The E.W. Scripps Company Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Refinancing: Closed $750 million senior secured second-lien notes, used proceeds to pay off debt, improve financial condition. Proceeds used to pay off 2027 senior notes, prepay Term Loan B-2, and reduce revolving credit facilities.
• Financial Results: Second quarter loss per share $0.59, including $38 million financing costs, $31 million gain on station sale, $5.6 million write-off of deferred costs, and $3 million debt extinguishment loss. Cash and cash equivalents totaled $31.7 million at June 30, net leverage 4.4x at end of Q2.
• Strategic Moves: Announced station swap with Gray, multiyear WNBA agreement, NHL deal in Tampa, renewed Fox affiliation. Seized streaming opportunity with CTV revenue growth (up 57% in Q2).
• Deregulation: Anticipating changes in broadcast industry regulations, working on portfolio optimization with Gray. Awaiting FCC decisions on national cap and Big 4 network ownership rules.

Segment Performance

• Local Media division: Revenue declined 8% y-o-y in Q2 due to lack of political advertising. Core advertising outperformed peers with local sports rights (NBA Finals, NHL playoffs) contributing. Expenses had less than 1% increase. Segment profit was nearly $56 million vs $88 million in Q2 2024. Revenue contribution from Local Media; Scripps Networks division: Revenue $206 million, down 1.4% y-o-y. CTV revenue up 57%. Expenses down over 12% to $150 million. Segment profit $56 million, margin 27% (9-point lift from Q2 2024). Other segment: Loss of $7 million in Q2 vs $9.2 million y-o-y. Shared services and corporate expenses $21.8 million, expected $22 million in Q3.

Guidance

• Q3 Guidance: Local Media division revenue expected down mid- to high 20% range, core flat. Scripps Networks division revenue expected down low single digits, expenses down mid-single digits.
• Full Year Adjustments: Expect cash interest paid $170-175 million, CapEx $45-50 million, cash taxes paid $5-10 million. These adjustments drive incremental cash flow.

Risks

• Credit Markets: Dependence on credit markets for financing; interest rate environment impact on cost of capital.
• Advertising Climate: Economic uncertainty leading to hesitancy in advertising spend, particularly in automotive category.
• Regulatory Uncertainty: Delays or changes in FCC regulations affecting station ownership, distribution, and portfolio optimization.

Question and Answer

Q: Dan Kurnos on deregulation runway and Q3 guide A: Adam Symson discussed deregulation progress, anticipating opportunities from swaps and asset sales; Jason Combs unpacked Q3 guide, noting core expected flat, distribution near flat, and political impact in Q3.

Q: Michael Kupinski on advertising environment and Q3 A: Jason Combs talked about advertising hesitancy, automotive weakness, and Q3 expectations, noting gradual build towards September due to political and crowd-out factors.

Q: Craig Huber on CBS nonrenewal, retrans margin, sports impact A: Adam Symson saw CBS nonrenewal as one-off; Jason Combs on retrans sub churn at down mid-single digits; Adam Symson on retrans margin expansion due to expense savings in network compensation.

Q: Steven Cahall on Networks sports, preferred equity A: Adam Symson on Networks sports strategy and CTV streaming growth; Jason Combs on preferred equity timeline, noting earliest take-out in Jan '26, focus on leverage reduction and cash use for debt paydown