Scripps reports second-quarter 2017 results
Thu, August 03, 2017 by Carolyn Micheli
CINCINNATI – The E.W. Scripps Company (NYSE: SSP) today reported operating results for the second quarter of 2017.
For the quarter, net income was $8.5 million or 10 cents per share. Unusual items added 2 cents per share. In the prior-year quarter, net income was $11.5 million or 14 cents per share. The 2017 quarter includes a $2.4 million non-cash charge to interest expense to write off deferred costs associated with our refinancing and $5.1 million of other income, primarily from the sale of our newspaper syndication business.
For the quarter, total revenue was $232 million compared to $228 million in second-quarter 2016.
• The company announced on Aug. 1 plans to acquire the Katz networks – four fast-growing, audience-targeted broadcast networks, for $302 million. Because Scripps was already a 5 percent owner in a portion of the business, the net purchase price is $292 million. Each network reaches more than 80 percent of U.S. television households and provides national advertising scale. The deal is expected to close Oct. 2.
• In June, the company exited the newspaper syndication business in a deal worth about $3 million with longtime partner Universal Uclick. Scripps sold the newspaper syndication rights for some popular comic strips and assigned other syndication rights to Universal Uclick for the comics in which Scripps owns the copyrights, including “Big Nate,” “Marmaduke” and “Nancy.”
• Retransmission revenue increased 24 percent to $66 million in the second quarter. For the year, retransmission revenue is expected to increase 20 percent and become about 35 percent of television division revenue.
• Digital revenue grew 27 percent in the second quarter, driven by growth at our industry-leading podcast company, Midroll, and our next-generation national news network, Newsy.
• In April, the company closed an offering of $400 million of new senior unsecured notes maturing in 2025. The notes have a coupon rate of 5.125 percent. Proceeds from the offering were used to repay a term loan, to pay related fees, and for general corporate purposes. Since this is a refinancing, the company did not significantly increase the total amount of debt outstanding.
Commenting on the second-quarter results, Scripps Chairman, President and CEO Rich Boehne said:
“The acquisition of the four Katz networks provides Scripps with a new platform for national advertising. This young, fast-growing company has built four broadcast networks – Bounce, Grit, Escape and Laff – that each target an audience demographic desirable to advertisers seeking national scale.
“Company founder Jonathan Katz is a creative and forward-looking entrepreneur who six years ago saw the opportunity for focused networks distributed over the air that could serve viewers in tandem with emerging over-the-top services.
“At the same time as we looked ahead to new ways of engaging television viewers, we said goodbye to our last ties to the newspaper business. For more than 100 years, newspaper comics were an important and valuable part of our company. Scripps brought many iconic strips to kitchen tables around the world. Although very small in recent years, the comics syndication business served us well for many years.
“In our largest business, broadcast television, we are anticipating the launch of our newest original program, Pickler & Ben, on Sept. 18. We partnered with country music star Faith Hill to produce the show, starring country singer Kellie Pickler and New York journalist Ben Aaron in a daily talk-show program. We have had good success with our original programming strategy, with RightThisMinute in its seventh season and The List in national syndication. This is another show that helps us build value, save money on syndicated costs and garner more advertising revenue.
“In our digital division, our next-generation national news network Newsy saw a 25 percent increase in views on the over-the-top platform, where it is distributed across all the major services. And our podcast company Midroll added several dozen new shows to its distribution and ad sales network, including the acclaimed podcast Welcome to Night Vale and the owned and operated show LeVar Burton Reads. Midroll now owns or represents more than 300 podcasts to a growing range of high-quality advertisers.”
Second-quarter operating results
Revenue was up 2 percent to $232 million compared to the second quarter of 2016.
Costs and expenses for segments, shared services and corporate were $196 million, up from $186 million in the year-ago period, primarily driven by higher network programming fees as well as increased costs in our digital businesses.
**Second-quarter results by segment compared to prior-period amounts were:* *
In the second quarter of 2017, revenue from our television group was $193 million, up about 1 percent compared to the prior-year quarter. Retransmission revenue increased $12.6 million, and political advertising revenue declined $5.9 million in the second quarter of 2017.
Advertising revenue broken down by category was:
• Local, down 3.8 percent to $85 million
• National, down 5.8 percent to $36 million
• Political, $2.5 million, compared to $8.4 million in 2016
Core local and national advertising revenue was down 4.4 percent in the second quarter, and retransmission revenue was up 23.6 percent to $66.1 million.
