E.W. SCRIPPS Co Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Outperformed financial expectations despite U.S. economic uncertainties. Successfully completed retransmission negotiations covering 25% of legacy PayTV households, reduced expenses, exceeded Scripps Networks' margin improvement (870 basis points vs 400-600 basis points promised), and closed refinancing transaction.
• Scripps Networks: Connected TV revenue up 42% in Q1, ION is a major contributor to CTV revenue, and NWSL and WNBA are expected to drive revenue in Q2 and Q3. Expenses decreased 6% due to tight cost controls and Scripps News operations reductions, resulting in 32% margins, the highest since Q4 2022.
• Local Media: Contract renewals for 2025 took effect at the end of Q1, with benefits starting in Q2. Local media expenses increased only 1% from the prior year quarter due to lower than expected employee costs.
• Awards and Recognition: Scripps News Network and local news teams received multiple journalism awards, and Scripps was awarded the 2025 Service to America award for disaster relief efforts.
• Sports Partnerships: Local stations are involved in NHL, WNBA, and NWSL partnerships. Scripps Networks upfront event emphasized women's sports, with new broadcast partnerships and upcoming announcements for women's sports properties.

Segment Performance

• Local Media division: First quarter revenue was down 7.8% year over year. Core advertising revenue decreased 3% due to economic uncertainty, and local distribution revenue was down 5% year over year. Local media expenses increased only 1% from the prior year quarter. Local Media segment profit was $35 million compared to $66 million in Q1 of 2024. For Q2, Local Media division revenue is expected to be down in the high single-digit range with core revenue down in the low single-digit range, and expenses are expected to be up in the low single-digit percent range.
• Scripps Networks division: First quarter revenue was $198 million, down about 5% from the year-ago quarter. Connected TV revenue was up a strong 42% in the quarter. Expenses in the Scripps Networks division decreased 6% in the first quarter. Network segment profit was $64 million, compared to $49.7 million in the year-ago quarter. For Q2, Scripps Networks division revenue is expected to be about flat and networks' expenses are expected to be down in the low double-digit range.
• Other segment: In the first quarter, a loss of $6.4 million was reported, same as the year-ago period. For Q2, the shared services and corporate expenses are expected to be about $22 million.

Guidance

• Local Media: Q2 revenue expected to be down in the high single-digit range, core revenue down in the low single-digit range, and expenses up in the low single-digit percent range.
• Scripps Networks: Q2 revenue expected to be about flat, and networks' expenses down in the low double-digit range.
• Refinancing: Completed refinancing positions the company well with a clear runway through mid-2027, focusing on using free cash flow to reduce debt.

Risks

• Economic uncertainty impacting advertising spending.
• Volatility in employee costs and advertising categories (e.g., auto and retail were worst performers in Q1).
• Regulatory uncertainties affecting ability to compete with big media companies and tech, including potential impacts on virtual MVPD negotiations.

Question and Answer

Q: Daniel Kurnos of The Benchmark Company asked about the regulatory environment and how Scripps is positioned to take advantage of changes, and about ION's performance and margins.

A: Adam Symson and Jason Combs responded discussing regulatory opportunities, ION's sports strategy, and margin expectations.

Q: Craig Huber of Huber Research Partners inquired about employee compensation in Scripps Networks, advertising categories, and real estate asset sales.

A: Jason Combs answered about employee cost variability, advertising category performance, and no immediate real estate asset sales expected.

Q: Avi Steiner of JPMorgan asked about cost savings transfer to local media, SEC regulation impacts on ION, and FCC initiatives.

A: Jason Combs and Adam Symson addressed cost savings potential, SEC regulation impacts, and FCC deregulation expectations.

Q: Michael Kupinski of Noble Capital Markets asked about advertising lift from gambling, EdgeBeam update, and FCC deregulation timing.

A: Jason Combs and Adam Symson discussed gambling advertising benefits, EdgeBeam status, and FCC deregulation timing expectations.

Q: Shanna Qiu of Barclays inquired about 2027 maturities, refinancing, and political benefits.

A: Jason Combs and Adam Symson responded on debt evaluation, refinancing, and political revenue expectations.

Q: Hal Steiner of BNP Paribas asked about pro forma cash balance post-refinancing.

A: Jason Combs stated he would provide the cash balance number later.

Q: Steven Cahall of Wells Fargo asked about network revenue visibility, programming costs, local media expenses, and virtual MVPD revenue opportunities.

A: Jason Combs and Adam Symson answered on revenue visibility, programming cost growth, local media expense drivers, and virtual MVPD revenue potential.