wanted to understand the sequential change in core ad growth at local. There's a lot in there, I think, going from plus seven to the down low single digit. I know there's a change in local sports. You know, there's the Comcast blackout. Can you help us kind of think about what the underlying sort of core sequential change looks like within that? I know it's a lot less than the nine percentage points of deceleration, so how do we kind of think about that within?

  A: Yeah, so from a core perspective, the Q1 number, the up 7%, had a significant benefit tied to our NHL deals as well as, you know, you had the Olympics in there as well. I would view it as you take out sort of the sports impact and the overall core marketplace is pretty consistent with what we've been seeing and not significantly impacted by what's going on sort of more broadly in the economy. And I think that down low singles that we put out there is also better than most everybody else I've seen in our industry was kind of down more low to mid singles. From that standpoint, I actually see our core as a strength right now.

• Q: And then just the last one for me. So if I understand what's going on in leverage, you're able to take advantage in your credit agreements of the transformation initiatives, which I think just gives you a little bit of breathing room versus covenants versus net leverage calculations. Does that mean you can start to devote this year's free cash flow towards the accumulated PREF dividends or otherwise kind of negotiating the PREF? Or do you think the PREF is kind of better left to you know, maybe be part of like a longer-term strategic M&A transaction? We'd just love to know how you're thinking about it.

  A: Yeah, so first of all, on the comments we've been pushing, I mean, we already were sort of well under all of our covenants. And so while the transformation does provide a benefit into our leverage calculation, like there was already significant coverage there. You know, from a Berkshire dividend perspective, based on the refinancing that we did last year, the large refinancings we did, We cannot pay the dividend until 2027 until our leverage is below four and a quarter, which obviously we're under, and we have less than $50 million outstanding on the B2 term loan. So when you think about the PREF, I would think of it this way. Those are the requirements for us to begin paying the dividend. Once we meet those, we would intend to start paying the dividend again. Once we get leverage into the low to mid three times, we would begin looking to address the principle, not all at once, but likely in increments. We can do that in 60 million increments. And so I think that is kind of the way we think about the press.