Total segment expenses increased 3.7 percent to $144 million, driven by increases in programming fees tied to our network affiliation agreements.
Second-quarter segment profit was $49.8 million, compared to $53.3 million in the year-ago quarter.
Radio revenue was $17.2 million, down from $18.2 million in the 2016 quarter. Expenses were flat year-over-year.
Segment profit in the radio division was $2.9 million in the second quarter, down from $3.9 million in the 2016 quarter.
Digital revenue was $19.3 million, up 27.2 percent from the prior period.
Expenses for the digital group were $23.5 million, an increase of $3.6 million from the prior-year period.
Segment loss in the digital division was $4.2 million in the second quarter, compared to $4.7 million in the 2016 quarter.
On June 30, cash and cash equivalents totaled $150 million while total debt was $405 million.
From Jan. 1 through July 31, we repurchased about 400,000 shares at an average price of $19.20. In November 2016, our board of directors authorized a $100 million share repurchase program that expires at the end of 2018.
The following comparisons are to the year-to-date period ending June 30, 2017.
In 2017, revenue was $443 million compared to revenue of $437 million in 2016. Retransmission revenue increased $25 million. Political advertising was $3.5 million in 2017 compared to $17.7 million in 2016.
Costs and expenses for segments, shared services and corporate were $391 million, an increase of $22 million, primarily driven by higher network programming fees as well as increased costs in our digital businesses.
Net income was $6.6 million or 8 cents per share. In the prior-year, net income was $16.4 million or 19 cents per share. The 2017 quarter includes a $2.4 million non-cash charge to interest expense to write off deferred costs associated with our refinancing and $5.1 million of other income, primarily from the sale of our newspaper syndication business.
In addition, we expect interest expense to be $5.6 million in the third quarter. For the fourth quarter, assuming an Oct. 2 close, the four Katz broadcast networks are expected to add about $38 million of revenue, $33 million of operating expense, $3 million of non-cash depreciation and amortization expense and $2 million of interest expense to company results.
The senior management of The E.W. Scripps Company will discuss the company’s second-quarter results during a telephone conference call at 9 a.m. (Eastern) today. Scripps will offer a live webcast of the conference call. To access the webcast, visit http://www.scripps.com and click on “investors” and then “investor information.” The webcast link can be found on that page under “upcoming events.”
To access the conference call by telephone, dial (800) 230-1085 (U.S.) or (612) 332-0226 (international) approximately five minutes before the start of the call. Investors and analysts will need the name of the call ("Scripps earnings call") to be granted access. Callers also will be asked to provide their name and company affiliation. The public is granted access to the conference call on a listen-only basis.
A replay line will be open from 11 a.m. Eastern time Aug. 3 until 11:59 p.m. Aug. 17. The domestic number to access the replay is (800) 475-6701 and the international number is (320) 365-3844. The access code for both numbers is 426610.
A replay of the conference call will be archived and available online for an extended period of time following the call. To access the audio replay, visit http://www.scripps.com approximately four hours after the call, click on "investors" then "investor information," and the link can be found on that page under “audio/video links.”
This press release contains certain forward-looking statements related to the company's businesses that are based on management's current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The company's written policy on forward-looking statements can be found in its SEC Form 10-K. The company undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date the statement is made.
The E.W. Scripps Company (NYSE: SSP) serves audiences and businesses through a growing portfolio of television, radio and digital media brands. Scripps is one of the nation’s largest independent TV station owners, with 33 television stations in 24 markets and a reach of nearly one in five U.S. households. It also owns 34 radio stations in eight markets. Scripps also runs an expanding collection of local and national digital journalism and information businesses, including multi-platform satire and humor brand Cracked, podcast industry leader Midroll Media and next-generation national news network Newsy. Scripps also produces television shows including “The List” and ”The Now,” runs an award-winning investigative reporting newsroom in Washington, D.C., and serves as the long-time steward of the nation’s largest, most successful and longest-running educational program, the Scripps National Spelling Bee. Founded in 1878, Scripps has held for decades to the motto, “Give light and the people will find their own way.”
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, Carolyn.firstname.lastname@example.org
Valerie Miller, The E.W. Scripps Company, 513-977-3023, Valerie.email@example.com