Scripps reports second-quarter 2015 results; reaffirms full-year guidance
Fri, August 07, 2015 by Carolyn Micheli
(Note: The merger of the company’s broadcast assets with those of Journal Communications and the spinoff of the newspaper business occurred on April 1, 2015. Second-quarter results reflect combined television, radio and digital operations. Newspaper results for periods prior to the transaction are reported as discontinued operations.)
AUG. 7, 2015
CINCINNATI – The E.W. Scripps Company (NYSE: SSP) today reported operating results for the second quarter of 2015. Unless otherwise indicated, all operating results comparisons are to the Scripps historical results for the second quarter of 2014, recast to reflect newspapers as discontinued operations.
For the quarter, the net loss from continuing operations was $13 million, or 15 cents per share. Transaction and acquisition integration costs associated with the Journal transaction, including the tax impact, were $15.7 million or 19 cents per share.
Second-Quarter Highlights • In our first quarter operating the former Journal stations, we met or exceeded revenue and expense guidance.
• Revenues from continuing operations were $198 million, up $78 million from the prior-year’s reported results.
• We completed contract negotiations with CBS, renewing the network affiliation agreement with our Nashville television station through June 2018.
• Retransmission revenue nearly tripled in the quarter to $36 million.
• At the close of the transaction with Journal Communications, we distributed $60 million in cash to Scripps’ shareholders.
• We refinanced Journal’s debt, increasing our debt by $200 million and increasing our revolving credit facility by $25 million, to $100 million. At the end of June, total debt was $407 million, and our cash balance was $101 million.
• Upon completion of the Journal transaction, we resumed our share repurchase program. During the quarter, we repurchased 115,800 shares at an average price of $23.14. About $97 million remains under our share-repurchase authorization.
• We acquired podcast industry leader Midroll in July.
Commenting on the results, Scripps Chairman, President and CEO Rich Boehne said:
“On April 1, we smoothly completed our transaction with Journal Communications and moved ahead into a full quarter of operations with 33 television stations, 34 radio stations and a complement of local and national digital media brands.
“The remainder of 2015 is focused on integrating these new stations and positioning us for the tremendous opportunity of 2016. Our large collection of stations in key swing states makes Scripps one of the most valuable platforms for political advertising in presidential election years, and 2016 could be a record year for campaign spending to reach those most critical voters. Also next year, we expect retransmission revenue to jump more than 50 percent thanks to step ups and renewals of agreements with our cable and satellite TV distribution partners.
“Although the newspaper spinoff and broadcast merger transformed Scripps into one of the larger local television groups in the country, we see opportunity to further strengthen our broadcast footprint while also building and investing in businesses that take advantage of new media technologies, emerging media marketplaces and shifting consumer habits. Our growing collection of digital brands, including Newsy, WeatherSphere, and an extensive network of local news brands, continues to be an area where we are investing in business models with strong organic growth.
“Two weeks ago that collection expanded through the purchase of podcast industry leader Midroll Media, a five-year-old company that creates podcast shows, offers a terrific podcast-serving app called Howl, and generates revenue for well over 200 other podcast shows. Midroll’s high-quality storytelling, comedy, journalism and other entertainment categories fit well with the Scripps mission and strategy for increasing the reach of our national digital brands.”
Second-Quarter Operating Results – Continuing Operations, GAAP Basis Operating revenues increased $78 million, or 66 percent, to $198 million, compared to the second quarter of 2014. The increase was primarily a result of the acquisition of the television and radio stations in the Journal and Granite transactions (collectively the “acquired stations”) as well as increases in retransmission revenue. Revenue from the acquired stations accounted for approximately $72 million of operating revenues in 2015 and $1.2 million in 2014.
Retransmission revenues nearly tripled, to $36 million. During 2014, we renegotiated retransmission agreements covering more than one-third of cable and satellite television subscribers in our legacy markets, and our 2015 results reflect the renewal of those agreements.
Costs and expenses for segments, shared services and corporate were $166 million, up from $109 million, primarily driven by expenses from the acquired stations and higher network compensation fees.
Second-Quarter Operating Results – Adjusted Combined Basis In order to provide more meaningful year-over-year comparisons, we are providing non-GAAP supplemental information for certain revenues and expenses for prior-year periods on an adjusted combined basis.
The adjusted combined revenue and expense information illustrates what the combined Scripps/Journal operations would have been, given the assumptions outlined in the supplemental materials and had the transaction been effective at the beginning of 2013. Refer to the “Supplemental Information” section that begins on page E-7 of the attached tables.
Operating revenues increased 3 percent to $198 million, primarily due to an increase in retransmission revenues and 16 percent growth in digital revenues.
Costs and expenses for segments, shared services and corporate were $166 million, up from $157 million, primarily driven by higher network fees.
Second-quarter results by segment compared to prior-period adjusted combined amounts were:
Television In the second quarter of 2015, revenue from our television group was $167 million, up $4.5 million. Retransmission revenues increased $13.5 million, to $36 million, while political advertising revenues decreased $4.7 million, to $2.2 million in the off-cycle year.
Advertising revenue broken down by category was: • Local, down 5.4 percent to $87.3 million • National, up 0.8 percent to $39 million • Political, $2.2 million in 2015 compared to $6.9 million in 2014
Total segment expenses increased 6.6 percent to $123 million, driven by an increase in network compensation tied to the renegotiation of the ABC affiliation agreements for 10 of our stations.
Second-quarter segment profit in the television division was $45 million, compared with $48 million in the year-ago quarter.
Radio Revenue and expenses of $19.4 million and $14.5 million, respectively, were essentially flat with the prior period.
Segment profit in the radio division was $4.9 million in the second quarter of 2015, compared with $4.6 million in the 2014 quarter.
Digital Digital revenues were $8.6 million, up 16 percent from the prior period, driven by increased sales from the television integrated sales team and dedicated digital sellers as well as increased revenue from programmatic advertising and passive business-to-consumer products.
Expenses for the digital group were $13.5 million, an increase of $700,000 from the prior-year period.
Segment loss in the digital division was $4.9 million in the second quarter of 2015, compared with $5.4 million in the 2014 quarter.
Looking ahead The guidance below is in comparison to the adjusted combined results explained above and outlined beginning on page E-7.
In the third quarter of 2015, management expects:
• Television revenue to be down mid single digits. Political revenue was $21 million in the prior-year period
• Television expenses to increase high single digits, primarily due to higher network compensation fees
• Radio revenue to be flat to down low single digits
• Radio expenses to be up low single digits • Digital revenue to be up more than 40 percent, including the impact of acquiring Midroll • Digital expenses to be up mid 20s, including the impact of acquiring Midroll • Expenses for shared services and corporate to be about $10 million
Consistent with prior guidance for the full year of 2015, management expects:
• Television revenue to be down low single digits • Television expenses to increase high single digits • Radio revenue to be flat • Radio expenses to be up mid single digits • Digital revenue to be up more than 30 percent (adjusted to include the impact of acquiring Midroll) • Digital expenses to be up about 20 percent (adjusted to include the impact of acquiring Midroll) • Expenses for shared services and corporate to be about $45 million
Conference call 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 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) 230-1059 (U.S.) or (612) 234-9959 (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. 7 until 11:59 p.m. Aug. 21. 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 363879.
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 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 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 podcast industry leader Midroll Media, over-the-top video news service Newsy and weather app developer WeatherSphere. 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.”
Investor contact: Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, email@example.com
Media contact: Valerie Miller, The E.W. Scripps Company, 513-977-3023, firstname.lastname@example.org