The E.W. Scripps Company Q3 FY2025 earnings call

Management Statement and Operational Highlights

• M&A and Sales: Moving ahead with station swaps with Gray and sales of WFTX in Fort Myers and WRTV in Indianapolis; sale prices were multiples well above local broadcast transactions, totaling $123 million in cash sales, improving balance sheet. Refinanced $750 million in senior secured second lien notes, paying off maturing debt and reducing revolver balance.
• Financial Performance: Third consecutive quarter of results meeting or exceeding expectations fueled by Scripps Sports strategy, strong sales execution, and tight expense controls. Net leverage at end of Q3 was 4.6x, improved from 6x in Q2 2024.
• Strategies:
  • Sports: Partnerships with WNBA, NWSL, NHL; driving core advertising revenue growth; plan to be aggressive in sports where value can be created without overpaying for rights.
  • Streaming Distribution: Strong Connected TV revenue growth; 20% of networks viewing on streaming; expanding FAST channels and distribution partnerships like with Peacock.
• Expense Management: Tight expense controls resulting in margin improvements; focus on using cash flow to reduce debt and lower leverage ratio.

Segment Performance

• Local Media: Third quarter revenue down 27% due to absence of political advertising; core advertising revenue up nearly 2%, national advertising revenue grew; distribution revenue flat; expenses down over 4%; segment profit nearly $53 million. For the fourth quarter, Local Media division revenue is expected to be down about 30%, core revenue up about 10%, and expenses flat-to-down low single digits, inclusive of new sports rights expense.
• Scripps Networks: Third quarter revenue was $201 million, about flat year-over-year; Connected TV revenue up 41%; expenses down 7.5%; segment profit $53 million with a 27% segment margin. Fourth quarter guidance: Scripps Networks division revenue expected to be down in the low-double-digit range, expenses down low double digits.
• Other: Third quarter loss was $7.6 million, same as Q3 2024; fourth quarter expected to be about $21 million.

Guidance

• Full-year cash interest paid expected between $165 million and $170 million, improving cash flow. Expect to pay off remaining 2028 term loan balance via cash flow before it comes due. At September 30, no borrowings on revolving credit facility, cash and cash equivalents totaled $55 million.
• Fourth quarter guidance: Local Media revenue down about 30%, core revenue up about 10%; Scripps Networks revenue down in the low-double-digit range, expenses down low double digits.

Risks

• Regulatory/Dispute: YouTube TV-Disney dispute impacting content access; uncertainty around affiliate renewals and retrans potential.
• Market Uncertainty: Economic uncertainty affecting ad categories like automotive, direct response; pharma volatility; government shutdown impact on Medicare open enrollment affecting Networks revenue.
• Debt/Refinancing: Dependency on successful debt management and refinancing; potential challenges with affiliate renewals and meeting debt obligations.

Question and Answer

• Q: Dan Kurnos on station sales multiples and M&A potential A: Adam Symson stated there are significant opportunities to identify accretive M&A, buy, sell, and swap stations, and they'll continue pursuing transformational opportunities to unlock shareholder value.
• Q: Daniel Kurnos on network mix and CTV impact A: Jason Combs discussed factors in Q4 guidance including political revenue absence, DR pricing weakness, and pharma volatility; Adam Symson noted sports drove upfront and CTV demand with WNBA seeing 90% increase in volume.
• Q: Avi Steiner on YouTube TV dispute and affiliate renewals A: Adam Symson mentioned YouTube TV-Disney dispute impacting content access but no direct revenue impact; Jason Combs noted 3 CBS affiliates up end of year, 18 ABC stations up in 2026 for affiliate renewals.
• Q: Craig Huber on advertising environment and viewership breakdown A: Jason Combs said local core has momentum with 2% Q3 growth and 10% Q4 guide; Adam Symson noted 20% of Networks viewing on streaming, and 50% of Local Media revenue from news/sports.