Free cash flow of $280 million far exceeded even recent projections, driven by a strong advertising market and sales execution in Local, Networks divisions
CINCINNATI – The E.W. Scripps Company (NASDAQ: SSP) reported impressive year-over-year, adjusted combined revenue growth of 14% for its Scripps Networks division and 8% for its Local Media division core advertising, for the fourth quarter of 2021.
The company’s $280 million of 2021 free cash flow is its largest for a non-election year since before it spun off its cable networks in 2008. Management had raised its FCF guide three times over the course of the year as the advertising market rebounded, company sales performance accelerated and expenses remained stable.
Looking ahead, Scripps expects about $270 million of political advertising revenue this year. The 2022 mid-terms projection would be up about 40% from Scripps’ political revenue in the last mid-term election year and would help drive an approximately 50% year-over-year increase in 2022 free cash flow, to a range of $400-$450 million.
Other highlights:
“Scripps shareholders have much to celebrate in the company’s fourth-quarter and full-year 2021 financial results, especially our delivery of record non-election year free cash flow of $280 million during a period when our country’s economy was emerging from a global pandemic,” said Scripps President and CEO Adam Symson.
“I am extremely proud of Scripps’ local sales teams, which were working diligently – and remotely – last year to win significant new-to-television advertising business, expanding advertisers’ audience reach into our local connected TV products and capitalizing on the emergence of the sports betting category.
“I am equally proud of our Scripps Networks team – barely a year old – which has come together to build a powerfully profitable operation that is laser-focused on serving the nation’s over-the-air and connected TV media consumers. This fall, our five Nielsen-rated entertainment networks were the only ones out of 10 comparable portfolios to grow audience year over year. You can clearly see the results of that audience growth in the division’s strong Q4 revenue performance.
“Scripps Networks already capture 25% of viewing in the expanding OTA marketplace, and as we move through 2022, we are devoting ourselves to continued viewership and revenue growth. Among our plans is a marketing campaign on how to watch over-the-air TV and the wide range of quality content you find on it. This campaign is part of Scripps’ effort to carve out our own valuable corner of the television ecosystem: free, ad-supported platforms such as OTA, FAST and AVOD that serve subscription-weary Americans.”
Operating results
Effective with the close of the ION acquisition on Jan. 7, 2021, the company realigned its internal reporting structure and changed the reporting of its businesses’ operating results to reflect this new structure. Operating results are now reported under Local Media, Scripps Networks and Other segment captions. The Scripps Networks segment is comprised of our nine national networks. The operating results of our divested Triton business and the other businesses that were reported in our National Media segment are aggregated into the Other segment caption.
Unless otherwise indicated, all comparisons below are to as-reported results.
Total fourth-quarter company revenue was $622 million, an increase of 5.3% or $31.2 million from the prior-year quarter, reflecting the impact of the ION acquisition.
Costs and expenses for segments, shared services and corporate were $454 million, up from $388 million in the year-ago quarter, reflecting the impact of the ION acquisition and higher affiliation fees from within our Local Media division.
Income from continuing operations attributable to the shareholders of Scripps was $40.2 million or 43 cents per share. Pre-tax costs for the quarter included: $4.8 million of acquisition and related integration costs as well as $1.6 million loss on extinguishment of debt from the redemption of $15.4 million of our 2027 senior notes and $22 million of our 2031 senior notes. These items decreased income from continuing operations by $4.8 million, net of taxes, or 5 cents per share. In the prior-year quarter, income from continuing operations was $114 million or $1.35 per share. The prior-year quarter included gains from the sale of WPIX totaling $6.5 million and $2.6 million of acquisition and related integration costs. These items increased prior-year quarter income by $2.9 million, net of taxes, or 4 cents per share.
Fourth-quarter 2021 as-reported results by segment compared to prior-period amounts:
Local Media
Revenue from Local Media was $351 million, down 26%, in this non-election year.
Core advertising revenue increased 1.5% to $183 million.
Political revenue was $11.1 million, compared to $138 million in the prior-year quarter, which included a presidential election race.
Retransmission revenue decreased 1% to $152 million.
Segment expenses decreased 2.2% to $269 million, driven by the sale of our WPIX television station on Dec. 30, 2020.
Segment profit was $82.2 million, compared to $202 million in the year-ago quarter.
Scripps Networks
Fourth-quarter revenue from Scripps Networks was $273 million. Expenses for Scripps Networks were $167 million. Segment profit was $106 million.
Fourth-quarter 2021 adjusted-combined results by segment compared to prior-period amounts:
In order to provide more meaningful year-over-year comparisons, we are providing non-GAAP supplemental information for certain revenues and expenses for the prior-year periods on an adjusted-combined basis.
The adjusted-combined revenue and expense information illustrates what the historical results of Scripps would have been, given the assumptions outlined in the supplemental materials and had the transactions been effective at the beginning of 2020. Refer to the “Supplemental Information” section that begins on page E-8 of the attached tables.
Local Media – Adjusted-Combined Basis
Adjusted-combined revenue from Local Media was $351 million, down $110 million or 24% from the prior-year quarter.
Core advertising rose 8.1% to $183 million.
Political advertising revenue was $137 million in the fourth quarter of 2020, which included a presidential election race, compared to $11.1 million in the current period.
Retransmission revenue increased 0.7%.
Segment expenses increased 3.9%, primarily driven by network affiliation fees.
Segment profit was $82.2 million, compared to $202 million in the year-ago quarter.
Scripps Networks – Adjusted-Combined Basis
Adjusted-combined revenue from Scripps Networks was $273 million, up $33.3 million or 14% from the prior-year quarter.
Segment expenses increased 14%.
Segment profit was $106 million, compared to $93.2 million in the year-ago quarter.
Financial condition
On Dec. 31, cash and cash equivalents totaled $100 million. That amount included $34.3 million in proceeds from the sale of the KMGH building in Denver that were restricted until January 2022. Total debt was $3.2 billion.
On Jan. 7, 2021, the company executed an $800 million term loan with its bank group and issued $600 million of series A preferred shares to Berkshire Hathaway, Inc. The proceeds from these transactions, in combination with the $1.05 billion of bonds issued on Dec. 30, 2020, and cash on hand, provided the financing for the ION acquisition. Under the terms of Berkshire Hathaway’s preferred equity investment, Scripps is prohibited from paying dividends and purchasing its shares until all preferred shares are redeemed.
During 2021, we redeemed a total of $437 million of the outstanding principal on our senior notes, including $37.4 million in Q4, and we made additional principal payments on our term loans totaling $125 million, including $25 million in Q4. In addition, we made mandatory principal payments of $18.6 million in 2021, for a total of $581 million reduction in gross debt.
Year-to-date operating results
The following comparisons are for the period ending Dec. 31, 2021:
In 2021, revenue was $2.3 billion, which compares to revenue of $1.9 billion in 2020. Political revenue was $272 million in the 2020 election year.
Costs and expenses for segments, shared services and corporate were $1.7 billion, up from $1.4 billion in the year-ago period, reflecting the impact of the ION acquisition and higher affiliation fees.
Income from continuing operations attributable to the shareholders of Scripps was $66.5 million or 74 cents per share. The 2021 period included: an $81.8 million gain from the sale of Triton; a $15.3 million loss on extinguishment of debt; a $99.1 million non-cash adjustment due to the increase in the fair value of the outstanding common stock warrant liability; $40.4 million of acquisition and related integration costs; $9.4 million of restructuring costs; and a $32.6 million gain on the sale of our Denver KMGH television station building. These items decreased income from continuing operations by $58.8 million, net of taxes, or 67 cents per share. In the prior-year period, income from continuing operations was $154 million or $1.83 per share. Pre-tax costs for the prior year included $18.7 million of acquisition and related integration costs and gains from the sale of WPIX totaling $6.5 million that decreased income from continuing operations by $9.1 million, net of taxes, or 11 cents per share.
Conference call
The senior management of The E.W. Scripps Company will discuss the company’s quarterly results during a telephone conference call at 9:30 a.m. Eastern today. To access the live webcast, visit http://ir.scripps.com and find the link under “upcoming events.”
To access the conference call by telephone, dial (844) 867-6169 (U.S.) or (409) 207-6975 (international) and give the access code 3859521 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. The public is granted access to the conference call on a listen-only basis.
A replay line will be open from 1:30 p.m. Eastern time Feb. 25 until midnight March 25. The domestic number to access the replay is (866) 207-1041 and the international number is (402) 970-0847. The access code for both numbers is 1094530.
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://ir.scripps.com/ approximately four hours after the call, and the link can be found on that page under “audio/video links.”
Forward-looking statements
This document 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. Such forward-looking statements are made as of the date of this document and should be evaluated with the understanding of their inherent uncertainty. A detailed discussion of principal risks and uncertainties, including those engendered by the COVID-19 pandemic, that may cause actual results and events to differ materially from such forward-looking statements is included in the company’s Form 10-K, on file with the SEC, in the section titled “Risk Factors.” The company undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date such statements are made.
Contact:
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, [email protected]
About Scripps
The E.W. Scripps Company (NASDAQ: SSP) is a diversified media company focused on creating a better-informed world. As one of the nation’s largest local TV broadcasters, Scripps serves communities with quality, objective local journalism and operates a portfolio of 61 stations in 41 markets. The Scripps Networks reach nearly every American through the national news outlets Court TV and Newsy and popular entertainment brands ION, Bounce, Defy TV, Grit, ION Mystery, Laff and TrueReal. Scripps is the nation’s largest holder of broadcast spectrum. Scripps runs an award-winning investigative reporting newsroom in Washington, D.C., and is the longtime steward of 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.”